Marketing Principles of DeMarco’s Departmental Store †Free Samples

Question: Discuss about the Marketing Principles of DeMarcos Departmental Store. Answer: Introduction The purpose of this report is to analyze the case study and the issues faced by the organizations. The case study deals with the issues faced by the manager of DeMarcos departmental store, Lauren Brewster. She too is worried about the economic downturns and competition prevailing in the industry. In order to give a competitive advantage and sustainability over other retail box stores, she realized the key is to retain the old customers by providing the premium and personalized customer services. In order to build a loyal customer base who can further acts as referrals, it is very important to give them a shopping experience which goes beyond the conventional way of just roaming around the stores, picking stuff and get it billed at the counter (Reyhle, 2016). In order to gear up the sales executives at the stores to make the customers feel special and induce them to come back, an incentive scheme was initiated instead of a giving them regular pay check (SHRM, 2014). The impact of this incentive scheme instantly reflected on the sales figure as the sales persons worked hard to create a strong customer base for their allotted area. On contrary due to this scheme an unhealthy competition started among workers and level of cooperation also decreased among them. Case study issues Issue 1: The incentive scheme suggested and implemented by Lauren does not give equal opportunity to all the workers to earn incentives and commission proportionately. In retail departmental stores, there are different types of segments which include products of different value. The commission fixed on those items will also vary accordingly. This created a situation of resentment between the sales associates Katherine and Damien. They were both working in different departments. They were getting the fixed hourly pay equally irrespective of the departments they served. Katherine handled the designer dresses section and Damien managed the womens shoes line. Designer dresses being the expensive one gives an opportunity to her to earn more commission on the sales as compared to Damien who have a less commission margin. This has led to a bitter relationship between two sales staff and affected the employees motivation. This has also affected the working environment as earlier the store was seen as a cooperative workplace but due to the implementation of this scheme give rise to unhealthy competition between not only in between Katherine and Damien but in other sales associates too. Upon discussing the difference in compensation packages many employees will consider it unfair and there will be workplace conflict and at the end the, the impact can be seen on the customer services (Martocchio, 2011). The individualized compensation plan is unfair and unjust due to difference in commission pay of every individual (Korm, 2011). Issue 2: The second issue in the case study was elimination of hourly pay and introducing the incentive plan in their retail stores. The hourly wage along with an attractive incentive package forms an attractive compensation package that acts as an employees motivation at workplace to be more productive and helps to retain employees in the longer run (RSC, 2013). In retail stores, a compensation plan can prove to be very effective in managing the performance of sales person so that they can achieve targets and provide premium services to customers. An assured pay gives an employee job security and satisfaction that their interest is protected in the organization and it is reflected in their performance. By discontinuing the hourly pay, employees at DeMarcos have no pay security (Choi Whitford, 2013). Their earnings are only limited to the commission received by them by selling their products. The economic conditions are not favorable and it has a direct impact on the purchasing power of the consumer and demand of the product. The incentives which will be received in the future will keep on fluctuating and this may create dissatisfaction regarding their salary. There are chances of increase in the turnover rate of the employees. Sales staff at DeMarcos is also responsible of retaining customers; there are chances that theyll switch to some other retail stores in the absence of their preferred staff. Issue 3: The time decided by the management to review the new incentive plan was two years, which was a lot. When new policies are designed and implemented it is necessary that the impact of such policies should be observed over a period of time and review it on a continuous basis so that necessary changes can be done but at DeMarcos, the time was two years and the effectiveness of the new system was analyzed on the basis just sales number based on monthly or quarterly results. The management should have given importance to the impact of such policies on the workplace environment, behavior and performance of the employees. Lauren, despite of knowing the issues arising such as unhealthy competition, no cooperation among the employees and there are more motivated to work for their own allotted them rather than focusing on the common goals of the organization. These issues can directly affect the stores performance in the competitive retail environment. Also, the customers also get affected because the workplace issues will directly affect the stores environment. The differences and conflicts among sales staff affects can adversely affect the employees retention rate. Management and Laurel must have reviewed their policy on time to time basis and acknowledge these issues. Advantages and Disadvantages of incentive system Advantages of Incentive system There is no earning restriction on the amount of incentives generated. The sales staff at DeMarco can earn great incentives on to basis of sales done by them. Employees tend to work harder because they know unlike the fixed hourly pay where every sales associates performance is measured on the same pay scale, the incentives will be the direct result of their skills and efforts. In the competitive world the cost of making new customer is high rather than retaining old customers. Laurels idea of providing personalized premium services to the store clients worked as customers referrals and mouth publicity help to build a customer friendly image of the store. This also led to repeat business from the happy customers (Quast, 2011). Disadvantages of Incentive System: No wages or hourly pay security is the major drawback of this system. The commission amount fluctuates depending on the demand and sale of the product. Employees may sometime take home a handful of incentives or nothing. The feeling of inequality and injustice developed in minds of employees each other can deeply affect the stores and personal performance. The level of cooperation also got affected. To achieve incentives, sales staff may push their products on the customers even if they dont want to buy. This is known as hard selling. The customers may find it irritating and annoying and the store may lose their customers (Miller, 2015). After the implementation of this system, all the sales executives geared up to maximize their incentives by providing customers a memorable shopping experience. The results were clearly visible on financial data but there were issues and conflicts between the employees regarding the unfair opportunity of earning fair. Issues and solutions related to incentive system Yes, the complaints of lower paid sales associates are legitimate because they dont have any secured earnings. Also the commission margin is also less on the items sold by the as compared to the sales associates of other department who have high commission percentage on the higher value of goods and there is no job security because they fear if they dont achieve the selling targets they might be fired. To address these issues Laurel should reconsider her decision of eliminating the hourly pay and along with it she should design an incentive program. Also the commission should not be based on the value of the product but on the quantity sold by them. The customer handling and satisfaction should also be a criteria for giving incentives. This would give equal opportunity to every sales associate to earn incentives (Chung, 2015). Loyalty to Customers Katherine and Damien have definitely set standards of providing elite personalized services to their customers which have induced them to visit the stores again. The reason they are loyal to customers is the incentive program initiated by Laurel. They have provided customized services to their customers by analyzing their needs and updating them with the latest updates. Their maybe chance that after the exit of one successful associate, the customers gets affected but the store can again attract more customers by hiring other sales executives who fulfill the expectations of the customers set by the previous sales associates. This can be done by communicating regularly and letting them know any special offers and discount running on the stores. Delivering the expectations is a key to running business successfully Recommendations The thought of the store manager Lauren Brewster to cope up with the competition faced by their stores due to online websites and slow economy was to retain customers by providing personalized services and elite treatment like a celebrity to every customers who visit their stores. Her experiment was successful and it was clearly reflected on the sales and profit figures of the organization but it affected the workplace behavior of employees who were not getting fair proportion of commission in comparison with the other associates. They were not getting their fixed hourly pay either. Lauren and other management people should start there hourly wages system so that sales associates can work freely without thinking about their low pay or job security. In order to boost the morale of sales associate to provide premium customer services to their stores, she can think of incentive scheme based on the quantity of goods sold and some factors like customer service and workplace behavior shoul d also be taken into account while calculating commission. This will motivate the workforce to work harder and contribute in the growth of the organization References Choi, S. Whitford, B.A. (2013). Merit-based Pay and Employee Motivation in Federal Agencies. Issues in Governance Studies. Retrieved from https://www.brookings.edu/wp-content/uploads/2016/06/Choi-and-Whitford_Merit-based-pay_v11.pdf on 24 May 2017. Chung, J.D. (2015). How to Really Motivate Salespeople. Retrieved from https://hbr.org/2015/04/how-to-really-motivate-salespeople on 24 May 2017. Korm, R. (2011). THE RELATIONSHIP BETWEEN PAY AND PERFORMANCE IN THE CAMBODIAN CIVIL SERVICE. Retrieved from https://www.canberra.edu.au/researchrepository/file/5aea8cba-27ff-e2e7-d368-62bedc4f79bb/1/full_text.pdf on 24 May 2017. Martocchio, J.J. (2011). Strategic Compensation: A Human Resource Management Approach. Retrieved from https://books.google.co.in/books?id=32Frpd_UlxQCpg=PA85lpg=PA85dq=unhealthy+competition+due+to+incentives%5Csource=blots=l8NfwJKeTPsig=CUGE_Lo-GebD2wViuYKffdJWBPEhl=ensa=Xved=0ahUKEwjihvCA7IbUAhWEs48KHUzTD94Q6AEINjAD#v=onepageq=unhealthy%20competition%20due%20to%20incentives%5Cf=false on 24 May 2017. Miller, B. (2015). Pros and Cons of Monetary Incentives. Retrieved from https://hrdailyadvisor.blr.com/2015/01/14/pros-and-cons-of-monetary-incentives/ on 24 May 2017. Quast, L. (2011). Creating Incentive Plans That Actually Incent Employees. Retrieved from https://www.forbes.com/sites/lisaquast/2011/09/19/creating-incentive-plans-that-actually-incent-employees/#3ccc2d51450d on 24 May 2017. Reyhle, L.N. (2016). Customer Loyalty In Today's Modern Retail World. Retrieved from https://www.forbes.com/sites/nicoleleinbachreyhle/2016/04/20/customer-loyalty-in-todays-modern-retail-world/#697986bf513c on 24 May 2017. RSC. (2013). The Importance of Base Pay. Retrieved from https://www.rscadvisorygroup.com/rsc/index.php/practice-advisor/50-the-importance-of-base-pay on 24 May 2017. SHRM. (2014). Bonus Policy: Customer Service Incentive Plan. Retrieved from https://www.shrm.org/resourcesandtools/tools-and-samples/policies/pages/cms_ on 24 May 2017.