3. Learning Objectives
Explain why intangible people resources van
provide a more competitive advantage than
tangible resources.
Describe how to recruit both the right employees
and the right customers to be the store’s partners.
Explain how to manage employees and customers
to develop long-term profitable relationships.
Discuss how to compensate employees and offer
customers a compelling value proposition.
11-2
4. Retailing Truism
Customers don’t care who runs the company,
they just care about how they are treated by
the first employee they meet.
Good quotation for a possible exam question!!
11-3
5. High performance retailers:
….of the future will be those that devote the maximum
effort to hiring good employees now.
Investments in tangible assets (land, building,
technology, equipment and fixtures, and
merchandise) will not produce a profitable return
unless the retailer is willing to invest in recruiting,
motivating, and retaining the right people.
Retailers must view labor costs, as well as the costs
of attracting and retaining customers, not as costs,
but as investments in obtaining a sustainable
competitive advantage
11-4
6. Intangible People Resources Make the Difference
LO 1
• Similarities Between Employees and
Customers
The people factor in Services Marketing.
Just like employees, customers need to be
recruited, motivated, and compensated for their
efforts.
• Employees and Customers are Profit
Drivers
11-5
7. Similarities Between Employees and Customers
Empowerment occurs when employees are given the
power in their jobs to do the things necessary to
satisfy and make things right for customers.
• Seeks to understand the customer’s problem.
• Desires to develop a relationship with the customer.
• Understands the value of customer loyalty.
Is allowed and encouraged to solve the customer’s
problem.
11-6
8. Customers and employees both perform retail
tasks and they both service each other
Employees must not only serve customers,
but also other employees (internal customers)
With servant leadership, employees recognize
that their primary responsibility is to be of
service to others
11-7
9. Employees and Customers are Profit Drivers
• The gross profit generated by an employee or
customer must exceed the cost of servicing these
employees and customers.
• Retailing is an exchange relationship, and in an
exchange relationships people want to be “treated
right.”
• Honesty
• Fairness
• Respect
11-8
10. Profit Drivers: “How much should a retailer be
willing to invest in recruiting an employee
and/or customer?”
If a retailer takes an investment versus an expense or
cost perspective, then that retailer is addressing this
issue from a long-term perspective.
The gross profit generated by an employee or
customer must exceed the cost of servicing these
employees and customers.
Customers should be thought of as employees and
employees should be treated like customers.
Good customer and employee relationships have a
synergistic effect on a retailer’s performance.
11-9
11. Factors Influencing Employees Performance
This Retailer’s Affects the Which Impacts
Program Employees
Training &
Development Skill
Performance
Employee
Appraisal Morale
Performance
Motivation
Methods Effort
11-10
12. Obtaining the Right People
•Customer Relationship Management
•Employee Sources
•Customer Sources
•Screening and Selecting Employees
•Screening and Selecting Customers
11-11
13. Obtaining the Right People
Customer Relationship Management
(CRM)
Is comprised of an integrated
information system where the
fundamental unit of data collection is the
customer, supplemented by relevant
information about the customer.
11-12
14. CRM Analysis
• Analyze transactional data, find times when the most
profitable customers shop, and schedule key
associates for those hours.
• Sales or visits have been declining: special marketing
programs such as direct mail, coupons, or a special
call from a sales associate.
• Identify the type of merchandise to stock during
certain seasons.
• A complete record of purchase history to prioritize the
special treatment of customers.
11-13
16. Screening and Selecting Employees
Application Form
Personal Interview
Testing
References
11-15
17. Screening and Selecting Customers
Reasons for Screening and Selecting
Customers:
The inability to adequately service
certain customers.
The deterioration of a retailer’s
atmosphere if customers of a certain
type are admitted.
The inability to profitably service
customers.
11-16
18. Managing People
Turnover
Training and Developing Employees
Training and Developing Customers
Evaluating Employees
Evaluating Customers
Motivating Employees
Motivating Customers
11-17
20. Question to Ponder
• Your store is understaffed and after reviewing
the current applications on file, you do not find
any good applicants available. Should you
hire someone who does not meet your
standards and risk having to replace him or
here within a couple of months or should you
have your present staff continue to work
overtime?
11-19
21. Training and Developing Employees
Be provided for both new and existing
employees.
Should not be a “one-time happening.”
Content should mirror employee development.
New training and development programs
should build on the content provided in
previous programs.
Online training for retailers who cannot afford
to have a complete training staff.
11-20
22. Evaluating Employees
Performance Appraisal and Review is the formal,
systematic assessment of how well employees are
performing their jobs in relation to established
standards and the communication of that assessment
to employees.
• Ongoing process.
• Feedback provided to employees.
• Reviewer knows the what the job tasks and
performance standards.
• Two people contribute to the review.
• Various types of measures to be used.
11-21
23. Criteria Used in the Appraisal and Review
Process
Exhibit 14.3
11-22
24. Criteria Used in the Appraisal and Review
Process
Exhibit 14.3
11-23
25. Evaluating Customers
• It is important for employers not only to
evaluate employees on their performance,
but also to evaluate customers for their
contributions to the retailer’s financial
objectives.
• A variety of retailers have detailed profiles
on their most profitable customers.
Increasingly CRM is allowing the retailer to
evaluate the profitability of each of its
customers
11-24
26. Motivating Employees
Motivation is the drive that a person has to
excel at activities, such as a job, that he or she
undertakes.
• Content Theories refer to theories on
motivation that ask, “What motivates and
individual to behave?”
• Process Theories refer to theories on
motivation that ask, “How can I motivate an
individual?”
11-25
27. Content Theories
• Hierarchy of Needs Model theorizes that individuals
have lower-level physiological, safety and security
needs, which are first satisfied before higher level
needs of belongingness or social esteem or self-
actualization are pursued.
• Theory X is a theory of management that views
employees as unreliable and thus must be closely
supervised and controlled and given economic
inducements to perform properly.
• Theory Y is a theory of management that views
employees as self-reliant and enjoying work and thus
can be empowered and delegated authority and
responsibility.
11-26
29. Process Theories
• Expectancy Theory suggests that an employee
will expend effort on some task because the
employee expects that the effort will lead to a
performance outcome that will lead in turn to a
reward or bonus that the employee finds
desirable or valued.
• Goal Setting is the process in which
management and employees establish goals
that become the basis for performance
appraisal and review.
11-28
30. Motivating Customers
Retailers use a variety of demand stimulation tools
to motivate customers to purchase or purchase in
higher volumes.
Most of these programs are based on the
assumption that customers are motivated primarily
by financial incentives.
However, innovative retailers are recognizing that
other factors can motivate success.
Some non-price elements that can motivate
customers include:
11-29
31. Motivating Customers
• Merchandise: quality, style and fashion, assortment, national
versus private labels.
• Physical Characteristics: décor, layout, and floor space.
• Sales Promotion
• Advertising
• Convenience: hours, location, ease of entrance and parking,
ease of finding items.
• Services: credit, delivery, return policy, and guarantees.
• Store Personal: helpfulness, friendliness, and courtesy.
11-30
32. Compensation
• Employee Compensation
• Common Types of Compensation Program for
Sales Force
• Supplemental Benefits
• Compensation Plan Requirements
• Job Enrichment
• Customer Compensation
11-31
33. Employee Compensation
• Compensation includes direct dollar payments (wages,
commission, and bonuses) and indirect payments
(insurance, vacation time, retirement plans).
• Fixed Component typically is composed of some base
wage per hour, week, month, or year.
• Variable Component is often compose of some bonus
that is received if performance warrants.
• Fringe Benefits is a part of the total compensation
package offered to many retail employees and may
include health insurance, disability benefits, life
insurance, retirement plans, child care, use of auto,
and financial counseling.
11-32
34. Common Types of Compensation Programs for a
Salesforce
• Straight Salary is a fixed salary per time period
(usually per week) regardless of the level of
sales generated or orders taken.
• Salary Plus Commission is a fixed salary plus
a percentage commission on all sales or sales
over an established quota.
• Straight Commission is limited to a percentage
commission on each sale they generate.
11-33
35. Attributes of Compensation Plans
Changing Economic Conditions Exhibit 14.5
Ability for Employee to Weather
Straight
Salary
Salary
plus
Commission
Straight
Commission
Incentive to Perform
11-34
36. Advantages and Disadvantages of
the Various Forms of Compensation
Straight Salary (Used by 11% of retailers.)
• Advantages:
• Straight salary provides for a regular income.
• It gives management a more direct control.
• It provides relatively fixed sales cost.
• It ensures that nonselling activities will be completed.
• It helps develop a high degree of salesperson loyalty.
• Disadvantages:
• It favors salespeople who are least productive.
• It provides minimum, if any, reasons to give customers extra
effort.
• It offers little, if any, financial incentive.
• It does not provide for a balanced sales mix.
11-35
37. Advantages and Disadvantages of
the Various Forms of Compensation
Salary plus Commission (Used by 51% of retailers.)
• Advantages:
• It provides security because there is stable income.
• Since there is commission, it provides encouragement for
salespeople to sell.
• Since there is salary, it provides salespeople with the incentive to
perform nonselling tasks.
• It would be beneficial for the department store chain because
there is a good chance we are going to be in a recession, so
employee costs would be partly proportional to sales.
• It would boost morale and provide security at the same time.
• It favors salespeople that are motivated and productive.
• It should give a balanced sales mix because salespeople will
push merchandise with consumer appeal and high volume.
11-36
38. Advantages and Disadvantages of
the Various Forms of Compensation
• Disadvantages:
Salespeople may not want this type of compensation if
we do go into a recession because a decrease in sales
volume will effect their wages.
• It may lead to high pressure selling.
11-37
39. Advantages and Disadvantages of
the Various Forms of Compensation
Straight Commission (Used by 38% of retailers.)
• Advantages:
• Salespeople have great incentive to perform well.
• Compensation relates directly to performance.
• Sales costs are directly related to net sales.
In times of a recession, employees’ incomes, that are expenses to
the chain, are directly proportional to sales volume.
• Disadvantages:
• It encourages high-pressure selling.
• The emphasis would be on volume not what the customer needs.
• Salespeople will neglect nonselling activities.
• The service aspect of selling tends to be neglected.
11-38
40. Supplemental Benefits
L4
•Employee Discounts
•Insurance and Retirement Benefits
•Child Care
•Push Money
11-39
41. Compensation Plan Requirements
Fair
Adequate
Prompt and regular payments
Customer interest
Simplicity
Balance
Security
Cost effective
11-40
42. Job Enrichment
Job Enrichment is the process of enhancing the core
job characteristics of employees to improve their
motivation, productivity, and job satisfaction.
Skill variety
Task identity
Task significance
Autonomy
Job feedback
11-41
43. Customer Compensation
Value Proposition is the promised benefits a
retailer offers in relation to the cost the
customer incurs.
The eight attributes for motivating customers
represent benefits and costs; the better the
value equation (benefits versus costs), the
more compelling the retailer’s value
proposition.
11-42
