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Is your pay-plan like a Christmas ham?

Why your salesperson pay-plan may look like a Christmas ham…

 

Christmas ham

What I am about to suggest just might be the most obvious and yet uncommon pay-plan idea you have ever seen and it’s all based on one simple fact…

I have often wondered why we do some of the things we do in the car business. Do you remember the story of the father preparing the Christmas ham?

As he slices the ends off the ham his son asks, “Daddy, why do you always cut off the ends of the ham before you bake it?”

The father pondered, “I don’t know son, my father showed me that. It probably has to do with the juiciness or the flavor, let’s call grandpa and ask him.”

Grandpa answers the phone and replies, “I don’t know if it’s the juice or the flavor, my father showed me.”

They get great-granddad on the phone and he explains, “I don’t know why you boys are doing that?? I only cut off the ends of the ham because I had a small pan!”

Is your pay-plan like the Christmas ham; based on “what your manager / dealer / dad used to do”?

What if we could rethink, reimagine, and rework our business?

One Simple Fact – Not all customers are created equal!

Think about the sources of customers you have opportunities to sell and I believe they fall into 5 main groups:

  1. Walk-ins
  2. Appointments
  3. Referrals
  4. Service Customers
  5. Repeats.

Now consider these 3 categories to measure them against:

  • how valuable they are
  • how we market to them
  • how we pay on them.

Category #1) How valuable they are – If you were to rank these 5 groups in order of L.R.V. (Lifetime Residual Value) how would you rank them based on lifetime potential profitability?

    GROUPS                       LIFETIME RESIDUAL VALUE

  1. Walk-ins                     1. _______________________ (Most valuable)
  2. Appointments              2. _______________________
  3. Referrals                     3. _______________________
  4. Service Customers        4. _______________________
  5. Repeats                      5. _______________________ (Least valuable)

Are you able immediately to see that not all customers are created equally? Do you have processes in place to ensure that your people understand the value of your MOST VALUABLE CUSTOMER? What are you doing at your store that is specially designed to cater to the highest L.R.V. customers?

 

Category #2) How we market to them – If you were to rank these 5 groups in order of how we spend our M.R.E. (Marketing Resources Energy) to attract them how would you rank the groups?

    GROUPS                   MARKETING RESOURCES ENERGY

  1. Walk-ins                     1. _______________________ (Spend the most M.R.E.)
  2. Appointments              2. _______________________
  3. Referrals                     3. _______________________
  4. Service Customers        4. _______________________
  5. Repeats                      5. _______________________ (Spend the least M.R.E.)

What you may have noticed is that your M.R.E. is opposite of your L.R.V.. This is very common. The average dealership is spending the most time, money, energy, resources, and marketing to attract the least valuable customers. And what’s worst about that is the most valuable customers get the least consideration and care.

One of my clients realized this when we did the math: $75,000 per month in advertising/marketing, 180 sales per month, equals $416/sale in marketing expense. That’s assuming that every sale was directly influenced by the marketing. But they’ve been there for decades and are on a dealership row and have a great reputation so it’s fair to assume they would sell cars even if they went “dark” and spent $0. Let’s assume they would still sell 100 with NO MARKETING SPENT. That means the $75,000 generated 80 sales, or $937/sale.

We can also assume that the 100 customers who would have bought without any marketing are the highest L.R.V. customers (Repeat, Service, Referral) so the $937/sale was to generate the least valuable customers; walk-ins and appointments – loss leaders ads, Internet, etc.

WOW!

We are willing to spend $400-$900 per sale to convince, beg, and incentive (pay) people to buy from us, but most dealers reluctantly throw $100 at a bird-dog program – as long as the customer can PROVE they are a REAL REFERRAL!!

 

Category #3) How we pay on them – If you were to rank how you pay your team to sell to the 5 groups how would you rank them? IMPORTANT! The question is; does your pay-plan differentiate between the groups?

   GROUPS                   PAY-PLAN, PAY OUT

  1. Walk-ins                    1. _______________________ (Pay-plan pays the most)
  2. Appointments             2. _______________________
  3. Referrals                    3. _______________________
  4. Service Customers       4. _______________________
  5. Repeats                     5. _______________________ (Pay-plan pays the least)

If you are like 99% of dealerships then you pay the exact same for each group so you probably couldn’t rank them. Sell a repeat, sell a walk-in, we don’t care – just sell someone something. You may pay a flat per unit, or pay a percentage of the gross, and almost everyone pays on some sort of volume. Most pay on 3 things: gross, CSI, and volume. And for good reasons… those things are important.

Here’s the problem… Like most humans, salespeople tend to only care about things they a rewarded for caring about. So it’s “easy” to stare out the window and wait for an “up” since it doesn’t require any extra effort like following up, or sending a newsletter, or prospecting, or getting good on the phone. And since they’re paid the same to sell the “easy” walk-in as they are to sell the repeat, they do what seems “easier” in the moment and they stand and stare and hope.

So your people do what is “easy” now and end up trying to sell the hardest to close, least profitable, most expensive to attract, and lowest value customer. And then they make no money, sell too few of them and end up quitting because it’s too hard to make any money and buyers and liars, and everyone beats you up on price… and on and on and on…  

In closing…

What if you could rethink, reimagine, and rework the way you spend your M.R.E. (Marketing Resources Energy) on your customers? How would you change the way you spend what you spend?

What if you could rethink, reimagine, and rework the way you look at the L.R.V. (Lifetime Residual Value) of your customers? What would you do to love the ones that love you most?

What if you could rethink, reimagine, and rework your pay-plans based on the activities you really wanted? What would your salespeople’s business look like?

 

I’d love to hear your questions, comments, concerns, hopes, dreams, or fears.

 

Jonathan W. Dawson

(612) 387-7776 – cell

(866) 769-8083 – main

jon@sellchology.com – email

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