The present global automotive motors market size is $20,321 million and will grow to $25,719 million by 2025. New vehicle sales will account for about 38% of this value. It is also expected that 110 million passenger vehicles will be produced by 2025. Adding on, around 18.43 million new cars will be sold in 2024 having a level 2 automation (drivers take their hands off the wheel).
Together, advancements in IoT, telematics, and smart applications have significantly enhanced connectivity and communication in the industry. This is providing the vehicle drivers, passengers, and commuters with seamless infotainment, protection, security, and vehicle management. Digitization along with mobility as a service (MaaS) is expected to gain good momentum in 2020 and beyond. However, profitability remains a major problem for service providers.
OEMs are including more connected systems in the mid and lower segment vehicles. Most of the Asia Pacific countries are going for attractive government incentives to popularize electromobility. German auto industry is calling for more incentives to revive the industry. Many auto industry experts agree that larger discounts could generate demand and cash flow but will erode carmakers’ profit margins. With slumping sales, the US auto market is trying to incentivize as much as possible.
Incentive Compensation – Background
Incentive compensation is aimed at promoting an individual or a group’s success in acknowledging their performance. The goal and purpose is to enable employees to target their activities and adjust their practices to achieve the required qualitative or quantitative success.
For example, many businesses pay their workers retention incentives in the US, based on various performance metrics. The following forms of compensation could be earned by an executive: a fixed pay, annual bonus package, stock options, and additional compensation.
In the automotive industry, non-cash rewards have been seen to deliver a 46% increase in performance when compared with cash. When a sales incentive program steps in seamlessly in an automotive business, it delivers an array of benefits:
- Optimizes sales and marketing campaigns by aligning targeted product incentives with corporate goals. It maximizes employee and channel partner performance.
- Creates a “Selling Organization Culture” with your sales commission software, logistics, technicians, and the entire organization focused on the sell.
- Automatically suggests the next best action on an individual basis to assist employees and channels to focus on key opportunities.
- Incentives automation can turn shadow accounting into productive time, and help staff focus on stock management, sales, and customer service needs.
- Drives business innovation by simulating profits gained from new product development.
- Helps in reducing IT and operating expenses with a best possible solution that covers all incentive needs
ICM in Automotive
The auto giants are now directly engaging with the customers to sell new, used or subscriptions for cars. With this evolving ownership model, there is an ”incentive war” among OEM’S and dealers alike. A major share of OEM spend on incentive program is the ”supplement” provided to dealers to upkeep the health of retail network. This acts as an impetus provided for faster inventory turnover or lowering lending rate for improving margins.
Below are some interesting ICM use cases that have been delivered by the architects at SoftClouds:
Use Case 1 – One of the leading automakers in Canada was handling the incentive compensation programs via a third-party service provider. This structure suggested that the automotive company did not have as much access as it desired through the commission processes. Hence, it opted to deploy a platform-based, in-house solution to further boost process transparency and compliance.
With the help of Oracle Incentive Compensation Cloud, SoftClouds customized a digital incentive program, incorporated it within the system. Now if a salesperson makes a transaction, the dealer submits the details of the deal that are completely incorporated with the info. The solution, then determines the payment of the compensation owned and is transmitted automatically. This helps ensure that up-to-date commission figures meet the individuals who need them, while allowing for processes of approval that are quick and compliant.
Now, the automaker acts faster, to deliver improvements in commission processes. Custom reports and audit flows are now simple and easy to produce to suit the specific needs of budgeting and sales teams. In addition, the organization is now motivated to adapt incentive rewards systems in an agile manner in a constantly evolving market environment to help it achieve changing business objectives. Completely audited workflows, meanwhile, help ensure compliance with regulatory standards for commission management.
Use Case 2 – Operating across five continents, the global auto company has more than 40,000 auto dealer clients. The organization aimed to develop a large sales force fueled by a world-class sales and performance management. However, the team spent much of their time manually integrating data with different division and compensation systems and estimating compensation for their growing sales team. This not only limited visibility, but also forbade them from more strategically looking at their data and developing initiatives that would encourage success across the sales organization.
Oracle Incentive Compensation Cloud helped SoftClouds to automate the customers entire compensation process, including previously painful data integration between core systems. Now, they can manage the expectations of the organization and examine everything from attainment to payout correlations, to distribution curves and participation scatter charts more strategically. Sales practices have removed manual data entry and extensive changes that have created long hectic days, allowing them to concentrate their attention on becoming strategic leaders.
Oracle Incentive Compensation Management – an Intro
Oracle Incentive Compensation (OIC) Cloud is a sophisticated application that helps enterprises manage their business objectives by controlling the way they compensate their sales forces. OIC is set up with an out-of-the-box integration with Oracle Receivables and Oracle Order Management but is flexible enough to work with all the legacy applications. It can support multiple operating units within an enterprise and can calculate monetary/ nonmonetary commissions.
OIC enables companies through incentive insight, to relate the sales rewards to the company goals and inspire sales reps, 3rd party members, customers/suppliers, resellers, or partners.
The following are the key advantages of the Oracle Incentive Compensation Cloud:
- Attract and Retain Partners – OIC helps attract and retain partners critical to accelerating growth of the organization through various channels. With accurate and timely payment, shadow accounting is reduced, and trust & sales moral is improved within the sales force and partner communities.
- Wallet Share Increase – OIC contributes to increased wallet share through improved alignment of compensation plans to corporate objectives and drives desired behavior such as increased cross sell/up sell, improved customer service and customer retention.
- Going beyond reporting to strategic modelling and analytics for sales results – OIC Analytics for ODI (Oracle Data Integrator) breaks down traditional front and back office silos bringing together sales performance data with those responsible for the sale and selling costs. Sales, Finance and HR executives and managers are empowered to make informed, actionable decisions that promote effective sales strategies.
- Increase in Productivity – Keep sales representatives motivated with prompt and accurate payments and direct access to schedules, calculations, and transactions for rewards.
- Flexibility of Benefit – Full coverage for the design of every benefit package. Meet evolving business needs and plans that can be easily developed, modelled, and rolled out.
- Financial Oversight – Manage running expenses and gain access to variable payouts with complete visibility. It also supports different incentive strategies for the corporate governance.
Here are some of my thoughts to help build and manage an optimized incentive compensation program for any automotive OEM.
Steer incentive spend based on facts, not just experience – Seek a granular view, define incentive guidelines to foster upselling. Make sure to build a digital/IT environment to run automated analyses and intelligent reporting cockpits to support interventions.
Analyze – Visualize regional differences in manufacturer profitability. In addition, observe the relationship between manufacturer profitability, incentive spend and volume to identify correlations. Increase visibility on regional target achievement, total volume, market share, model mix, transaction prices and incentive spend. Compare these measures to overall averages and identify outliners.
Action from analysis – Prioritize relationships with dealers who have high volumes or manufacturer profitability. Identify lagging dealers, develop mitigation, performance management plans. Introduce model mix targets and transaction price targets. Develop regional coaching programs to address market share, mix or transaction price issues.
The battle for sales at the automotive dealership level will intensify, compelling automakers to increase their incentive spending. In the long term, incentives will be used as a strategic differentiator to sustain and grow market share. Due to competitive business mindset and evolving ownership models, there is also a strong need to rationalize incentive spend.
Incentive will evolve from being vehicle centric to a specific customer. The digital tools will facilitate a quantum leap in incentive domain and ensure that data and insights connect people with right information. This will ultimately lead to a better experience for all the stakeholders.
SoftClouds has an extensive domain experience working with global automotive OEMs in incentive compensation management. If you are interested or want to learn more about or use ICM to support your enterprise, please message us, or visit us at www.softclouds.com and schedule a meeting with us today!
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Sundar Viswanathan leads the Oracle Cloud/CX practice at SoftClouds. He has more than 17 years of CRM, Business Intelligence, and Data Integration experience with expertise in the areas of Sales, Marketing, Service, and Loyalty.
Sundar has a broad range in IT Consulting Services experience that includes pre-sales, project implementation and technical consulting. He has played nearly every lead role from solution analyst, lead consultant, technical architect, and project lead across a wide range of successful customer implementations.