It's no secret that times are tough in the automotive industry — and now, the economy is affecting incentives. Disappointing first-quarter sales at Ford and General Motors have left both companies in the middle of restructuring efforts that will slash 45,000 jobs and close 16 plants at Ford and eliminate 34,000 jobs and 12 plants at GM. And with Japanese rival Toyota Motor Corp. surpassing GM in vehicle sales worldwide for the first time this quarter, GM has its work cut out for it.
As a result, automakers are operating “in defensive mode,” says Dick Fiala, account director in the automotive group at Minneapolis-based incentive house BI. “They're using an awful lot of cash for sales consultant and sales manager incentive programs.”
It's natural to see an uptick in cash incentives in rough times, says Ed Barclay, senior vice president, Mideast region, CarlsonWorldwide, who is based in Troy, Mich. “Cash programs spike more when you have slower-moving models. They've always been a quick way for the factory to respond to a short-term market need.”
Other companies are tweaking existing programs to increase their effectiveness. “We have seen some companies that were previously running three 60-day programs a year cut that to two programs but run those for 90 days instead,” says Fiala. One challenge with these longer-running incentives, however, is making sure that participants are engaged from the start and results are apparent quickly.
“We are looking at 90-day programs and getting more creative with them to give them a quick start right out of the box,” says Barclay. For Barclay's automotive clients that offer travel incentives, this may mean offering first-class airfare or two extra days on the front end of a trip to qualifiers who meet their objectives in the first 30 days of the program.
While U.S. automakers are making adjustments to their programs, it's business as usual for the people who plan Toyota's incentives. “We're not the type of company that is constantly changing direction based on quarterly results,” says Louann Cashill, CMP, CMM, meeting services manager, Toyota Motor Sales, U.S.A. Inc., Torrance, Calif. A number of Toyota and Lexus offices sponsor awards for the top 10 sales-producing dealers within a particular region, and parts and service managers are rewarded based on customer satisfaction. The company also offers multiple trips each year for top sellers, with past destinations including Cabo San Lucas, Mexico, and Napa Valley, Calif.
Another company that has fared well in sales recently and is continuing its incentive programs is the GM-owned European brand Saab. “The company just took a group to Cabo San Lucas, where it was announced that Saab had sold its highest volume of vehicles this past year,” says Scott Siewert, divisional vice president of sales for Atlanta-based USMotivation. The company's incentive programs are focused on building brand loyalty and include an annual incentive trip for top sales managers as well as monthly merchandise awards for employees who meet sales and service targets.
While some automakers are scrutinizing their incentives, none appears to be scaling back on recognition. Says Fiala: “We don't see anybody pulling back from recognition programs. Because employee turnover is such a big issue, manufacturers do a lot to keep people in the fold and make sure that they feel appreciated.”