Radical overhauls in commission schemes at Vodafone and Carphone Warehouse have set a new standard for retail in 2009.
New products are entering the mobile market by storm and it is no longer simply about selling a mobile phone to customers. A prime example is Carphone’s move to focus on wider electronic goods with its Best Buy partnership.
In addition, as competition increases and economic conditions bite, retailers need to work harder to retain customers.
Customer service is now the golden chalice of retail sales, alongside maximising store profits while cutting overall costs. Sim-only has also put an onus on operators to keep customers because if a consumer leaves after 30 days, it ceases to be worthwhile.
A subtly aggressive approach to sales has emerged. Far from some retailers’ traditional ‘car salesman’ methods, many are now concentrating on providing consumers with the best experience possible in an increasingly competitive market.
From July, Carphone will implement the biggest ever shake-up in mobile retail salaries by scrapping commissions across its entire 800 UK store base.
Commissions will be replaced with a lift in basic pay and a store profit share scheme, where outlets must reach at least 90% of their sales targets before they qualify for a bonus, which consists of five metrics with particular focus on customer service scores. The bonus figure will be 2% of the store’s gross profit divided between the staff.
It overhauls the once 50-50 split between basic pay and commission, to an 80-20 model of basic pay and a monthly bonus.
Meanwhile, it emerged last week that Vodafone has also overhauled its store targets criteria to focus on profits, with 24 month contracts a key credit crunch tactic. Store targets were previously based on sales volumes.
Longer contracts, which are emerging with more and more force, dissolve the heavy subsidy associated with the start of a contract. They also mean the operator has the customer for that two year period, and can free them up to offer incremental add-ons such as broadband during the time.
Retail staff are increasingly seeing customer service rewarded in their pay packets, as retailers and networks look to maximise profit by cutting churn.
One retail source says: ‘What we now sell is a utility, so you can’t compete on price alone anymore, but you can control the customer experience. The old way of thinking used to be that you couldn’t measure it, but it can be done.’
Phones 4u started to measure staff customer service with Fizzback 18 months ago, which attains customer feedback via text message. Carphone and T-Mobile are now also using the service.
Fizzback’s chief marketing officer, John Coldicutt, says: ‘A big inhibitor of profit is churn. Around 30% to 35% of people switch providers every year, which means networks have to replace one third of their bases each year. The cost of acquisition is high, and any tiny reduction in the amount of customers they lose is profitable.’
Higher customer satisfaction can improve brand perception, says Coldicutt: ‘Retailers are increasingly looking to boost customer service to create better brand perception, which raises word of mouth advocacy of services.’
Staff say the onus on customer service is a good thing. One Phones 4u salesman says: ‘Phones 4u as a brand would have burnt out if nothing was done.’
Another Phones 4u staffer says: ‘It’s to ensure we don’t rip anyone off. It puts a lot of emphasis on after-service, as the customer receives a text 30 days later.’
Meanwhile, Vodafone emphasised rewards for customer service recently with the addition of two extra mystery shop categories: pay-as-you-go and business.
Orange staff are rewarded for good mystery shops in an internal incentive programme called ‘Take the Credit’.
The stalwart of new products such as mobile broadband and laptops has opened up alternative competitive markets for retailers, and has demanded a change in staff behaviour.
Coldicutt says: ‘The diversification into mobile broadband has seen a land-grab situation where everyone wants to be in the best place, in the new market – understanding the customer reaction to this is key.’
With Sim-only, there is a need to satisfy the customer early, due to the chance they could churn after just one month with new 30 day rolling contracts. Coldicutt says: ‘It would be inefficient of operators to encourage promiscuous behaviour.’
Meanwhile, 3’s recent retail pay changes, where basics were decreased, could be an attempt by the network to grab for mobile broadband, as the drop in pay provides potential for higher commissions on products in this field.
One retail source says: ‘Mobile broadband and laptops will separate the men from the boys, as an increasing amount of product knowledge is needed.’
With a move to profit share for staff from both Vodafone and Carphone, the pressure will be on all staff to perform well because their bonuses are based on overall store performance.
One Carphone salesman says: ‘It’s a motivational thing too, everyone will have to pull their weight.’
Expectation is also higher with Carphone’s new profit share, indicating a push to increase turnover. One Carphone salesman says: ‘With the new scheme, profit targets have increased and we have to hit 90% to 100% of the target to make bonus – otherwise we get nothing.’
Increasingly, the cost of running a retail estate is also being reflected in the store staff’s pay. For example, one aspect of an upcoming Carphone manager incentive programme will be to keep within budget for items such as electricity and paper.
One operator source says: ‘Retail estate is expensive to run; people need to properly understand what you do.’
One retail source adds: ‘Store profitability is very important when you consider rent etc. By basing targets on profits you are ensuring profit, and if a store makes a loss you don’t have to pay commissions.’
The new targets are definitely of benefit to businesses. Time and economics, as well as a strong product offering, will see whether profits based schemes are as successful for the salespeople who work on them.
Retail pay structures
Sales adviser: £13,000-£14,000 basic + bonus (ratio varies)
Store manager: Starting salary £20,000 + bonus based on store targets
What is commission based on? Based on commission per sale and a monthly three-tiered target. Additional commission can be earned from sales of ‘extras’ including insurance, accessories and broadband.
Sales adviser: £12,000 basic + commission (75:25 ratio)
Store manager: Up to £21,000 + bonus based on store targets
What is commission based on? In a scheme called ‘Spirit’, O2 staff receive points for sales, which can then be exchanged for high street vouchers. Quarterly, staff receive a bonus based on sales targets.
Sales adviser: £14,000 basic + bonus (75:25 ratio)
Store manager: £28,000-£30,000 + bonus
What is commission based on? Vodafone staff are paid a proportion of the store profits per month (£1 per £100 profit). Store managers receive a proportion of profits per month if store targets are met.
Sales adviser: £13,000 basic (subject to six monthly review) + commission (ratio varies)
Store manager: Starting salary £17,00