Retail

The Birth of a Salesman: Retail Commissions

“I’m not a salesperson!” How many times have you heard nail techs use that one? Change that thinking with a fair commission structure, a big-picture view of the benefits for them and for you, and incentive programs that make it worth their while.

The cachet of salon-brand products lies not in the ingredient list — the retail giants can out-spend any professional brand on product R&D — but in the professional recommendation. With the myriad product choices on the market, most consumers will happily leave the buying decision in the hands of a trained professional.

The only problem is, how do you get nail technicians to make the recommendations? First, you have to make your techs understand it’s part of their responsibilities as professionals.

“If salon professionals don’t think retail products are important for their customers, they should take the products off their station,” says John Mangiameli, owner of Creative Hail Design Salon & Spa in Omaha, Neb. “They’ll say they can’t do the service.” Mangiameli’s response? “Now you know how your customer feels when she gets home.”

Second, you have to educate them on the product lines, teach them the ins-and-outs of consultative selling. And third, you’ve got to provide an incentive — a piece of the profits. Here, salon owners and consultants share their views on how much to pay as well as when and how, and what they’ve found to be the most effective incentives above and beyond the standard sales commission.

Money Talks

Commission structures themselves are fairly straightforward — the industry standard is a flat 10% or 15%. Also popular is a tiered commission structure that ranges from a 5% to 20% commission depending on the individual’s sales.

For example, Dawn Mongelluzzi, co-owner of La Barberia University Spa in Cleveland, pays staff members a 10% commission on sales of $200-$350; 15% on sales of $351-$500; and 20% on sales over $500.

Creative Hair Design Salon & Spa has a similar structure, with a few twists.

First, Mangiameli pays a 5% commission on monthly sales of up to $300, from which he stair-steps up to a 20% commission for sales over $ 1,400.

Tiered systems seem to be gaining in popularity. Karen Bryan, owner of Hair Port in Sterling, Va., says she’s considering increasing from a flat 10% commission. “Our staff does a reasonably good job with retail, but there are those who do an excellent job and we feel a higher commission provides even more incentive,” she explains.

Rather than setting breakpoints at a specific dollar amount, though, Bryan plans to equate them to a percentage of the individual’s service sales. “People with higher service numbers should be selling more retail,” she points out.

If you opt for a tiered commission structure, customize the break point for each tier based on your staff’s current performance and future potential. Set the break point for the highest commission tier above your top retailers’ average monthly sales — high enough to make them stretch, but something they can achieve with work Your objective, after all, is to grow sales.

Say retail sales currently account for 8% percent of your salon’s sales, and you want to grow retail to 20% of overall sales over the next few years. Consider making your highest commission payable on retail sales accounting for 21% or more of an individual’s service sales. Then back it down—15%-19% earns a 15% commission, 8%-15% earns a 10% one. If an individual’s retail sales are less than 8% of her service sales, consultants say the products are selling themselves.

If you have a receptionist or front desk staff, salon consultants recom­mend compensating them differently.

“I recommend splitting a 3%-5% commission among the front staff,” says Cindy Angelly, president of Spa and Salon Systems in Houston. “My experience is that a 3% override on salon retail sales is equivalent to 10% individually.” And it eliminates the hassle of trying to track who sold what.

Kate Grider-Troc, president of 20/20 Foresight, a salon and spa training and consulting firm based in Bolingbrook, ill., agrees that the front desk should get a cut of sales, but takes a slightly different view. “Team-based incentives are wonderful, so set a budget with a sales goal and give the front desk a bonus on anything sold over the goal,” she says. “Involve them m the process and show them where the money goes.”

Pay Attention to How and When

According to some salon owners, how and when you pay commissions are just as important as how much you pay. For example, if a nail tech sells $300 in retail each month and earns a 10% commission, she’s earned $30. If you include the commission in her biweekly check, she’s likely not to notice — oreven be inspired by—the extra $ 15.

“The problem with paying a commission and adding it on to pay checks and then taking taxes out is that it becomes de-incentivizing. Unless you’re selling a phenomenal amount of retail, you don’t see the reward,” says Carol Shanks, president of Denver-based ProSpeak Consulting and manager of Figaro’s Salon in Denver.

Shanks advocates converting cash commissions to a point system that nail techs can “bank’ for future time off. “Let the points build up like a savings account that can be translated into hours off with pay,” she advises. “That way, if they get sick they can stay home and be sick. There aren’t a lot of salons that offer sick pay.”

Shanks tells of a salon owner she’s consulted with whose staff members opted to use their retail commissions to fund their IRAs. “But a staff full of 22- year-olds may choose to put it toward college tuition or to pay health insurance premiums,” Shanks notes. “If they have a say in what they can do with it, they’ll be more motivated to earn it.”

Don’t try to make the options fit all people, though. “If you have 27 staff members, don’t offer 27 choices on how they can use their retail commissions,” says Shanks. She recommends a maximum of three choices — say, paid time off, a retirement fund, or health insurance premiums.

Others make a strong argument for simply paying out the money on a regular basis, be it annually, biannually, or monthly. Mangiameli’s staff voted for a yearly bonus check payable the first week of December. Others, though, wanted the payments monthly or quarterly, and he accommodates them. “It’s their money, so if they want it once a month, they can have it,” he says.

Jan Alexander, owner of The Class Act in Torrington, Wyo., pays everyone’s retail commissions monthly. She includes with the check a detailed report of the employee’s total sales as well as her average service and retail tickets. She also runs a report showing hypothetical scenarios.

“I’ll show how much she would have made if she had sold a bottle of shampoo to every client,” she says. “It’ll show the difference it would have made that month, over six months, and over a year. I’ll also show what she would have made if she was reaching the level required for a 20% commission.”

Show the Big Picture

Many salon owners use profits from retail sales to pay for advertising and marketing the salon and for employee benefits — but many staff members don’t see it that way, which may dampen their enthusiasm for selling.

Shanks urges salon owners to explain to employees where the profits go by ear-marking portions of the profits for education and other benefits. Barbara Berberich, owner of Artistic Trends Salon in Perkasie, Pa., for example, makes all employees aware that in addition to their individual 10% commissions, 7% of retail profits go into a salon A&E fund for education and entertainment outings.

At Chelsea Tyler Nail & Body Spa in Schaumburg, Ill., owner Sheila Joiner also uses a percentage of retail profits above and beyond the slidingcommission scale to pay for staff ed­ucation. “We decided to encourage then with a point system, so we set it up that they earn one point for every $10 in retail they sell,” she says. “Ten points equals $10. It’s a reverse 10% commission.”

Employees can apply their points toward the cost of any class. When we spoke, Joiner says staff members were eager to attend an upcoming trade show, so she had decided to leverage their enthusiasm by offering double points on the services and retail items she’d like to grow.

Salon owners also advocate setting salon and individual goals to give employees something to work toward. For example, Alexander works with staff members to have them set their own goals of what they want to achieve. “I can set any goal that I want, but if I try to push them to make $2 mote and they don’t want to, they won’t do it,” she observes.

Similarly, Denise Provenzano, co- owner of Naperville, Ill.-based Zano Salons, says spa managers set yearly goals with each individual staff member. As incentive, employees who reach their sales goal for the year qualify for a bonus; those who make 10% of their total sales in retail get a double bonus.

Play the Game

In addition to paying a commission, many salon owners devise contests and other incentive programs to energize the staff’s retail sales. “People are like that,” Alexander remarks. “You have to have something dangling in front of them because lots of people can’t look at goals over a one-year period.”

Provenzano views contests and other short-term incentive programs (aside from the annual bonus) as an attention-grabber. “The idea is that we’re looking for them to increase their retail sales, but we have to support them in that,” she says. “Some need a challenge, others need a focus, and some just need more information.”

Zano Salons recently devised a contest sponsored by Mid-City and OPI Products to meet all of those needs. They kicked off the contest with a break- fast meeting where an OPI educator reviewed the features and benefits of OPI’s retail products and did some role-play­ing with the staff. At the meeting, they announced prizes for the three people with the highest dollar sales of OPI Products in the coming 30-day period.

Some salon owners caution against structuring a contest around a specific product line. While you may see sales of that particular line jump, they say, those sales could be at the expense of your other lines.

“If goals are done by product line, you’re just trading dollars,” Bryan notes. “Our goal is to get product into all of our clients’ hands, not to switch clients from one line to another.” Nor do many salon owners like contests that make staff members compete against each other. “My top third sellers in retail are always my top third,” says Shanks. “It’s very difficult to unseat them.”

Mangiameli, for one, doesn’t even try. Like Shanks, he challenges employees to beat their own past performances. For example, last year he set a goal for his staff members to boost their service and retail numbers by at least 15% over a four-month period. The five people with the highest increase over the 15% minimum received a custom-made leather jacket. The entire staff achieved — and sus­tained — the 15% increase. The $1,200 jackets more than paid for themselves, he says.

Mongelluzzi, on the other hand, doesn’tmind a bit of friendly competition, but she evens the odds somewhat by teaming up employees. Each month the staff divides into retail teams captained by the top sellers of the previous month. Captains get to choose their teammates, though each team must be balanced between the departments. “This way, the team leader cheerleads and counsels anyone with problems,” she says.

Members of the winning team who sell a minimum of $200 in retail during the month share 15% commission on the team’s sales in addition to their commissions on their own sales. “I was leery at first of the added expense of the team bonus, but everyone wants to earn that extra bonus so they’re really promoting the products,” Mongelluzzi adds.

Contests are most effective when used sparingly. “Don’t let your staff become dependent,” says Shanks. Alternate contests with games and other reward programs. At Weis-Morris Day Spas in Rockford, Ill., staff members love to play Casino, where they earn points for every retail item they sell. When they get a certain number of points, they earn a roll of the dice. Every player is a winner—with prizes ranging from a T-shirt to gift certificates for a local restaurant to cash.

Galvez takes $300 in bills of various denominations — lots of ones, fives, and tens, a few twenties, and one fifty — and seals them in envelopes. She puts the envelopes in a cloth bag and invites staff members who reach their weekly goals to grab an envelope. She likens it to playing the lottery — the odds of striking it rich are low, but people love to try their luck. The $300 goes a long way because she doesn’t refill the bag until it’s completely empty.

Even better than cash sometimes are those things that people want but wouldn’t think to spend their own money on. Over the holidays, Berberich says she gave each employee a ticket for every $50 of retail she sold. At the end of each week, everyone put their tickets in a hat and Berberich drew to see who won dinner and a movie. “Those kinds of things are what motivates my staff,” she says.

Of course, all of these things cost money, but Provenzano advises staying focused on the goal. “We’re looking to have 75% of our staff meet their goal each month, which would give us a 15% increase in sales for our company,” she says.

Just One Piece of the Puzzle

Regardless of how you structure your commission and incentive programs, salon owners emphasize the importance of keeping the numbers in front of employees — including the salon’s goal, their personal goals, and where they are in reaching both.

“They have to know where they’re going and have a plan for getting there,” Mangiameli stresses. “The other thing is that for every action there has to be a reaction—whether it’s higher pay, tips, or retail commissions.”

But make no mistake: It’s not all about money. “Salon owners don’t recognize people’s efforts as much as we should,” Bryan reminds. “It has an incredible effect just to announce in a staff meeting that so-and-so raised her retail commission by 10% this month. We get so caught up in things that we forget to give people a pat on the back.”

Alexander, who calls to congratulate and thank each staff member who reaches her weekly goal, agrees. “They look forward to the call. If they don’t hear from me, I hear about it from them the next week,” she says with a laugh.

Finally, accept the fact that regardless of what you do, some people will still refuse to sell. “People who are motivated to sell are going to whether or not they get a commission,” Mangiameli observes. “And some people won’t make a retail recommendation no matter what you do.”

Which means viewing commissions and sales incentives as part of your overall strategy.

Clients Are Consumers, Too

If your clients aren’t buying it from you, they’re buying it elsewhere. While professional recommendation remains an integral aspect of salon retail sales, remember that mass merchandisers and specialty retailers alike are also trying to woo your clients. Rather than depend just on your staff to sell, borrow from retailers’ most successful promotions and merchandising strategies. If it works on you, it’ll work on your clients. Here, salon owners share some of their favourite consumer promotions.

Figaro’s in Denver; “We have a special rack in the front of the salon that we reserve for monthly promotions, which are straight off the distributor’s deal sheets,” says Carol Shanks ‘The salon buyer chooses the deals he thinks will interest clients the most.”

Some salon owners hesitate to offer too many promotional deals on retail, but Shanks says her experience is that clients don’t change lines just because of a deal. ‘There are customers who like to jump around, and these things are very attractive to them,” she comments. “But mostly we find customers already use the product and enjoy the freebie.”

A Class Act in Torrington, Wyc.: “We do a promotion every six to eight weeks,” says Jan Alexander “Right now we’re going into tanning season so we’re sending out flyers to our salon client base that includes coupons on tanning accelerators.”

The coupons — which only go to existing clients — help Alexander track the response to the mailers and also serve as a client appreciation in her mind.

La Barberia University Spa in Cleveland: Mongelluzzi’s — and clients’ — favourite is a “Buy Three, Get One Free’ sale. For every three products clients buy, they receive a fourth one of equal or lesser value free.

Salon clients also like it when Mongelluzzi marks all the cards in a deck with varying discounts. Clients are invited to pick a card from the deck and use the discount on their retail purchases that day. “We do lots of 10% and 15% cards, somewith 20%, and all Aces are 50% off,” she says. “It really doubles our sales.”

A staff favourite, though, had to be last year’s “Caribbean Weekend.” The staff decorated the salon, served margaritas and offered 10% off on all retail sales. The volume of retail sales more than made up for the discount, and — just as important in Mongelluzzi’s mind — it was an effective staff pick-me-up. This year she’s planned a disco- themed weekend.

Hair Port in Sterling, Va.: “Buy into manufacturer’s deals whenever possible, particularly when it’s a “Buy this, Get This Free” promotion that introduces clients to something new,” says Karen Bryan. Clients love freebies, and Bryan says it helps to build new or less popular products.

Keywords:   retail incentives     retailing  

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