A Pay Plan To Build Transparency and Hold Gross

January 10, 2012

I’m seeing a new breed of pay plans emerge at dealerships that seek to balance transparency with customers and the store’s need to make a profit on every deal.

Here’s an example from a dealership that has achieved double-digit growth in its used vehicle sales since adopting velocity principles, market-based pricing and a transparency-minded sales approach (e.g., RealDeal) with customers:

  1. Volume-based bonuses: At this store, salespeople who sell 20 units will make $1,700 per month (or $85/unit, a figure that’s
    adjusted for lower volume tiers).
  2. Transaction discount bonus: The idea here is to minimize the discounts salespeople give to customers. The scale: $250 for closing a deal at asking price; $225 for deals $100 off asking price; $200 for $200 off; $175 for deals more than $200 off.
  3. Trade-in valuation bonus: The store uses AutoTrader.com’s Trade-In Marketplace (TIM) and a walk-around with customers to value each trade-in. The salesperson receives 15 percent of the difference (if any) between the TIM value and the ACV.
  4. F&I/Other sales bonus: The dealership pays a flat $20 if a customer finances the deal at the dealership, and 10 percent commission on any accessory and service contract sales.

I like this pay plan because it strikes a good balance between meeting customer expectations, ensuring profit margins for the store and providing a respectable wage for salespeople.

Likewise, the third-party validation gives salespeople confidence to stand behind the store’s approach to pricing and trade-in valuations and helps them “hold gross” through all facets of the deal in a manner customers increasingly expect and respond to favorably.