The automotive industry is undergoing fundamental changes. According to BDO’s Motor Salary Survey 2024, UK automotive dealerships are facing shrinking margins and high turnover rates, with average salaries decreasing for the first time in four years. Incentivised pay dropped by 10%, and staff turnover remains high at 29%, reflecting the financial pressures and competitive talent landscape in the sector.

What can Original Equipment Manufacturers (OEMs) in the automotive sector do to support their dealers without incurring additional costs?

Our experience in applying behavioural economic principles into our clients’ sales incentive programmes shows that diversifying the rewards opportunities not only drives sales, but also increases employee retention and customer satisfaction.

Right Reward. Right Place. Right Time.

For some years, we’ve advocated a point of view called “move the middle”, where incentives are designed to engage salespeople across the spectrum of performance and productivity. We conducted a study using sales results gathered during non-incentive periods from 150 companies and more than 50,000 salespeople. The study found:

• More net lift is available from the bottom 80 percent than the top 20.
• Any incentive programme aimed at the top 20 percent eliminates more than half of the top producers.

Salespeople are intrinsically motivated to succeed, but relying solely on intrinsic motivation is simply not enough. By diversifying your cash-only incentives to include a variety of hedonic rewards (experiential and luxury merchandise rewards) trigger extrinsic motivation, which will keep salespeople motivated longer and help meet sales targets more often.

Our research shows that a greater variety of incentive types are associated with increased sales. If you truly want to influence results, cash won’t get you there. Cash disappears into day-to-day necessities, but hedonic rewards inspire emotional commitment.

Use incentive programmes to drive results beyond sales

Incentives can be used to drive different business outcomes by creating excitement and focus on specific objectives for a limited time period, to inspire people to change behaviour or perform at a higher level. For example, our Learn2Earn™ programmes have proven to be very effective in better educating the sales force, which, in turn, helps them be more effective with customers. One client implemented a customer-centric programme which, in the first year, yielded a 31 percent decline in employee turnover and a four-point increase in customer satisfaction.

Final thoughts

When redesigning or implementing a sales incentive programme, consider the following:

1. Despite the benefits of moving away from the legacy structure, people will be put off that you have taken something away and replaced it with something new.
2. Avoid replicating the earning opportunities, measures or rewards that were common in the legacy programme. Do something different so that the new incentive programme is not so easily compared to the old. Make the new programme a platform for a new message, new branding, and new focus.
3. Consider that sales uplift runs 5-10 percent higher during busy periods because the opportunity to sell is greater. When salespeople are putting in maximum effort, they increase their closing rate, and their compensation plan should reflect that.