Let me state clearly that this is not a preach piece from a guy who never wrote a car deal and who hasn’t seen the benefits of incentivized pay plans. I have been in the retail car business for nearly 20 years. I am a sales manager for a large store in a major market. What follows is an honest conversation and three reasons why a commission-only pay plan hinders your business more than it helps.
As a side note, I won’t be touching on the customer experience. Nor will I cite the positive financial impact of a fixed compensation plan, the state of sales margins, or the redundancy of percentage plans and “minis.” These arguments, though valid, have already been covered countless times.
For the purposes of this article, let’s talk in terms of talent, production and responsibilities.
1. Your Hiring Pool
How many times have you asked, “Why can’t we get good salespeople?” We know there are plenty of bright, personable and reliable individuals looking for employment. So why can’t we find, hire and keep them? I believe it’s because bright, personable and reliable folks generally have better offers on the table than a 50-hour workweek for zero guaranteed dollars.
Now, you and I have enough experience to know that incentivized compensation does indeed offer ample earning potential. But try convincing a young parent with a mortgage payment and student loans. It’s tough to sell a variable pay plan against a $45,000 fixed salary at that office job across town.
A draw, you say? You mean I can work the whole week and then owe money at the end? C’mon.
Without guaranteed pay, we can expect the same candidates sales floors have been attracting for decades: 20-somethings, singles, second-chancers and transients. A commission-only job is the ultimate lifestyle gamble, and that’s why so many moderate, traditional workers stay away.
“No experience necessary! $100,000 potential!” Does that sound more like a solid career path or a pyramid scheme? Bottom line, a more stable pay plan will yield a more stable employee.
I realize there are other industries that pay solely on commission and have no trouble attracting qualified workers. However, the majority, such as real estate, allow the individual to work independently with a flexible schedule. That is hardly the case with our employees, whom we summon to the showroom multiple times a day over loudspeaker. They give us their nights, weekends and holidays.
And let’s be real: Our sales reps are not flying from Marriott to Marriott for software demos and booze-fueled pharmaceutical conferences. Our people are running from lot to lot, jumpstarting dead batteries in sweat-stained golf shirts, and pushing gas-drained coupes through the snow.
Think about it like this: If you guarantee a new recruit nothing, there is no guarantee they will give you anything.
2. Your Sales Floor
Commissions are supposed to incentivize sales pros to maximize production. But motivation works both ways. If you charted each salesperson’s day, which slice of pie would be biggest: active or dormant? Are they all driven to execute your sales steps, every day, with excellence? Are they being consistently motivated by the commission?
Of course not. If they were, you would never have to push them to do simple things like make their follow-up calls or approach training with enthusiasm.
I’ll argue that your pay plan actually gets in the way of production as much as it promotes it. Good days, weeks and months are followed by bad. I have seen a recordbreaking March stymie a saleswoman the first 20 days of April. I have also seen a Saturday-morning deal distract a salesman for the rest of the weekend.
Incentive-based motivation is a short-term stimulant, not a long-term strategy. That means your pay-to-sell plan is actually working against you half the time! It should not make much of a difference among your top performers. Every dealership has a few, and they will excel in any situation you put them in. But a commission-only pay plan conveys the same attitude to every employee: Cash (or gross) is king.
When your top-grossing salespeople become your de facto leaders — regardless of whether they are your best employees — you create a casino culture that conflicts with your store’s core values. The short-term gain of each deal will always prevail over the long-term good of the company, affecting everything from reputation to CSI.
Finally, commissioned workers don’t exactly have a reputation for loyalty. They will almost always follow the money, just like you encouraged them to do.
3. Your Defined Roles
If we were to break down each of your store’s sales, contract to contract, I bet we would find the person responsible for inking the deal is not the salesperson. The majority of your deals come from other employees.
I’m talking about the deals that are sealed before the client ever enters your lot. Some are legitimate BDC deals, complete with money in-house, while others are admittedly untied with variables to address onsite.
In both cases, the customer has agreed to include you in their purchase process without ever speaking with a traditional salesperson. Strangely, these deals are often handed to your salespeople as hooks. However you handle them at your store, nobody would deny this segment of what I call “pre-purchases” will continue to multiply.
And when your sales reps run out of options, the desk managers, closers and turnover managers insert themselves into the dialogue and take control. Experienced managers are often able to find a hot button or common ground that secures the commitment and saves the day.
I listen to incoming phone calls on a daily basis. Recently, I heard a call from a sales customer looking to reschedule their delivery date. When the receptionist asked her to provide her salesperson’s name, the woman was able to recall two names: Ryan, the BDC rep she had spoken with before her visit, and Gary, the finance manager who spun the deal.
When the receptionist attempted to identify the sales rep as the individual the customer met in between Ryan and Gary, she replied, “Oh, him? I don’t know his name.” This was a reliable 20-car guy with stellar CSI scores. How could she remember the other two and not him?
We all agree that the power of the salesperson has been diminished over the last couple decades as buying habits have drastically changed. Years ago, a customer would visit multiple stores as part of their shopping process, and a talented salesperson was of great value. They were the difference-makers, the frontline relationship-builders who stood between your customer and your competitors.
Today’s consumer visits less than two stores before purchasing. If they walk through your doors, they are ready to buy. They don’t need to be sold in the same way they did 30 years ago. It’s time to rethink the way we approach our job descriptions.
A recent MAXDigital/Erickson poll asked dealers how often their employees know more about a given vehicle than their customers do. Only 15% said “always” or “most of the time,” and 5% said “never”!
Pay your sales pros to do more than just sell. Pay them to become product experts and impress your shoppers. Pay them to adopt your company’s culture and philosophy, and convey that to your patrons. Pay them to make their follow-up calls, their CSI calls and their owner calls. Pay them to service the hell out of your clients. Only then will you see the results you truly desire.
Joel Gordon is the business development director for Boston’s Expressway Toyota and a 20-year auto industry veteran. Contact him at email@example.com.