A Compact for the Century
Not too long ago, one of the RV industry’s most trusted manufacturers announced the creation of a Franchise for the Future program. In it, the OEM would help subsidize some of the dealer’s advertising costs and pitch in to create in-store and exterior décor to “brand the store.”
The proposal was greeted with much fanfare and cited as a business model for the future. But, if the Franchise of the Future is such a good deal, why are many of the franchisees frustrated? Because hidden deep within the contract — not too far away from the clause that requires franchisees to accept all terms or lose the product line — rests a provision that allows the manufacturer to pay the dealer’s salespeople directly for selling the firm’s motorhomes.
Why a manufacturer thinks it can usurp an RV dealer’s ability to manage his day-to-day business is cause enough for concern. But, going around the dealer’s back to pay his staff in some type of under-the-table transaction goes against everything the RV industry is trying to do to improve customer service.
If our salespeople are supposed to “listen to customers” and “discover their needs” and “recommend an RV to fit those needs,” how is that possible when one manufacturer dangles a giant carrot in front of a salesperson. In the process of doing so, isn’t the manufacturer telling the salesperson in a not-so-subtle way to put the OEM’s best interests ahead of dealer’s and the consumer’s.
If a salesperson receives a check at home from a manufacturer for each franchise-branded RV he sells, human nature suggests the salesperson will avoid recommending another RV brand that may better suit the customer’s unique needs.
Along those lines, would not another manufacturer be justified in one-upping the original OEM to provide a better under-the-table incentive to the salesperson?
The natural result of this slippery slope will be the creation of a sales team that acts less like sales advisors and more like free agents.
I can see it now. Joe Sales has a customer torn between two competing units. The customer makes an offer on both and the salesperson excuses himself to consult with the sales manager. But, along the way, he calls both OEMs and entices them into a spiff and incentive bidding war to secure the deal. Whichever company offers him the better incentive, that’s the deal he pitches to the sales manager, politely explaining to the customer that the other motorhome just couldn’t go for the asking price.
I’m certainly not saying our salespeople are deceptive, but why create the opportunity? Beyond the bribes and the possible deception, the current policy is a slap in the face of the entrepreneur charged with running his dealership, training and managing his staff, and growing his business.
But, apparently the idea has merit. So, in that regard, I suggest that RV dealers adopt a similar Compact for the Century. In it they would pay a spiff directly to the person who processes the OEM’s warranty claims without question. Since the check will go directly to the employee’s home, the dealer can include a few bucks for approving claims past the warranty period. After all, the OEM’s employee is simply looking out for the firm’s customer and dealer partner, right? Perhaps the OEM’s employee in charge of shipping parts could earn a few bucks slapping on a next day air label to the box instead of using standard UPS ground.
Realistically, let’s just allow manufacturers to stick to what they do best – assemble RVs – and let’s let dealers do what they do best – sell and fix the RVs. That way, each entity can be assured that its own employees are watching out for the business’s best interests because the business’s owner is the only one who writes the checks.
November 21st, 2006 at 5:31 pm
What a foolish article. Sounds like you read a page or two of a franchise agreement and thought yourself educated to comment. I can deduce, however, that you haven’t a clue as to the intimacies of the program or the habits of RV salespeople in general.
Take a consensus of participating dealer’s and their feelings toward the program. Dealer profitability has risen exponentially and sales have gone to a manufacturer with an infrastructure sufficient to support its customer base with reputable customer service.
In a market where the average buyer is getting younger and younger, and sales are weighted more on aesthetics than qulaity and service, it is refreshing to see unassuming customers “lured” to a manufacturer that will leave them pleased and coming back for more in the long run. Is retention not what this indutry needs?
I guess I am missing the travesty of which you refer to in your “educated” opine.
October 30th, 2006 at 12:40 pm
As a dealer in a state where all dealer agreements ammount to franchise agreements.albeit they are slanted in the dealers favor.While I beleive that the rhetoric currantly will prove to be successful in the distant future right now as pointed out by earlier comments They (Monaco)are not exactly an honest broker in the deal.Nor are any RV manufactors that I know of I only have 16 years in this game.Spiffs are not the problem neither is a dealer hold back or an advertising allowence.The problem is the fact that at month end or quarter end or some other excuse favored dealers are offered substantal discounts on perfectly good product giving them a definate compettive edge over other dealers this short sighted way of doing business weakens the value of the franchise and causes dealers to doubt the effectiveness of the program.
Monaco suffers from the same short sightedness as the rest of the manufactors in that they look at the dealer as their ultimate customer when in fact the ultimate customer is the retail buyer.they will listen when it comes to fetures and floor plans but that is it.while this is 90% of the deal the rest comes from large scale issues like quality and customer satisfaction and continuity of price.while msrp is pretty close nation wide actual dealer price varries by several thousand dollars.To correct this problem all incentives need to move from the wholesale to the retail customer in the form of rebates and or dealer cash insentives based on actual sales not whole sale purchaces will leavel the playing field and make a franchise more valueable and exclusive.this would also allow and encourage more trading between dealers and make it easier to move older product.Until munufactors stop treating us dealers like reail “ups” with their offers of “if i can get you 10grand off will you buy it today”then the franchise will not have any real value to it
October 28th, 2006 at 11:17 pm
Quote”Realistically, let’s just allow manufacturers to stick to what they do best – assemble RVs – and let’s let dealers do what they do best – sell and fix the RVs. That way, each entity can be assured that its own employees are watching out for the business’s best interests because the business’s owner is the only one who writes the checks.”
Dealers do Sell Rvs - but fix them? Are you kidding? I think some dealers might actually have some intention of wanting to fix them, but I have yet to run in to one that actually does.
Maybe [the franchise of the future’s originator]
will actually end up creating a business model that works as well for the consumer as the old one has for sellers - uh, I mean “dealers.”
October 26th, 2006 at 7:51 pm
Your all Right! Just remember what goes around come’s around. Use your head and don’t let things get out of hand. If we all can make money no matter where it comes from and it does not hurt the dealerships bottom line or your customer CSI then I say let it ride after all we all need to earn a living.
October 26th, 2006 at 3:00 pm
There are two problems with Greg’s article: 1. It villifies OEM’s by implying that this is a one sided issue, and 2. the hypothetical examples are just plain silly. I am a manager for an OEM to disclose my perspective, and I fully admit OEM’s are not without sin on this issue. However, I think the sentiments expressed by Sales Man Extraordinaire (SME) exhibit why this is a problem and demonstrate much of what is wrong with this part of the business. I dislike the concept of spiffs, but we offer them from time to time because we receive requests from so many dealers. The implication is we will be at a competitive disadvantage if we don’t offer a spiff program. The comment, “You want to make sure our salespeople are excited about selling your product” came with one such written request earlier this year. But the OEM’s are driving this issue?
SME made the comment: “Well, what incentive do I have to sell a RV that I know will make me less money even though the dealership wants to get rid of it?”. Answer: It’s your job. The dealer bought the unit and has tied up capital resourses and carrying costs associated with it being there too long. The customer buying that unit will be back for service, to buy parts, and maybe another new RV in a couple of years - all activities that drive revenue into the dealership. SME’s boss has an obvious incentive/motivational problem. He is only focused on his commission for a particular sale and not the good of the dealership as a whole. This may be very understandable based on his compensation structure, which is the very issue the dealer needs to address. If dealers want to keep the “evil influence” of OEM spiffs out of their businesses, they need to take responsibility for motivating and providing proper financial incentives for their salespeople.
At the OEM level, we hold our reps accountable for selling all of our models and moving non-current models at model change. We often have to offer additional discounts to move this product, which cuts our already thin margins. We do not ask our reps to take the hit. Perhaps dealers could do the same by reducing often excessive overhead packs and other internal charges on older units instead of simply cutting the gross on which the salepeople are paid. This may not follow the 20 Group profit maximization playbook, but it would move some stagnant units and keep product from aging.
October 26th, 2006 at 10:13 am
For most professional salesperson, it all begins with helping find our customers the right RV, not the the RV with the best sales spiff. Most manufacturer’s spiff programs are given to bring attention to a new products, to refocus sales attention on older units, and usually given for a limited time. This makes spiffs hard to track, hence; are often not told to new & existing salespeople till after the sale. In the overall sceme of thing, spiffs are viewed as an added bonus for a job well done, or a way to earn a living at those dealerships that “pencil back” a sales person’s commission through excessive dealer packs and add on’s.
October 25th, 2006 at 7:00 pm
Good morning greg
Well I need to tell you how taken back I was by knowing that you would publish something like this. I have been in the industry for over 28 years and selling 10 million plus dollars a year wholesale.The word spiff has been around since I started.I have been paid spiffs by many of manufactures for a long time.Monaco is the only one that has put in writting as a dealer agreement.Please keep in mind that auto industry has been doing this forever. Dealer hold back and spiffs for the sales team.How about other companys that pay spiffs ? gulfstream,Fleetwood,nu wa,Alpine coach,Forest river to list several.Almost every rv manufacture pays spiffs.Even workhorse and ford have a chassis spiff program.Does that meen I will try to sell them befor another one. NO… If you are in the industry for the long haul you can never survive by selling customers the units that only pay spiffs.You will starve!! If you do your job and listen to the customers wants and needs you will guide them to the coach that best fits their needs.With the internet now letting some dealers try to blow units out for invoice outside there market area. At least we the sales rep can still make a living and feed our familys with the help of franchise to the future.I will tell you that they are the #1 in diesel sales and I am proud to repersent their line of luxuary coaches.Maybe you should come aboard and try to sell for a while.They say they who sell are salesmen and those who can not train. Thanks again
October 25th, 2006 at 12:37 pm
You have hit a hot button with me on this item. I have
been a Dealer for this OEM for several years, but am going
out when I retail this last one on my lot. They blew me
away with all the smoke/mirrors when this program came out
at vegas a couple years ago. At first blush it sounds good. Then comes the fine print….Our oldest OEM is and
has been our sales leader, and I have no intention of changing that. Plus, this mystery Shopper program, where
they hire some plug, who couldnt afford a wheel off a motorhome, and send them to your lot to pester a sales person trying to make a sale(and getting one of these bums)for a :”UP” We dont need or want that on this lot.
And you are right, what if all the others have to start
greasing the sales person? When does it stop ? You lose all control over your own business.
October 25th, 2006 at 10:22 am
Why do manufacturers issue these spiffs? They issue them because their product is lacking something. In order for them to sell, they have to make up for it. Maybe it is old inventory, maybe it lacks features, or maybe it lacks a price point. In any event you usually do not have large general spiffs across the board from a company that makes solid products at good prices. Some companies may intice you with a hundred dollar spiff across the board, but you can usually expect to make a little less to begin with on those types of products, and the hundred dollar spiff helps make up for it. They lack a good price point for the features they offer. In addition, if it is old inventory, then you are usually taking a smaller profit margin. Well, what incentive do I have to sell a RV that I know will make me less money even though the dealership wants to get rid of it? The answer is a spiff. Furthermore, if the manufacturer is going to provide that for the dealer, then they are smart enough to realize that by helping to move the old unit, they will be able to bring in more new units. It works out in the end for everyone. Spiffs are not usually a way to buy a sales persons loyalty to that product.
October 25th, 2006 at 9:01 am
The Franchise for the future is a program we went into reluctantly. We still are a reluctant dealer. Not for the salesmen spiffs, but something bigger than that. The deals to some dealers and not others was supposed to stop. Well, I just got offered 10 grand off a certain model that this manufacturer makes last week. I spoke to another dealer in a different state, he did not get the same offer. The upper management of this company is not trustworthy and does not keep their word.
October 24th, 2006 at 8:56 pm
And these same Manufactures wonder why the distrust, by Dealers. These manufacture need to take a look at why Blue Ox and Fantastic Vent are so honored by the users, and dealers
October 24th, 2006 at 4:49 pm
Greg,
I think you raise a good, but misleading, point about RV manufacturer payments (“spiffs”) to dealer salespeople. You make it sound as if only one manufacturer follows this practice, when in reality the practice has been a given for every manufacturer and every dealership for years.
Another important point is the fact that the program you mentioned, Franchise for the Future, isn’t a requirement for any dealer, it’s voluntary, and it isn’t part of the manufacturer’s dealer agreement. Furthermore, dealers are the ones who must sign up their salespeople to participate in the program. There is no relationship between the manufacturer and the salespeople directly.
My understanding of the Franchise for the Future program is that its purpose is to allow dealerships to be able to provide a higher level of service to their customers.
Sean
October 24th, 2006 at 3:54 pm
This article is the worst I’ve ever read from you Greg. The thought that a salesperson would have the time,while working a deal to call the two manufacturers to start a bidding war is ridiculous. In our busy season we don’t have time to eat let alone start bidding wars. The problem is that due to price gouging from certain dealers in the country, to keep your local hometown customer from going to another state you have to take short (non profitable) deals. Thank god for the franchise for the future, in some cases if it were not for this kind of incentive on the back end the salesperson would not make any money, and when that happens who really loses? The customer, because the salesperson isn’t able to make a living to stay at the dealership to service their customer.The dealership, because of high turnover of its staff due to price gouging. The manufacturer, due to unsatisfied customers,who in the end really just got a “great deal”,not a relationship with their local dealer. And last the Industry which loses face with the general public because “don’t go rving” its not what it’s cracked up to be to much of a hassel to own these things. The next time you write an article consider who’s reading it and don’t throw the guys on the front line under the bus!
October 24th, 2006 at 3:37 pm
Greg
As a Franchise holder, I feel compelled to ask you to please not speak for me. The franchise adds profit to our bottom line and value to the dealership.
Sales spiffs have been with us a long time and will continue because it is a valuable sales tool.
By your logic, a GOOD salesperson would send a customer to a competing dealership ,if needed ,in order to serve his customer properly.
Bottom line is - managment knew what the deal was before signing up for the franchise and managment retains the ability to accept or turn down a customer/salesmans offer. Profit margin is not set by the salesperson.
As a manager, I can tell you that the factory sales spiff has helped move aged product when the opportunity to make a proffit had gone. Sales people are always going to take their customer to the unit that pays the most. It’s got nothing to do with “customer needs”. I’m not saying that it should be that way but to deny it, is folly.
Is it wrong for the dealer to get holdback ? Isn’t that a spiff for the dealer for selling a certain product ?
If the factory is paying a good spiff, doesn’t it allow the dealer to pay a smaller commission ?
I had my dobts about the franchise agreement in the beginning and it still is not perfect but I have become a beliver.
October 24th, 2006 at 3:28 pm
Intriguing! I know a dealer who lost their ability to sell one of their brands because they wouldn’t sign up for the program. This is a hard core attempt at making dealers sell only their brands.. nonsense!
Franchising has worked in the automotive industry for years… based on the “big 3″ plus imports, etc. The RV indusutry is much different, and can’t be run this way.
Ford looks like it could be going the way of the dinosaur, and if we piss off the boomer generation, our industry will go the same way!
October 24th, 2006 at 3:22 pm
Hello Greg,
This is such an insightful article. I find it almost to hard to believe. However, realizing how hungry some OEMs are to sell product, I can see how they might seek to entice some salesfolks who are just as hungry. But….
Let it be known that RVers are not stupid, and in most cases are very resourceful. Most, if not all, are are very deliberate in what they want when choosing a new or replacement RV, be it a MH or TT/5th Wheel. It does not take many evenings of sitting around the Camp Fire to find out what are the “hot buttons” to veteran RVers when it comes to selecting a new Rig. They will quickly see through the “hype” that is being promulgated by this less than honest OEM.
There are two HUGE reasons that OEMs have problems selling new models and they are QUALITY and RELIABILITY. It is to bad that OEMs cannot make their decisions on what really sells to the RV Public by listening to and participating in “Camp Fire” roundtables. I have listened to and participated in many of these discussions and have never failed to learn a lot about what the RVer really wants. That is how I decided on what sells in the RV marketplace.
I have found that very few RVers purchase anything strictly on price. Most RVers are very concerned about their nickels and dimes. Thus, if they really want a “Brand A” model and it costs a little more than “Brand B”, they will put down the extra cash and get what they really want.
So, let this OEM play the games. It will all wash out in time. RVers are a smart lot and they will soon hear about the games.
Hang in there.
Gene