Reference no: EM132217346

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.