July 2014 | Vol. XIII - No. 7
For Retailers on the Edge of Adding Commission as Incentive
Ron Johnson, formerly with JC Penney, ended retail sales commissions for his staff in fine jewelry, shoes, window coverings, men's suits, and hair salons shortly after he took over.
He said, "I know with every bone in my body that a non-commissioned sales force will create better customer service, better teamwork over time."
According to the Wall Street Journal article, JCP spokeswoman Kate Coultas added, "Our new business model requires that we move away from a commission-based environment so that every team member is motivated by meeting the needs of our customers."
Every time I hear that somehow, retail employees who receive no commission deliver better customer service, I want to puke.
Cutting costs is cutting costs, but don’t use some smoke screen to try and kid yourselves that not paying retail sales commissions makes you more competitive.
Shortly after Johnson was fired, JCP returned commissions to their retail salespeople. Cutting commissions had not helped anything and probably was a factor in their loss of 4.3 billion in sales.
Which brings me back to the need for commissioned salespeople in retail…
If you are a retailer on the verge of offering commissions, here are a few benefits to push you over the hump:
Salespeople will know if they don’t sell, they don’t eat as well.
Salespeople are motivated to learn about your products.
Salespeople are driven to initiate, rather than wait for customer interaction.
Commissioned salespeople will be better at selling the merchandise because they have a stake in the game. They will be motivated to truly create better value for your customer. The sky’s the limit which means their enthusiasm can be unbounded.
On the other hand, non-commissioned employees have no need to initiate sales. The stability of their paycheck, regardless of how many sales they made, removes their drive to sell; they can get away with just being helpful.
Some employees will even brag about not making commissions like an employee during my recent Best Buy shopping experience.
If you own a jewelry, photography, home furnishings or other high-dollar store, you should already know that there are few products that can sell themselves.
Rather than giving more discounts, coupons and deals, why not offer commission to your employees so they have a direct connection to your success?
Now, I’m not talking about straight commission as that often keeps the really great salespeople away. And those who will work for it will balk at doing anything but trying to sell your merchandise.
What I am talking about is adding commission on top of their hourly wage or salary. Come up with an easy system that is meaningful, or employees will feel it is worthless or impossible to achieve. Again, you want your best to do even better for you!
Learn how to create a commission program here
A tiered approach can be a good place to start. For example, if your salesperson exceeds their own sales the previous month by 10%, they get a percentage of all the sales they made. If they go over last month by 20%, they get a nicer commission.
Just remember, your best salespeople are like you - they want to make a lot of money.
Maybe you don't want to call it commission, but rather a bonus. That's fine.
Without passionate salespeople in retail, there’s little to compel a shopper to take it home today.
We saw it with JC Penney and I don’t want see it with you.
Don’t kid yourself - great customer service means an employee has some skin in the game.
Get off the fence and find a way to commission your retail salespeople.
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Writer's Bio: Bob Phibbs is the Retail Doctor®, a best-selling author and speaker who has helped thousands of independent businesses compete. His new book, The Retail Doctor’s Guide to Growing Your Business has received praise from both Inc. magazine and USA Today and can be found at your local bookstore or ordered at http://www.retaildoc.com/guide. He and his work have been featured in the New York Times, the Wall Street Journal and Entrepreneur magazine. Questions? Contact Bob at firstname.lastname@example.org. This article was reprinted with permission of the author, Bob Phibbs, aka The Retail Doctor®. Read more articles by this author
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