Retailers defend commission sales

PIECE OF THE ACTION

July 27, 1992|By Chicago Tribune

CHICAGO -- "Good morning. What can I do for you?"

It's 11 a.m. and Dennis DeRosa approaches a man scrutinizing a dryer. Mr. DeRosa is already 90 minutes into his selling day amid the washers and dryers, freezers, refrigerators, ranges and microwaves in Sears, Roebuck and Co.'s Oak Brook store in Illinois.

Mr. DeRosa is a 22-year veteran of Sears. He sells appliances in Sears' Brand Central department at the sprawling Oakbrook Center. And he sells on commission, which means how much money he makes depends on what customers buy.

Mr. DeRosa is one of the front-line troops in a debate about the ethics of and potential for abuse in commission sales. Whether the perception is valid, many customers suspect their best interests aren't always served when the sales person gets a direct cut.

Sears has acknowledged mistakes at its auto-service centers. The company denied a pattern of wrongdoing, but it has ended commission pay and sales goals at the centers.

And Michigan-based Highland Superstores Inc. last month announced that it was putting all its newly christened customer advisers on salary, ending their commission selling days. Even some car dealers are experimenting with one-price strategies and salaried salespeople.

But, the experts say, the majority of salespeople in America are compensated through some kind of variable pay, commission or bonus plan. The reason for that is "they work," said Thomas Mott, an expert in sales compensation at Hewitt Associates in Illinois.

That's "the good news and the bad news about sales incentives," he said. "The good news is they can work for the company, the salesperson and the customer. The bad news is they drive sales people to the wrong behavior."

Companies gain from the plans because they give sales people reason to get up and sell rather than sit around and wait for a sale. And the plans put more of the cost on a variable, rather than fixed, basis.

Mr. DeRosa, 42, wouldn't have it any other way. And that's true even though Sears has changed its compensation structure so that he has to work harder. Although he can take a draw against commission, he has never drawn it in his years at Sears.

Mr. DeRosa believes the commission system ultimately serves the customer better because it provides an incentive for him to learn more about the products he sells and to find out more about what the customer really wants.

"I ask a lot of questions," he said. "Is there anything specific I can show you? How many people in your family? How many loads of wash a day do you do? Could I show you some specials? Do you need gas? Electric?"

Although the commission rates and specials vary, on one recent day he pointed out a top-of-the-line $799 Kenmore washer on which he would make an 8 percent commission. A basic stripped-down model would net him 1 percent. But Mr. DeRosa said he wouldn't steer you to the $799 washer unless he figured you were really interested. Alienated shoppers don't stick around.

"You don't take everyone to the $799 washer and say, 'Here's the one I'm going to sell you.' It might be a little too high-tech for them," he added. "A lot of people say they want something like they had before. They'll tell me, 'Don't show me one with all the buttons and lights.' "

A short time later a woman trailed by three children did just that. "Don't show me one with a lot of junk," she said. And he didn't. "Does this come in white?" she asked. Yes. She wants to talk it over with her husband and says she'll get back to him. Mr. DeRosa gets her phone number. "If she doesn't call this afternoon, I'll call her," he said. "If I were getting straight salary, I don't think I would have taken her number."

"I'm not really sure today that I sell anybody anything," Mr. DeRosa said. "I help people determine their needs. I help them solve problems. If you treat them right," he said of customers, "they reciprocate."

Well-designed compensation programs recognize that fundamental fact. They also recognize that shoppers walking into a store are frustrated when they're ignored. "Customers really want someone to respond quickly," said Mr. Mott. "If [salespeople] have a personal financial interest, they are likely to be more responsive."

Mr. Mott and Steven H. Grossman, a Chicago-based compensation expert, said abuses are caused not by commission sales plans, but by flawed plans.

But Mr. Mott said the solution to a flawed plan like Sears' "isn't to give up the variable-pay plan but to re-engineer it," so it produces the kind of behavior a company wants to reward. "Salespeople listen very carefully to their wallets. A company can offer incentives to do the right thing," he said.

"Don't look at the commission pay plan as the culprit," Mr. Grossman said.

"It depends on everything else that was going on. Have the sales reps been trained in the value of repeat customers? Where the plans can get out of control is if something causes the sales person to be too aggressive."

Just putting people on salary isn't a panacea, he said. When a sales person is "just punching a clock . . . the profile of that person can be less caring" of the customer.

A company really interested in serving customers should go to the front lines, Mr. Mott said. "Ask the salespeople. They know if the pay plan makes them do things that make them uncomfortable. It sets off tension in their minds. They know."

Fundamentally, commission pay is as basic as this: "Make a sale, get a check," said Mr. Grossman. "But what's left out is all the factors that go around a commission plan that make the sales person and the company click."

A legend has grown up around Seattle-based Nordstrom Inc.'s service-oriented sales force. But Mr. Grossman said the system works there because "they know what is acceptable and what isn't. You can have short-term success by taking advantage of the customer," he explained.

"Long-term success requires that you serve the customer."

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