The Right Way to Reward Dealers

“As you all know first prize is a Cadillac El Dorado. Anyone wanna see second prize? Second prize is a set of steak knives. Third prize is you’re fired. Get the picture? You laughing now?” –Glengarry Glen Ross

Awards. Rewards. Incentives. Whatever you call them, brands struggle with the right way to use them to engage and motivate dealers. Some go all-in on the David Mamet approach and apply a healthy dose of fear. It didn’t work so well in the movies, and it’s equally ineffective in real life. Others try anything and everything–money, Caribbean cruises, gold plaques–and while some of these things might move the needle, brands never understand why they’re effective or how make them last. Which is to say, a lucky guess isn’t the basis of a solid plan.

So, let’s look at how to create an effective plan for dealer incentives (more on the word “incentives” in a bit, but trust me, I’m using it for a reason).

First, get out a pen and blank piece of paper. Jot down the reasons you want to incentivize your dealers–the more detail, the better. Here’s a short list to help you get started:

• Jump start growth of a new product category
• Improve placement and promotion of specific SKUs within dealer showrooms
• Increase close rates on leads forwarded to dealers
• Lift participation in brand-driven promotions

Notice that “increase sales” and other equally vague phrases are absent from this list. Of course you want to increase sales, but to effectively incentivize your dealers you have to break your goals down into tangible, manageable tasks that everyone can understand, buy into, and tackle.

Once you’ve got that list, get out a second sheet of paper. For each incentives goal, list the dealers you want to include. Start with broad categories then add examples. Your sheet of paper should start to look like this:

Jump start growth of a new product category

• Our brand’s top 10% of dealers, by sales
  • ABC Kitchens, NYC
  • Acme Home Store, Chicago
  • …

Improve placement and promotion of specific SKUs within dealer showrooms

• Dealers with difficulty closing provided leads (<10% close rate)
  • Glen’s Appliance, Salina, KS
  • Kitchens, Kitchens, Kitchens!, NYC
  • …

And so on.

By doing this, you’re moving away from a very general notion of rewarding dealers for doing their job toward incentivizing them to perform in ways that benefit your brand. Ways that are customized to address dealers’ specific strengths, weaknesses, and capabilities. Not all dealers perform equally or offer your brand the same advantages, so why offer them the same incentives?

There’s that word again–incentives. There is more than a semantic difference between rewards and incentives. Making dealers your brand heroes is about more than short-term fixes. It’s about giving them ongoing incentives to engage with your brand, open up meaningful lines of communication, and perform as partners. Rewards, which tend to follow a single accomplishment, seldom buy that kind of loyalty. Applied correctly, incentives can.

Let’s return to that sheet of paper because now it’s time to determine the right incentives. No every dealer is the right choice for accomplishing your objectives. In the same way, not every incentive is right for every dealer.

Incentives fall into three categories:

• Recognition
• Access
• Material things

There’s no priority order to this list. No one incentive is most valuable to all your dealers. This is not the world of Cadillacs and steak knives; cash isn’t necessarily king.

Dealers seek recognition because it shows that brands are paying attention, and because it may place them among an elite peer group. A wall plaque says a brand loves its dealer, but in a way that takes very little effort. Public recognition that gives high performing dealers preferential placement in advertising and increases the potential for sales leads is tangible, valuable and – most important – aligns with brands’ sales objectives.

Alec Baldwin (to return to the speaker of our opening quote) didn’t care what anyone below him thought. To paraphrase, he was there to tell everyone how to do their jobs. Feedback wasn’t welcome. But brand dealers who occupy that hero slot crave the opportunity to offer feedback. Access matters to them more than almost anything. They know how to market their dealership. They close sales. What they truly value is the opportunity to help brands make them more effective at selling products. They want a direct line to product managers and maybe even the C-suite. They want brand support for pitching large projects. They want influence that has value beyond money.

Then there are material goods. Cash, product terms and discounts, maybe a cruise–these are the things that create short-term incentives but rarely have a lasting effect. Spreading cash or its equivalent around can have an immediate impact on your goals, but in all seriousness, do you think you can buy dealer loyalty for a few hundred dollars? The corollary to this is that if you can, these are probably not the dealers you want as partners.

You might be asking if all of this is setting up a system of haves and have-nots. Absolutely. It is. You want every dealer to be a top performer, but the reality is that many aren’t and will never be. We’ll address the uncomfortable dynamic this creates in future articles, but for now it’s critical to consider what creates the right incentives for dealers and start putting those in place. First, understand what makes dealers aspire to be heroes. Second, figure out how to elevate the ones who aren’t. Finally, determine to gently send your lowest performing dealers on their way to represent your competitors.