Citroën changes bonus scheme to help dealers

After a tough 2005, during which the National Dealer Council called for “drastic action” to prevent business failures, Citroën believes it has turned the corner on the back of new product and a new sales drive for sales.

Xavier Duchemin, who replaced the studious Alain Favey as UK managing director last September, has implemented a 10-point action plan in conjunction with the NDC to pull all retailers into profit this year. He says “a minority” lost money last year, but there were none of the business failures feared by some.

Every Citroën director is monitoring dealer profits and coming up with ideas on how the network can raise its returns. Citroën was at the foot of the most recent Sewells and RMI dealer attitude surveys but Duchemin believes relationships with the network have improved since he took charge. “There’s still lots to do but we are on the right track,” he says.

The Citroën bonus scheme was revised in January to help more dealers earn revenue. If dealers hit their new car volume target they now achieve 100% of bonus; if they fall slightly short they earn 80% bonus, and so on down the scale. “It’s no longer all or nothing,” says Duchemin.

Incentives encourage test drives

He has also adjusted demonstrator incentives, improving the commission structure to make it more profitable for dealers to conduct test drives.

Aftersales is another area in the spotlight. Citroën is introducing a ‘Euro Parts’ initiative that will cut prices for older cars, helping dealers to raise their penetration in the five- to eight-year-old sector. This will aid dealers competing against independents, including those on Citroën’s authorised network, although they can also access the scheme.

“We want a lot of activity in the workshop,” says Duchemin. “Our car parc has risen 30% over the past four years and we want to see an improvement in the hours sold. If dealers can improve turnover by more than 5% in the workshop it will make a big difference to their bottom line.”

Margin should be more than 1%

Average margins, believed to be below 0.5% last year across the network, should rise accordingly. Top dealers already exceed 3% return on sales. “If we increase our sales volumes and increase workshop business, the new profit scenario means the network should easily make more than 1%,” Duchemin confidently predicts.

Such bullish statements help attract applications from the right dealer candidates. This year, 15 will be added – five have been already – to take the total to 220, and 230 is the medium-term target.

The plan is behind the schedule devised by Alain Favey two years ago – he wanted 260 dealers by 2005 – partly because of the sales setback last year. Favey also aimed for 350 authorized repairers, but the network is currently 280-strong, with just under 50 standalone centres. It’s likely to grow to 300 this year, largely through new franchised dealer appointments.

Duchemin knows the UK market well. Fourteen years ago he earned his spurs in the marketing department under the wing of Marc Raven, now PR boss.

“I’ve been impressed by the improvement – sales have grown from 80,000 to 140,000 in the past five years,” he says. “I came back to the UK with a positive view and we still have a big potential to increase sales. We have lots of new vehicles and our cars are well designed for the UK market.”

#AM_ART_SPLIT# Retail sales trail behind fleet

He expects to see improvements in retail and, especially, fleet following a reorganisation of the department last year. “We have a huge potential for improvement in the medium sector with the C4, new C5 and C6 – our fleet market share is not good enough.”

Over the first four months, Citroën’s share of the retail sector is down year-on-year at 4.96% (full year 2005 was 6.7%), while fleet is slightly ahead at 3.45% (2005: 2.75%). Within 18 months, Duchemin expects fleet’s share to rise to 4% and, eventually, to 5%, with each dealer employing a fleet sales specialist.

Citroën’s retail strategy continues with upfront price cuts, cashbacks and ‘no VAT’ deals. “We want to grow retail sales and 6-6.5% will be a good performance this year, and 7% within two years ,” says Duchemin.

He wants a 4.5% new car market share this year (130,000 sales, with 40% to fleets) and a 7% share of the van market.

Emphasis now on technology

Xavier Duchemin is determined to make more of Citroën’s research and development.

He points to innovations like the lane departure warning system introduced on the C4, the C5’s xenon headlamps, the heads-up display showing speed and sat-nav instructions and the fixed-centre controls steering wheels. Also, the emphasis on safety that saw the C6 become the first car to be awarded a full four stars for pedestrian safety by Euro NCAP and the company take the What Car? 2006 award for safety.

“We want to talk up our products more in terms of technology so there will be more tactical advertising campaigns to focus on this,” Duchemin says.

“We are encouraging dealers to do more test drives because we believe this is the best sales tool and an opportunity to show off the technology – that’s why we will be monitoring the number of test drives each dealer does.”

#AM_ART_SPLIT# Xavier Duchemin CV in focus