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Incentive compensation in the retail sector : Where do we stand ?

Incentive compensation in the retail sector : Where do we stand ?
December 07, 2018

Incentive compensation in retail

What are the main trends currently being observed in terms of incentive compensation in the retail sector? Here are a few tips for successful bonus schemes and improved motivation levels among sales advisors and other sales team, as well as maintaining close relationships with customers.

 

Trend N°1: Collective bonuses in stores

As a customer, you’ve likely already felt the effects of bonus schemes for retail staff that are focused on individual rather than collective performance levels. For example, have you ever felt “pressured” by a sales rep, in a store or at a stall, to finish the purchase, as they practically lead you by the hand to the register? The answer is probably yes.

Focusing your incentive policy solely on individual performance can lead to a negative customer experience during the purchasing phase, which can have a counter-productive effect on long-term sales. It’s also difficult to measure a seller’s performance based on a given in-store purchase: this shouldn’t be too big. It should also be possible to identify staff individually.

For these reasons, retail activity stands apart from other sectors: it traditionally targets incentive schemes based around collective sales bonuses, sometimes via a mix of individual and collective rewards. Everything depends on the company culture and whether or not it is possible to introduce individual compensation. Your pay scheme must also be capable of adapting to points of sale or geographical sectors.

Whatever the method chosen, it’s important to always think in terms of fostering team spirit. How do you do this? By building upon key qualitative indicators. These indicators will help you effectively measure customer satisfaction, and the influence of sales team on other sellers.

 

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Trend N°2: Focus on conversion rates

All retail activity boils down to the number of customers who enter a store and proceed to purchase a product. The conversion rate is often examined as a navigational tool, both in retail and in other sectors. However, this rate is rarely incentivised. If you have the data at your disposal, think about applying it to your variable pay schemes and using it as a performance criterion! This will help spur motivation and aid in the evaluation of your sales staff’s performance.

 

Trend N°3: Focusing on products from a particular brand

In retail, it’s common for Commercial departments to set challenges for staff, organised by a particular brand.

The objective: selling more of a particular product. These types of events can boost sales, and also function as fun, dynamic team-building exercises. They highlight a product or an extra service to be sold. However, this practice can be problematic if it impacts the store’s global sales. The key question to ask is which is more profitable: for your staff to succeed in an occasional challenge, or to stimulate global sales for your entire product range? It’s up to you to decide which performance drivers you want to engage.

 

Trend N°4: Paying special attention to seasonal activity

Retail is a business activity with a highly seasonal flow, notably in peak periods such as around Christmas and during annual sales. It can be advantageous to target an additional challenge during these periods throughout the year. Make sure you take seasonal considerations into account in your incentive policy. How? By integrating high-sales periods into the calculation process for your bonus scheme.

 

Which performance drivers should you use to motivate your teams? Take a look at our motivation wheel.

 

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Blog post author

Hervé de Riberolles

Depuis plus de 15 ans, je mène pour le compte de nos clients de nombreux projets sur l’optimisation des dispositifs et process de rémunération variable de leurs équipes. La diversité des environnements (secteurs d’activité, pays, populations) auxquels nous sommes confrontés, mon équipe et moi-même, nécessite une adaptation perpétuelle de nos méthodes et de notre offre. La motivation des collaborateurs, sujets éminemment humain, est, de mon point de vue, passionnant, en perpétuelle évolution et à la croisée de plusieurs domaines d’expertise. C’est ce qui le rend aussi intéressant. Depuis quelque temps, nous avons également mené des projets sur l’optimisation des politiques commerciales ou conditions de remises. Les effets de levier que nous pouvons constater sur ce thème sont impressionnants : la professionnalisation des pratiques sur ce sujet est un enjeu à forte valeur ajoutée pour les entreprises.

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