While Nissan USA opts to end its stairstep retail sales program, its Canadian counterpart has modified its bonus plan, although it has maintained sales targets, which have long divided dealers.
The company has made “significant” changes, including “enhancing the rewards” for dealers hitting customer experience and loyalty targets, Nissan Canada President Steve Milette told Automotive News Canada in April. Meanwhile, the financial reward for hitting aggressive monthly sales targets has been “lessened” since the start of the year, he said.
But “in Canada, we still have targets.”
Sibling publication Automotive News reported that Nissan dealers in the United States will now receive $250 per vehicle sold, replacing monthly sales targets that promised large cash payouts to dealers. A volume-based incentive plan for Titan full-size pickups was in place for U.S. dealers through May 3.
“We have our own program, and we’re pleased with the results at this point in time,” Milette said. “They’re different markets, and we’re also starting from different places in different categories.”
While some retailers thrived under the old system, others have said the targets were unrealistic and encouraged some stores to punch vehicles to inflate their totals and receive cash bonuses that are crucial to profitability. That means they report vehicles that stay on dealer lots as loaners or rentals as sold, typically selling them later as used vehicles with little mileage on them. A Nissan Canada spokesman said the company “does not condone” such practices.
TARGETS MISS THE MARK
“It completely destroys our used-car market, our residuals, as well as the value of the brand itself,” said a Nissan Canada dealer who asked to not be named. “Why would you buy a car from me ... when you can buy it from the guy down the road on the used-car lot with no mileage at $1,500 less?”
Jason Bender, chairman of Nissan Canada’s dealer advisory board, said the new program is “more balanced” than the previous one. The board worked with Nissan to develop the initiative, called the Nissan Next Rewards Program, over the last year.
It launched in January, shortly after Nissan introduced the redesign of its top-selling Rogue crossover.
The previous program had many dealers “chasing toward a pot of gold,” Bender said. “That’s not a good business plan if your profitability is based around program money from a manufacturer.”
Nissan Canada says the revamped incentive plan emphasizes customer experience and loyalty. Milette said the company’s metrics on customer loyalty improved in the first quarter as a result. “From an internal metrics perspective, we’ve never been as high on what we call the purchase confidence score as we have been in the first quarter,” he said.
The company measures satisfaction through internal surveys of customers after they purchase a vehicle or service one at a Nissan dealership, said Nissan Canada spokesman Didier Marsaud, who declined to provide details.
‘BACK IN GROWTH MODE’
Milette said the new bonus program helped to boost Nissan’s first-quarter sales results, which were up 28 per cent from a year earlier when including the Infiniti luxury brand.
“We are one quarter into this new program, and what I can say is we’re back in growth mode,” he said.
Still, some dealers who spoke with Automotive News Canada hoped Nissan Canada would eventually back off of its targets completely, especially as the COVID-19 pandemic continues to keep some customers out of the market and as the global microchip shortage affects new-vehicle inventory.
“The carrot is not as big now, but I would still think that for most dealers, it’s as much as $150,000 to them that they could miss out on” if sales targets are not hit, said a Nissan dealer who spoke on the condition of anonymity.
“You’re under the gun to perform.”
TARGETS ‘NOT ARBITRARY’
Milette said the company’s sales targets are managed by a third party and they vary depending on the health of the dealer’s market and other factors.
“Targets... are not arbitrary,” he said. “A third party would tell us, ‘Here’s the size of the market for Dealer ABC. It’s a market that’s going up or down, here’s the segmentation of the market [and] what’s been sold in the market.’”
Bender said the dealer advisory board is pushing Nissan Canada to make adjustments to its target methodology.
“It’s an impossible task to try to balance these targets right now, but our hopes are that in a normal market that they do balance out and are reasonable,” he said. “Hopefully we can work with them and get some support around target methodology and maybe get some changes around that.”