Dealer Incentive

What is ‘Dealer Incentive’

A corporate sales strategy in which the price a dealer has to pay a manufacturer for a particular product is reduced, allowing the dealer to make a higher profit or to reduce the price at which the product is sold to consumers. Dealer incentives can be tied to certain sales quotas, meaning that the dealer will only receive the incentive when a certain number of units is sold.

Explaining ‘Dealer Incentive’

Dealer incentives are often associated with the automobile industry. Manufacturers will reduce the price a dealer has to pay for a particular vehicle model in the hope of increasing the sales volume of that model. If the dealer charges the end consumer the same price but pays less to acquire the model, then the dealer earns a higher profit. The dealer can also pass the cost savings to the consumer, but may not be required to do so.

Further Reading

  • The failure mechanics of dealer banks – [PDF]
  • Dealer versus auction markets: A paired comparison of execution costs on NASDAQ and the NYSE – [PDF]
  • Completing contracts ex post: how car manufacturers manage car dealers – [PDF]
  • Contractual allocation of decision rights and incentives: The case of automobile distribution – [PDF]
  • Broker-dealers and investment advisers: a behavioral-economics analysis of competing suggestions for reform – [PDF]
  • Corporate sale-and-leaseback transactions: An examination of corporate incentives, wealth effects and dealer spreads. – [PDF]
  • Bid-ask spreads in multiple dealer settings: some experimental evidence – [PDF]
  • A model of incentives for the illegal exploitation of black rhinos and elephants: poaching pays in Luangwa Valley, Zambia – [PDF]
  • Do dealer firms manage inventory on a stock-by-stock or a portfolio basis? – [PDF]
  • A new approach for assessing dealership performance: An application for the automotive industry – [PDF]