ELKHART LAKE, Wis. -- Two main elements of Johan de Nysschen’s plan to rehabilitate Cadillac’s image are to tighten dealers’ inventories and quash their sell-at-any-cost mentality.
There’s a big problem though: Cadillac’s dealer-incentive programs today are designed to do just the opposite. One makes cash payouts for growing sales; the other attaches up to $700 in dealer bonus money to every vehicle they order from the factory.
De Nysschen, Cadillac’s president, says those programs must change for dealers to adopt a true luxury mindset, one based on an engaging customer experience, rather than sales volume.
“The business model has been structured more for the bigger brands inside General Motors, rather than the small Cadillac brand,” de Nysschen said here at a test drive event for the media. “The luxury business is different.”
He said Cadillac is in talks with its national dealer council “to develop the next generation of what these programs should look like for Cadillac.”
It’s an example of the obstacles de Nysschen faces in reshaping Cadillac’s retail network into something that more closely resembles those of German luxury brands such as BMW or Audi. Most of Cadillac’s more than 900 dealerships are hard-wired to carry far more inventory than other luxury stores, often moving the metal through deep discounts.
A Midwest Cadillac dealer, who didn’t want to be identified discussing factory business, believes it would be difficult for many dealers to fathom an incentive program that’s not tied to sales performance.
“There’s only one thing that matters, and it’s selling more cars,” said the dealer, who said he sells a couple dozen Cadillacs a month. “I did not come in here today to buy more digital stuff for the showroom.”
Taken together, the two incentive programs provide an important revenue stream that many dealerships depend on to pad their bottom lines.
Essential Brand Elements, or EBE, expires in fall of 2016. GM introduced it in 2009 across the Chevrolet, Buick-GMC and Cadillac sales channels, primarily to defray the cost of renovating dealerships or building new ones.
Dealers qualify for EBE by adhering to Cadillac’s facility standards, along with jumping through less onerous hoops, such as employee training. They’re paid $400 to $700 per vehicle they order, depending on volumes.
Standards For Excellence
The other program is Standards For Excellence, in place since at least the mid-1990s. Dealers pay a fee upfront for the chance to get paid a quarterly bonus if they hit certain targets. The main hurdle is to sell at least one more vehicle than in the year-earlier quarter. That pays 80 percent of the quarterly bonus, which can range from less than $10,000 for small dealerships to more than $200,000 for bigger stores.
De Nysschen says he would like to keep a pot of money to reward “top-performing dealers,” but not necessarily those who are increasing sales fastest.
Instead, he wants to pay dealers “in terms of the overall support to the brand.” That could mean benchmarks for customer satisfaction scores, for example. Or it could include requirements to have adequate employee-recruiting processes in place or in-store digital displays.
“What I see as the future model of what comes next after SFE and EBE is to have a system that also drives the right behaviors,” de Nysschen said. “If you don’t exhibit the right behaviors, you won’t be rewarded.” c