Smaller brands embrace stair-step incentives
Stair-step incentives aren't just for the big boys.
Volkswagen, Mitsubishi, Suzuki and Kia are among the smaller import brands dangling carrots of cash in front of their dealers, too. Indeed, for some smaller brands, stair-step programs -- which pay dealers escalating bonuses as sales targets are hit -- have been around for years.
Automakers with the largest U.S. sales, including Honda, General Motors, Chrysler and Nissan, have been turning to stair steps increasingly this year. GM's program, which began April 25, is its first since before its 2009 bankruptcy. Honda's began March 1 and runs an unusually long six months.
Stair-step incentives have been a consistent part of the strategy behind Kia's rapid growth in the United States, Kia dealers say. Some brands use stair steps to promote specific nameplates, but Kia's program pays dealers per-car cash bonuses for hitting total dealership sales objectives, regardless of which vehicles are sold.
One Kia dealer, who asked to not be named, said he can count on earning an extra $800 on every car he sells, every month, from the program. He earns half by hitting his target and earns the other half by exceeding it.
"We think there is a real benefit for a dealer knowing each and every month what we expect and what we're counting on that dealer to deliver in a particular market," Tom Loveless, vice president of sales for Kia Motors America, said last week during a panel discussion sponsored by the American International Automobile Dealers Association.
Under Volkswagen's Volume Based Performance plan, dealers earn bonus cash for hitting a percentage of a sales target. The dealer earns a percentage of the sticker price of each vehicle sold that month, and the percentage increases depending on how well the dealership performs against its target.
One VW dealer says the program has been around for about two years.
Mitsubishi dealers also can earn stair-step cash for hitting total dealership sales goals. If the target is hit or exceeded, the dealer gets paid. The dealer gets squat for falling short.
Suzuki dealers can earn up to $1,000 for each car sold in May that exceeds their April sales total, if their May sales exceed April sales by at least 20 percent.
But some import brands are staying away. Hyundai, for example, has no stair-step incentives.
Acura has no such program now, even though the bigger Honda Division does for the Accord sedan, says Jeff Conrad, Acura Division general manager.
Conrad says the topic is "hugely controversial" when it comes up in meetings with dealers.
He added: "You can almost split the audience in half. Half says, 'When are you going to come out with these things?' The other half: 'Don't do that again [or] I'm going to slit your throat.'"
Christina Rogers contributed to this report
|Some current stair-step programs|
|Chevrolet||2-Jul||Cruze, Malibu, Equinox, Traverse, Silverado|
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