Incentives: Rubik's Cubes for retailers

Incentives can seem like a Rubik's Cube. Discounts and rebates — triggered by numerous factors — are like the moving puzzle parts that eventually result in a quoted price for consumers. There is customer money, dealer money, lease discounts, spiffs for members of the National Funeral Directors Association, rebates for Realtors and so on.

One thing is clear: Even amid such complexity, the more accurate consumer information that dealers and their finance departments have, the better.

According to the J.D. Power 2018 U.S. Sales Satisfaction Index Study, among customers who shopped but didn't buy a vehicle at a dealership, 14 percent said they rejected the store because they had difficulty getting a straight answer on price. Nine percent walked away because of a perception of dishonesty.

Thomas King, senior vice president of J.D. Power's data and analytics division, said dealers should decide on a strategy for tackling pricing, then make sure they have the best tools. J.D. Power uses its Power Information Network to provide post-sale rebates and incentives data to manufacturers.

"If you're going to have a fixed-price strategy ... accuracy is very, very important because consumers are coming in with the expectation that it is the best price, and if there's an error or a misalignment there, that can be a real problem," he said.

Cox Automotive's rates and incentives unit released a white paper that showed wide discrepancies in competitors' incentive and rebate information on dealer service provider tools. In a study of seven vehicles on the East Coast and West Coast of the U.S., Cox's rates and incentives unit compared interest rates, cash and conditional incentives through dealer service provider tools. The company claimed to have found pricing fluctuations of up to $6,750. That led to changes in monthly payments of up to $122.

Brad Korner, general manager of the unit, said dealers should check their digital retailing tool against their desking tool to make sure they align. "Ultimately whatever their findings are, they need to take them back to their service provider and explain they need that data in their tool to accurately represent incentives and deal structures," Korner said.

He said gathering incentives and rebates is more complex than it was just four years ago. "What's happening is OEMs are getting a lot smarter with their spend," Korner said. That means incentive money is applied more directly where it's needed, often down to a model, option package or VIN.

Cox gets its incentive data from three main sources: automakers, captive finance lenders and other lending institutions. The rates and incentives unit supports about 70,000 dealer applications per month. Dealer applications can include things such as vehicle detail page listings, desking tools, digital retailing tools and equity calculators.

Among incentives and rebate information providers Automotive News spoke with, each company stood by its accuracy. "We feel the raw data we provide are the most accurate and timely," said Craig Jennings, president of Autodata Solutions.

Chrome Data, part of the Autodata Group, has multiple roles in incentive data distribution. It helps automate some incentives for certain automakers, which can then provide them to dealers, lenders and third parties. Several automakers compile spreadsheets and bulletins on PDFs that they send to dealers.

The documents describe the programs and how much money is being put on which vehicles. A few automakers have hired Chrome Data to publish the incentives in an electronic format.

Separate from that, Chrome Data gathers incentives from several automakers, which Jennings declined to identify. For dealers, there is "an incredible need to see and use these incentives," he said.

"It is really, really challenging because the manufacturers want these incentives available to dealers. They want consumers to know about them, but they don't want competitors to know them," Jennings said. This leaves dealers scrambling to put together marketing plans in the first few days each month.

For F&I managers, keeping track of incentives can seem like a full-time job.

"Our suggestion to anyone in the space, and it doesn't matter where you are in the space, you need to have access to technology that will do the heavy lifting for you," said Rusty West, president of Market Scan.

Market Scan has been gathering incentive and rebate data for about 30 years, and spent five years in the 2010s building out incentive collection software, West said. That software gives it an advantage in reduced manpower needed to compile incentive data, he said. But the system does not skimp on accuracy, he added.

"Once the data leaves us from a technology perspective, we don't have control over it," West said. "But for our dealer-facing products we guarantee the accuracy of the data."

West said that in its most recent audit, in 2018, it weighed a million transactions and had just 13 transactions that were off.

No matter their incentive tracker, F&I managers are often on the front lines, dissecting and selecting the best incentives for their customers. And those incentives' complexities can be challenging. One customer may not tell the dealer that he or she qualifies for a military discount, for example.

"The trick is," King said. "for the dealer, do you have the tools to get the best possible price out there?"