If there were two dirty words at the 2011 National Automobile Dealers Association convention in San Francisco this year, those expletives would be "stair steps."
In stair-step incentives, manufacturers pay steadily increasing cash bonuses to dealers to meet a series of volume targets, typically as part of a monthly sales promotion. Dealers who hit the factory-set targets enjoy a price advantage over those who do not. To critics, they create a two-tier pricing system that confuses and alienates consumers. To proponents, they provide tempting cash incentives to move more metal.
AutoNation CEO Mike Jackson set the tone at NADA, upbraiding manufacturers for the practice in a speech at the J.D. Power automotive conference before the convention. Jackson showed a cartoon -- called Stairway to Hell -- depicting dealers desperately climbing over each other in pursuit of a bag of money.
"The sales targets are arbitrary," Jackson said. "Any manufacturer who preaches customer satisfaction and practices stair-step incentives is a hypocrite."