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Automotive manufacturers (OEs and suppliers) have historically focused on technology and operations to gain a competitive advantage in the market.

While those elements remain critical, leading companies in the automotive space are also advancing their commercial models to drive accelerated growth.

The automotive landscape is a complex environment of tiered supply chains, distribution networks and routes to market that attempt to support an industry that faces persistent pressure globally. Manufacturers and service providers must continually evolve product and service offerings to meet shifting consumer preferences and environmental demands. To increase revenue growth in this competitive space, leading automotive firms are advancing their commercial models in the following three ways:

  1. Rethink how to manage channel complexity
  2. Leverage inside sales
  3. Enhance sales incentive plans

1. Rethink how to manage channel complexity

Wholesale distributors, jobbers, retail stores, dealers and service centers are just a few channels that form the route to market between a manufacturer and consumer. These complex three- or four-step distribution models require a thoughtful approach to channel coverage and partner enablement programs. Leading manufacturers are proactively working “downstream” to connect with customers rather than solely relying on channel partners to sell their value proposition. In addition, companies are deploying in-depth partner programs that provide differentiated incentives based on the level of value a partner provides. These elements are critical for all parties to ensure a mutually beneficial relationship.

2. Leverage inside sales

Prior to the pandemic, very few automotive companies used inside sales as part of their commercial model. Historically, there has been a perception in the automotive space that sales must be in-person to develop strong relationships with customers and partners. However, there are a few examples of automotive companies that began deploying inside sales with great success before the pandemic. And with all we have learned in the past year about how to interact virtually, inside sales must be a component of the commercial model to generate the efficiency and scale needed.

3. Enhance sales incentive plans

Many automotive companies have typically used sales incentive plans that aren’t directly influenced by the salesperson. Company-wide revenue, EBIT and MBOs are examples of payment measures for sales compensation but do not include individual impact. This aligns with legacy thinking that the value of the company is solely in technology and operations. The perspective of many CEOs has been that the product should “sell itself” and the salesperson provides little value to the organization. This is shifting. While technology and operations drive key differentiators, the sales organization can (and should) capitalize on those differentiators in the market.

When done right, this leads to incremental revenue growth. How does a company ensure their sales team is driving the company’s competitive advantages? By aligning some (or all) of their compensation to each individual’s performance rather than company-wide results. Leading commercially-focused companies are driving toward more individual pay with positive results. The sales organization is often an underutilized resource in many automotive companies. Enhancing sales incentive plans can drive greater ROI from this valuable investment.

For more information on how automotive manufacturers can manage channel complexity, leverage inside sales and enhance sales incentive plans to drive accelerated growth, please contact an Alexander Group manufacturing practice leader.

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