Incentive practices in the US automobile industry

Abstract

Automobile salespersons have long been viewed by the general public as cunning and cold. They only fare better than murderers. The bad perception that the public has can be traced to the compensation system in the industry. This compensation system has also contributed to the high turnover rates of salespersons in dealerships. High turnover rates are costing the dealerships training cost and lost sales from returning customers. Dealerships have to start changing how they compensate their sales force. Replacing the at risk pay with salary and bonus will greatly change the salespeople’s selling attitude for the better. Salary based will also reduce the turnover rate especially during a lean period. It will also give a chance for a novice to enter the industry without them downgrading their lifestyle. Financial hardship during the learning period has been the main deterrent for newcomers to enter the industry. Other non‐cash incentives, such as free demonstrator, profit sharing and pension plans will help to retain the sales force. Another important factor is to hire the right salespeople from the beginning.