Balancing Act DeMarco’s Department Store manager Lauren Brewster’s “wow” moment

Question

Balancing Act

DeMarco’s Department Store manager Lauren Brewster’s “wow” moment came when she saw a Chicago restaurant staff’s gushing treatment of an international celebrity.

“Everyone dreams of that kind of star treatment, like being Oprah,” Lauren told her assistant, Jack Klein. “Think about it. People brag about their bank or the local bar where ‘everybody knows your name,’ or enjoy showing off a favorite restaurant where the hostess always remembers their favorite table.”

DeMarco’s, like other upscale department stores, suffered the double whammy of a slumping economy and increased competition from discount retailers and online shopping. How could the store, the “box,” compete, retain its old customers, and build a strong future customer base?

“We’ve always known that it’s all about customer service,” Jack responded. “What’s so great about grabbing a giant plastic shopping cart and slogging through some giant warehouse in your shorts and flip-flops, and then joining the herd at the check-out? That is not a shopping experience.”

“I know that you are too young for this, but I can remember my mother dressing up in a lovely suit and hat and gloves and going downtown to have lunch with her friends and shop all afternoon. She would come home with shopping bags and hat boxes. When she shopped, she was a queen and I thought it was fabulous!” Lauren said.

“We’ve lost that. But that sort of customer experience can be recaptured—here—at DeMarco’s.”

Lauren’s formal proposal to senior management was that store customers receive that personal, upscale, “you’re somebody special in here” treatment. Sales associates would raise their own professional level, regard customers as worthy of personalized service, and build their own clientele. As an incentive, the entire DeMarco sales team would be changed over from hourly pay to straight commission. The idea intrigued corporate, which approved a two-year experiment. “Your pay is built through your own initiative and individualized service that makes customers return to you again and again,” Lauren told the sales force at the outset of the experiment.

As expected, the new plan created a minor exodus among those who wanted the assurance of a “regular paycheck.” But as the program moved through its first year, both store and corporate management was pleased with the overall numeric results. Marketing pushed the new image of elite, personalized customer service and phrases such as “Katherine at DeMarco’s helped me select this outfit,” or “Damien always lets me know when something new arrives at DeMarco’s that he thinks is perfect for me” became a typical boast of savvy shoppers.

Now, two years into the experiment, corporate has urged Lauren to submit a full assessment of the program as a potential model for implementation throughout the department store chain. Sales numbers vouched for the overall success, particularly over the last two quarters of the second year. Certain associates, including Katherine Knowles in designer dresses and Damien Fotopolous in women’s shoes, showed sig- nificant gains in sales and pay as a result of straight commissions. Overall, most sales associates and customers responded favorably and urged a continuation of the pro- gram. Reliance on commissions inspired most sales associates to treat their individual department as if it were their own small business, becoming experts on nuances of merchandise, exploring designs and trends, finding ways to promote their expertise, and building an impressive number of loyal customers.

The satisfaction level of customers was apparent in the numbers—not only sales numbers, but in repeat business, customer referrals to friends, and customer comment cards, all of which had been tracked since the beginning of the program.

The downside of the experiment—and there was a downside—was that while some associates soared, others either veered toward an aggressive, pushy sales style or be- came intimidated by coworkers and teetered, monthly, on the verge of replacement by not making enough sales. The previous high level of cooperation among sales staff was, in many instances, eaten away by relentless competition. Behind the scenes, staff fought over new customers. Work assignments away from the sales floor that contrib- uted to the store in general were ignored or resented. No one wanted to straighten up merchandise, retag items for a sale, handle returns, do stock work, or ring up small customers. In addition, the managers and sales associates of certain departments such as women’s accessories complained of lower wages because, as one associate pointed out, “My commission on a $50 belt is nothing compared to Katherine’s commission on a $2,800 designer dress.” Resentment was high among those who witnessed the extravagant wages of a few.

“If we change this program, if we keep straight commission for some and return to hourly pay for others, how does that fit with our new image?” Lauren said to Jack. “How does it deal with the difference in pay scale? How does it assure us that the attitudes of our sales team and the culture of this store will not return to what we were before—just another store?”

Discussion questions

1. What kind of incentive system do you suggest DeMarco’s use for sales associates? Why?

2. Do you think the complaints of lower paid sales associates are legitimate? Why? How do you suggest Lauren respond to these complaints, such as the gripe that the system offers few opportunities for large commissions in some departments?

3. Have the successes of sales associates such as Katherine or Damien created a situation in which loyalty to customers is stronger than loyalty to the store? Is that the best culture for a store like DeMarco’s? For example, if a successful associate leaves DeMarco’s, might the customer leave also

Explanation / Answer

1.      I would recommend a compensation package, which includes a fixed basic remuneration with the percentage of sales incentive based on the sales performance or business generated from your customer. The advantages of fixed remuneration would be that it would cover the basic costs and encourage the sales staff to voluntarily support tagging, displaying and straightening the merchandise. The staff will be encouraged to upsell and cross-sell to make better incentives. De Marco would further acknowledge and reward the following:

·         Best Customer experience/ Customer service based on customer feedback irrespective of sales.

·         Best window display of the season.

·         Employee of the month based on customer feedback, sales and a overall performance in all business aspects.

·         Acknowledging and rewarding the best salesperson of the month

All these would be given publically clearly highlighting the parameters and the rating.

2. No, I do not think the complaints of low paid associates are legitimate. They are basically covering their inefficiencies behind excuses in building customer relationship and lack the ability to create a rapport with the customer. They need to put in extra efforts to keep in touch with customers, update them about new collections and also invite them for the previews.

Firstly, Lauren should ask them to maintain statistics on the number of calls they have made, the number of customers’ visited and sales derived from each one of those customers.

Then she should give them the data about those customers’ purchases in the last few seasons before this system started. This analysis will indicate the customer-buying pattern.

She should also arrange a training program to improve their customer service approach and find ways to continuously build relations with customers. The staff needs to be trained in improving their sales techniques and increase the sales volume.

Thirdly, there should not be a product specific sales approach. A sales staff will handle a customer end to end through all divisions of the store. The sales person will be a customer relationship manager for that customer.

To sum it up one sales associate will take care of entire buying needs of the customer and will remain in touch with the customer for any new collections or updating the client regarding any new product introduction or happening at the store.

3. No, it will not make the sales associate more loyal to the customer. Creating a personalized system where the customer is associated with one salesperson will create a comfort level for the customer. The customer will feel special and will be used for the salesperson. The staff will also be rewarded equally as the customer will be in contact with them. Further, the customers will refer more friends and relatives to visit the store and meet their customer relationship manager. This will enhance stores sales and will create a status symbol for the customer.

It will not change loyalties as the staff makes the customer feel special on behalf of De Marco. The staff is empowered and maintained by DeMarco with constant motivation, training and giving sufficient incentives. DeMarco has to constantly take care of employees by encouraging them, giving them enough incentives and constantly training them to give personal attention to their clients.

If a client leaves De Marco the transition should be processed properly and a new sales staff associated with the customer well in time. The customer is driven by his relationship and the collection which they find enticing. The treatment they get here is not easily replicated in other places even if the sales associate is joining another brand. This special feature is available only at DeMarco. DeMarco has to ensure smooth transitioning of the customer from the exiting sales associate to the new sales associate to avoid customer dissatisfaction.

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