Dealer holdbacks (was: Re: V8Q brakes)

["linus d. toy" <linust@interramp.com>]

At 08:45 PM 02.09.96 -0500, AUDIDUDI@delphi.com wrote:

>> you ever wonder how car dealerships can sell cars for $500 over invoice
>> and still say in business?  that's your answer right there.
>
>In many cases, the factory adds a dealer holdback to their invoice and gives
>it back to them later in one form or another ... even selling AT invoice, it
>shouldn't be too difficult for a dealer to make a profit (perhaps not enough
>of a profit to stay in business but a profit nonetheless).

Dealer holdbacks are even more interesting than this.  (Somewhere in the
archives may be a post I wrote oh so many months ago...can't find it, don't
recall how long ago, sorry.)  

So...here's Channel Marketing 101.

Dealers get an "override" or other compensation from the manufacturers for
hitting sales goals (btw, the auto industry is not unique in this
practice--my mom's a travel agent and the airlines do same for them).
Typically, this is a progressive scale that increases as the dealers volume
increases.  There are also the "incentives" we always hear about (and how
they are set up is kinda amazing), and marketing (advertising) assistance
per unit sold.  In some industries (don't know about cars--why not?) there
are also spiffs available to the individual sales person wholly separate
from the dealer's compensation/bonuses.

Here's the basic ideas:
Override.  Once a dealer sells a certain number of units in the month (say
50), they get so many $$$ per additional car (say $250 each).  If they get
to the next level (say 75), maybe they get $500 for each beyond 75 for the
month.  It might get real interesting in some programs where hitting yet
another level (100) means they get the $500 not just for the cars sold
beyond 100, but also for all cars sold beyond the first 50.  This can get to
be serious $$$ for many dealers--there's a story about where a dealer
practically gave away a car to get to that golden ring..  These programs
change monthly, quarterly, etc depending on the manufacturer, what sells,
what doesn't, etc.

Incentives.  That bright yellow 2 door in the ads?  sells like hot-cakes.
That puke green 4d is a dog.  So the incentives might be applied only to the
puke green 4d.  When they get real slick, everywhere but Wall Drug (where it
outsells the yellow 2d)  I suppose we could add in some of the override
program ideas, too.

These things are limited only by the imagination of some marketing person in
corporate--and their ability to know what's selling, what's not, and very
importantly, to track how many of each car is sold by each dealer (that's
where I got this stuff from--my company has built such tracking systems for
car companies and other manufacturers i'm not allowed to mention)
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* linus toy           email:  linust@interramp.com                   *
*                                                                    *
* "...it's stuff that does things people want, but they don't know   *
*     how it works.  But if they did look inside it would probably   *
*     have lots of wires."                                           *
*                            --4 year old explaining 'technology'    *
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