A new study co-authored by a University of California, Riverside business professor offers some sound advice for retail store managers who limit their product selection to specific brands. Managers should consider brand strength when building pay incentives for sales staff.
This study focused on the retail industry, which marketing scholars refer to as “brand management.” These outlets include “stores within stores,” such as the counters of major department stores with dedicated sales staff that only offer cosmetics from one brand, such as Clinique. It may also be a store within a mall that offers a single brand product line, such as Nike sportswear or Gap clothing.
UCR marketing professor Subramanian “Bala” Balachander and his colleagues have found that when brand strength is weak, group incentives, such as sales commissions, can be distributed evenly among sales team members, allowing specific retailers to found that sales performance improved. We also found that individualized incentives, such as commissions based on each salesperson's sales volume, are more effective for stronger brands.
Although these results may sound counterintuitive, Balachander explained that weaker brands generally have more uncertain sales results. When salespeople are paid individually, stores run the risk of paying certain salespeople a higher salary to facilitate sales from repeat customers or customers who arrive at the store ready to buy.
“When a brand is weak, group sales compensation provides a better filter because it doesn't matter whether a particular salesperson had an easy sell or a hard-to-sell customer. We're confident that they're doing their job and succeeding in converting those new customers. This advantage is much more valuable to weaker brands,” said Balachander, the Albert O. Steffey Professor at UCR Business School.
This study is based on data from brand managed retail operations in the United States and China.
In the United States, researchers obtained data on the prevalence of collective rewards in brand management outlets by obtaining designer brand names for beauty and fashion lines offered by high-end department stores and street-level stores at the Mall of America in Bloomington. collected. , Minnesota, from an online directory. The researchers used Glassdoor.com and Indeed.com to collect employee-reported information about sales force incentives in the form of commissions and cash bonuses offered by brands.
The researchers obtained monthly sales data from 23 gold jewelry brands sold in large retail stores in China, each with its own counter and sales staff. Similarly, sales data was collected from a major electronics retailer in China, which received a portion of the sales revenue from 51 brands generated in its stores. Each brand set up its own sales counter and employed its own sales force.
This study presents a model of how brand strength or equity based on marketing, promotions, customer awareness, and other factors that influence customer perceptions before arriving at the store influences sales force sales efficiency. is also provided.
The title of this study is “Are sales incentives a group or an individual?” What's best for brand management retail sales operations?'' Published in the Journal of Marketing. Other co-authors are Wenshu Zhang and Jia Li.
