A few weeks ago, I visited a dealership and asked to review their spiff program. When I flipped to page two, it was clear there were multiple issues to address. Not only had the dealership essentially ceded control of their ordering process to their vendors, but they also had no clear strategy for managing their overstock problem.
This scenario isn’t unique—it highlights challenges that many dealerships face. Managing inventory and spiff programs effectively requires proactive leadership and a strategic approach. Many dealers get lost in the process of remaining compliant with factory certification programs, and then spend considerable amounts of time and money when unsold inventory stacks up in the warehouse and on the showroom floor.
The Role of Managers in Dealerships
Managers wear many hats in a dealership. Their responsibilities often include:
- Training staff to meet the dealership’s standards.
- Holding employees accountable for their performance.
- Managing inventory, including ordering and retail strategies.
- Resolving problems and issues that arise daily.
- And juggling a host of other operational tasks.
Among these responsibilities, addressing inventory overstock stands out as a critical area that impacts cash flow, customer satisfaction, and overall dealership profitability.
Tackling Inventory Overstock
Overstock issues can generally be addressed in two key ways:
Ordering and Stocking:
- Regaining control of this process is essential. Managers should set clear stocking and turn targets, ensuring the dealership maintains optimal inventory levels. This involves careful forecasting and aligning purchases with realistic sales expectations.
Aged Stock Management:
- Aged inventory must receive dedicated focus to ensure it moves off the floor. Strategies include targeted marketing, competitive pricing, and incentivizing sales through spiffs.
Rethinking Spiff Programs
During a recent NCM 20 Group meeting, I made the point that if a dealership puts every vehicle on sale, it essentially becomes a discounter. The same principle applies to spiffs. When the majority of inventory is incentivized, those incentives lose their impact. They become background noise, an expectation rather than a motivator.
Years ago, a $20 spiff was enough to inspire action from sales staff. Today, even $100 may not have the same effect. Additionally, staff can struggle to focus when presented with an extensive list of spiffed vehicles.
Sharpening the Focus
Dealerships can achieve significantly better results by narrowing their focus. Instead of tagging 50 or more machines with incentives, aim to keep the list under 20. Increase the per-vehicle payout to make the incentives more meaningful and impactful. This streamlined approach makes it easier for sales staff to prioritize and act.
It’s also critical for dealers to change up these programs. Try new things that keep the team engaged and focused. Some great examples I’ve seen over the years.
- $1 per day – when sold, vehicles on the aged inventory list earn $1 per day of age
- Staircase – employee earns X% of the margin for one vehicle sold, 2X for 2 sold, etc. (drives selling not only quantity, but also retaining margin)
- Golden ticket – salesperson earns an incentive such as a tier bump, or a 1 or 2 point commission increase on all vehicles sold during the month
- Team split – If the employees can sell Xnumber of the vehicles on the list then the team gets to split a pot of money
- Lottery – Each vehicle sold gets one entry into a pot to win a prize (could be cash, vacation days, a trip, etc..)
I’ve seen a multitude of great incentive programs over the years. My recommendation is that a dealer never run the same program for more than 2 months in a row.
A Call for Introspection
Customer preferences evolve, and dealerships must adapt. If you continually face a growing list of aged inventory, it’s time to take a hard look at your processes. Reevaluate your ordering strategies and inventory management practices. By taking control back from the vendors and setting clear objectives with your team and the sales reps, you can turn overstock from a recurring challenge into a manageable process.
Effective inventory and spiff management require deliberate planning and consistent execution. With the right approach, dealerships can create programs that drive results, inspire their teams, and ultimately improve profitability.
#Powersports #Spiffs #Inventives #Inventory #FloorPlan #Programs #Vendor #BusinessPartner