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Relayware Partner Relationship Management

This American Life Captures Incentives in Action

Posted on January 20, 2014 by Chris Bucholtz

It’s not often that you hear a discussion about the impact incentives have on a channel partner on the radio, let alone an hour-long episode of American Public Radio’s This American Life. But, as I ran errands in late December, I heard an episode called “129 Cars,” and it provided a fascinating insight into how incentives motivate behaviors.

If you have time, listen to the program – as with all TAL episodes, it’s well done and has a good sense of humor and drama to it. Just for time’s sake, I’ll summarize it: Town and Country Jeep Chrysler Dodge Ram in Levittown, NJ is nearing the end of the month. They have a goal of 129 cars for the month set by Chrysler. If they make the goal, the dealership gets a bonus from Chrysler of between $65,0000 and $85,000. Make the bonus, and the dealership is in the black for the month. Miss it and the dealership’s in the red. With time running out, the sales staff pulls out all the stops to hit the number. The thing is, they pull out the stops every month.

The personal toll it takes is illustrated in the piece, but so is the fact that the goal leads to behaviors that may not be intended by Chrysler. Sell cars at a loss? Check. Sell cars to family members? Check. Give more for trade-ins? Check. Get the dealership to buy new courtesy vehicles? Check. The scrambling and scraping reveals organizational issues at the dealership, and by the end the managers and salespeople sound totally frazzled.

Did Chrysler’s goal work to achieve its aims? Well, it drove the dealership to sell, all right. But does it make Chrysler easier to work with? At one point in the program, it is revealed that bonuses for individual sales people and for the dealership change month to month and are only made known by Chrysler at the start of each month. For a salesperson, that means an unpredictable income and the possibility of long hours each month.

Of course, a car dealership can’t switch its affiliations easily, which explains why this activity continues. But if your payment and incentives programs induced the kind of stress on your partners as the auto industry, would your partners be eager to sell your products – or even stay with you as a vendor?