Would you like to rev up revenue?
Looking at a typical P&L, dealer margin is the first and biggest line item with promotional incentive expenses second. There’s no doubt that incentives are critical to meeting demand and revenue growth objectives. Incentive spend accounts for 10% to 20% of automaker OEM revenues.
For example, one large automaker had a total revenue in 2018 of $147B and they spent $26B on incentives or 17.7%. The industry estimates that up to 10% of incentive payments are due to overpayment. In this example, we’re talking up to $2.6B in potential overpayments! This indicates a huge opportunity to recover revenue. If only 1% is recovered that is a total of $26M.
By tracking the customer’s journey through the purchasing process, automakers will be able to learn what types of incentives and sales promotions have the most impact and help target offers to sell more cars. Below illustrates the potential net revenue for one vehicle.