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MKTG 1058: DISTRIBUTION CHANNELS
MKTG 1058:
DISTRIBUTION
CHANNELS
11
Distribution Channels MKTG 1058
LECTURE ELEVEN
111-1
(Dunne Chapter Fourteen)
Managing People
1
11-2
Learning ObjectivesLearning Objectives
�Explain why intangible people resources van provide a more competitive advantage than tangible resources.
�Describe how to recruit both the right employees and the right customers to be the store’s partners.
�Explain how to manage employees and customers to develop long-term profitable relationships.
�Discuss how to compensate employees and offer customers a compelling value proposition.
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Retailing TruismRetailing Truism
Customers don’t care who runs the company, they just care about how they are treated by the first employee they meet.
Good quotation for a possible exam question!!
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High performance retailers:High performance retailers:
….of the future will be those that devote the maxim um effort to hiring good employees now .
� Investments in tangible assets (land, building, technology, equipment and fixtures, and merchandise) will not produce a profitable return unless the retailer is willing to invest in recruit ing, motivating, and retaining the right people.
� Retailers must view labor costs, as well as the cos ts of attracting and retaining customers, not as costs , but as investments in obtaining a sustainable competitive advantage
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•Similarities Between Employees and Customers
The people factor in Services Marketing.
Just like employees, customers need to be recruited, motivated, and compensated for their efforts.
•Employees and Customers are Profit Drivers
Intangible People Resources Make the DifferenceIntangible People Resources Make the Difference
LO 1
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Similarities Between Employees and CustomersSimilarities Between Employees and Customers
Empowerment occurs when employees are given the power in their jobs to do the things necessary to satisfy and make things right for customers.
•Seeks to understand the customer’s problem.
•Desires to develop a relationship with the customer .
•Understands the value of customer loyalty.
� Is allowed and encouraged to solve the customer’s problem.
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Customers and employees both perform retail tasks and they both service each otherCustomers and employees both perform retail tasks and they both service each other
�Employees must not only serve customers, but also other employees (internal customers)
�With servant leadership , employees recognize that their primary responsibility is to be of service to others
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Employees and Customers are Profit DriversEmployees and Customers are Profit Drivers
•The gross profit generated by an employee or customer must exceed the cost of servicing these employees and customers.
•Retailing is an exchange relationship, and in an exchange relationships people want to be “treated right.”
•Honesty
•Fairness
•Respect
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Profit Drivers: “How much should a retailer be willing to invest in recruiting an employee and/or customer?”
Profit Drivers: “How much should a retailer be willing to invest in recruiting an employee and/or customer?”
� If a retailer takes an investment versus an expense or cost perspective, then that retailer is addressing this issue from a long-term perspective.
� The gross profit generated by an employee or customer must exceed the cost of servicing these employees and customers.
� Customers should be thought of as employees and employees should be treated like customers.
� Good customer and employee relationships have a synergistic effect on a retailer’s performance.
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Factors Influencing Employees PerformanceFactors Influencing Employees Performance
This Retailer’s Program
Affects the Employees
Which Impacts
Training & Development
Performance Appraisal
Motivation Methods
Skill
Morale
Effort
Employee Performance
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Obtaining the Right PeopleObtaining the Right People
•Customer Relationship Management
•Employee Sources
•Customer Sources
•Screening and Selecting Employees
•Screening and Selecting Customers
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Obtaining the Right PeopleObtaining the Right People
Customer Relationship Management (CRM)
Is comprised of an integrated information system where the fundamental unit of data collection is the customer, supplemented by relevant information about the customer.
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CRM AnalysisCRM Analysis
•Analyze transactional data, find times when the mos t profitable customers shop, and schedule key associates for those hours.
•Sales or visits have been declining: special market ing programs such as direct mail, coupons, or a special call from a sales associate.
• Identify the type of merchandise to stock during certain seasons.
•A complete record of purchase history to prioritize the special treatment of customers.
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Employee and Customer SourcesEmployee and Customer Sources
Exhibit 14.1
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Screening and Selecting EmployeesScreening and Selecting Employees
�Application Form
�Personal Interview
�Testing
�References
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Screening and Selecting CustomersScreening and Selecting Customers
Reasons for Screening and Selecting Customers:
�The inability to adequately service certain customers.
�The deterioration of a retailer’s atmosphere if customers of a certain type are admitted.
�The inability to profitably service customers.
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Managing PeopleManaging People
�Turnover
�Training and Developing Employees
�Training and Developing Customers
�Evaluating Employees
�Evaluating Customers
�Motivating Employees
�Motivating Customers
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Types of Employee Turnover CostsTypes of Employee Turnover Costs
Exhibit 14.2
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Question to PonderQuestion to Ponder
•Your store is understaffed and after reviewing the current applications on file, you do not find any good applicants available. Should you hire someone who does not meet your standards and risk having to replace him or here within a couple of months or should you have your present staff continue to work overtime?
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Training and Developing EmployeesTraining and Developing Employees
�Be provided for both new and existing employees.
�Should not be a “one-time happening.”
�Content should mirror employee development.
�New training and development programs should build on the content provided in previous programs.
�Online training for retailers who cannot afford to have a complete training staff.
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Evaluating EmployeesEvaluating Employees
Performance Appraisal and Review is the formal, systematic assessment of how well employees are performing their jobs in relation to established standards and the communication of that assessment to employees.
•Ongoing process.
•Feedback provided to employees.
•Reviewer knows the what the job tasks and performance standards.
•Two people contribute to the review.
•Various types of measures to be used.
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Criteria Used in the Appraisal and Review ProcessCriteria Used in the Appraisal and Review Process
Exhibit 14.3
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Criteria Used in the Appraisal and Review ProcessCriteria Used in the Appraisal and Review Process
Exhibit 14.3
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Evaluating CustomersEvaluating Customers
•It is important for employers not only to evaluate employees on their performance, but also to evaluate customers for their contributions to the retailer’s financial objectives.
•A variety of retailers have detailed profiles on their most profitable customers. Increasingly CRM is allowing the retailer to evaluate the profitability of each of its customers
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Motivating EmployeesMotivating Employees
Motivation is the drive that a person has to excel at activities, such as a job, that he or she undertakes.
•Content Theories refer to theories on motivation that ask, “What motivates and individual to behave?”
•Process Theories refer to theories on motivation that ask, “How can I motivate an individual?”
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Content TheoriesContent Theories
•Hierarchy of Needs Model theorizes that individuals have lower-level physiological, safety and security needs, which are first satisfied before higher leve l needs of belongingness or social esteem or self-actualization are pursued.
•Theory X is a theory of management that views employees as unreliable and thus must be closely supervised and controlled and given economic inducements to perform properly.
•Theory Y is a theory of management that views employees as self-reliant and enjoying work and thu s can be empowered and delegated authority and responsibility.
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How Retailers Can Use Maslow’s Hierarchy of NeedsHow Retailers Can Use Maslow’s Hierarchy of Needs
Exhibit 14.4
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Process TheoriesProcess Theories
•Expectancy Theory suggests that an employee will expend effort on some task because the employee expects that the effort will lead to a performance outcome that will lead in turn to a reward or bonus that the employee finds desirable or valued.
•Goal Setting is the process in which management and employees establish goals that become the basis for performance appraisal and review.
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Motivating CustomersMotivating Customers
� Retailers use a variety of demand stimulation tools to motivate customers to purchase or purchase in higher volumes.
� Most of these programs are based on the assumption that customers are motivated primarily by financial incentives.
� However, innovative retailers are recognizing that other factors can motivate success.
� Some non-price elements that can motivate customers include:
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Motivating CustomersMotivating Customers
•Merchandise: quality, style and fashion, assortment, national versus private labels.
•Physical Characteristics: décor, layout, and floor space.
•Sales Promotion
•Advertising
•Convenience: hours, location, ease of entrance and parking, ease of finding items.
•Services: credit, delivery, return policy, and guarantees.
•Store Personal: helpfulness, friendliness, and courtesy.
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CompensationCompensation
•Employee Compensation
•Common Types of Compensation Program for Sales Force
•Supplemental Benefits
•Compensation Plan Requirements
•Job Enrichment
•Customer Compensation
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Employee CompensationEmployee Compensation
•Compensation includes direct dollar payments (wages, commission, and bonuses) and indirect payments (insurance, vacation time, retirement plans).
•Fixed Component typically is composed of some base wage per hour, week, month, or year.
•Variable Component is often compose of some bonus that is received if performance warrants.
•Fringe Benefits is a part of the total compensation package offered to many retail employees and may include health insurance, disability benefits, life insurance, retirement plans, child care, use of aut o, and financial counseling.
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Common Types of Compensation Programs for a SalesforceCommon Types of Compensation Programs for a Salesforce
•Straight Salary is a fixed salary per time period (usually per week) regardless of the level of sales generated or orders taken.
•Salary Plus Commission is a fixed salary plus a percentage commission on all sales or sales over an established quota.
•Straight Commission is limited to a percentage commission on each sale they generate.
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Attributes of Compensation PlansAttributes of Compensation Plans
Exhibit 14.5
Straight Salary
Salary plus
Commission
Incentive to Perform
Straight Commission
Ab
ility
fo
r E
mp
loye
e to
Wea
ther
C
han
gin
g E
con
om
ic C
on
dit
ion
s
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Advantages and Disadvantages ofthe Various Forms of CompensationAdvantages and Disadvantages ofthe Various Forms of Compensation
Straight Salary (Used by 11% of retailers.)
• Advantages:• Straight salary provides for a regular income.• It gives management a more direct control.• It provides relatively fixed sales cost.• It ensures that nonselling activities will be comple ted.• It helps develop a high degree of salesperson loyal ty.
• Disadvantages:• It favors salespeople who are least productive.• It provides minimum, if any, reasons to give custom ers extra
effort.• It offers little, if any, financial incentive.• It does not provide for a balanced sales mix.
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Advantages and Disadvantages ofthe Various Forms of CompensationAdvantages and Disadvantages ofthe Various Forms of Compensation
Salary plus Commission (Used by 51% of retailers.)• Advantages:• It provides security because there is stable income .• Since there is commission, it provides encouragemen t for
salespeople to sell. • Since there is salary, it provides salespeople with the incentive to
perform nonselling tasks.• It would be beneficial for the department store cha in because
there is a good chance we are going to be in a rece ssion, so employee costs would be partly proportional to sale s.
• It would boost morale and provide security at the s ame time.• It favors salespeople that are motivated and produc tive.• It should give a balanced sales mix because salespe ople will
push merchandise with consumer appeal and high volu me.
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Advantages and Disadvantages ofthe Various Forms of CompensationAdvantages and Disadvantages ofthe Various Forms of Compensation
•Disadvantages:
� Salespeople may not want this type of compensation if we do go into a recession because a decrease in sal es volume will effect their wages.
• It may lead to high pressure selling.
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Advantages and Disadvantages ofthe Various Forms of CompensationAdvantages and Disadvantages ofthe Various Forms of Compensation
Straight Commission (Used by 38% of retailers.)• Advantages:• Salespeople have great incentive to perform well.• Compensation relates directly to performance.• Sales costs are directly related to net sales.� In times of a recession, employees’ incomes, that ar e expenses to
the chain, are directly proportional to sales volum e.
• Disadvantages:• It encourages high-pressure selling.• The emphasis would be on volume not what the custom er needs.• Salespeople will neglect nonselling activities.• The service aspect of selling tends to be neglected .
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Supplemental BenefitsSupplemental Benefits
•Employee Discounts
•Insurance and Retirement Benefits
•Child Care
•Push Money
L 4
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Compensation Plan RequirementsCompensation Plan Requirements
� Fair
� Adequate
� Prompt and regular payments
� Customer interest
� Simplicity
� Balance
� Security
� Cost effective
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Job EnrichmentJob Enrichment
Job Enrichment is the process of enhancing the core job characteristics of employees to improve their motivation, productivity, and job satisfaction.
�Skill variety
�Task identity
�Task significance
�Autonomy
�Job feedback
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Customer CompensationCustomer Compensation
Value Proposition is the promised benefits a retailer offers in relation to the cost the customer incurs.
�The eight attributes for motivating customers represent benefits and costs; the better the value equation (benefits versus costs), the more compelling the retailer’s value proposition.
Past Year Examination Questions
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Chapter Fourteen: Managing
People
April 2009
