Spiffs isn’t a four-letter word, but I often think it should be. Like most promotions, it can be easy to give something but difficult to take it away.
Spiffs have become such a part of showroom sales that some even count them as income. This makes it increasingly challenging for showrooms to navigate and a difficult topic to discuss with both your vendors and showroom staff.
As with anything, there are opposing views about the value of spiffs, and I can certainly understand how a showroom employee would enjoy the perks that can come from selling a particular product brand — especially the end-of-year spiffs that help offset their holiday spending! But I also can appreciate the views of many owners, managers and manufacturers.
Ideally, I’d like to see manufacturers do away with spiffs and find other ways to use marketing funds.
An owner’s perspective
If owners aren’t controlling their spiff programs, they’re likely selling the wrong products at the wrong profit margin. Some owners are fine with their employees selling what they can and making a few extra bucks. But I would encourage them to consider what could happen if they sold manufacturers’ dedicated showroom products at a higher dollar amount with a corresponding higher gross profit. Of course, it’s always more challenging to sell higher-level products, but showrooms are supposed to provide a unique and special experience, right? By following that practice, showrooms would be more profitable and their employees could be paid on a commission that would offset any spiffs.
I have observed situations in showrooms where the consumer was steered toward products that had a hefty spiff and while the consumer walked away satisfied, the bottom-line consequences for the showroom were painful.
As an example, when an employee is unaware of any rebate program or growth goal you have arranged with your dedicated vendor partner, your showroom risks losing that year-end bonus because your employee is now steering your goals. If an employee is good at selling and using social media and marketing tools, they could even create enough demand with the non-partner vendor that your ERP system begins stocking products you don’t really want on the shelf. Then when the spiff ends or changes, you’re sitting on dead inventory.
There are salespeople so focused on getting a spiff that all they do is try to sell particular products to customers, without regard to price, and get them out the door so they can collect. Then they claim a competitive issue forced the sale. The employee walks away with $10 (or more) and you get virtually nothing. It’s really happening out there. If you recognize this type of employee, you may want to rethink your overall strategy and your team.
It also can cost owners valuable time and potentially other showroom business to just collect the spiffs. Some manufacturers want showrooms to provide excessive data, including cumbersome forms about customers that your employees must fill out after each sale. This means your staff is spending an hour of your time filling out manufacturers’ reports to send in. This ties up your resources and prevents your staff from prospecting new customers or following up with bids they have created. I consider this a theft of their time. Your nonaligned vendor is now keeping your employees off the sales floor.
I’ve also seen many spiffs I believe have gone too far. Sure, I think a $100 spiff for a tub is a great treat for the employee — but imagine what could have been the result if that money was invested in displays and actual advertising to get more customers in the door. Enough is enough.
And while that those extra treats are fun when salespeople receive them, they can really skew tax returns. Salespeople receive 1099 forms for income that hasn’t been taxed, so if they’re not good at stashing away the money, they’ll owe for their spiffs and get a nasty surprise when filing their taxes. I strongly suggest at the very least, showroom managers should insist manufacturers provide all spiff money to them directly so it can be distributed through payroll. Food for thought — some showrooms charge their staff a processing fee to help offset the costs of performing this function.
It sometimes can be a challenge to maintain integrity of the program — for example, tracking whether the sale came from the showroom or if it was generated from the wholesale side of the business. There is an opportunity for abuse if not monitored properly.
One final piece of advice for showroom leadership before I move on — please make sure if your employees are claiming spiffs, you/they are not abusive to the manufacturers.
Stopping the crazy train
During my years in showrooms, I’ve talked with vendors about the amount of advertising budget used in spiffs and they have told me the outlay of cash is staggering. Many also have told me they would rather see the monies used for displays, updates and training. I would, too. I think their businesses would be better for it.
Some vendors have reported only about half their total spiffs are being claimed by showrooms. I can’t help but wonder how quickly these programs would stop if all the spiff money was being claimed?
So how do we get this crazy train to stop?
Will manufacturers ever finally do the uncomfortable and take spiffs away? Good question. I think showroom owners should ultimately make the decisions of which employees can get spiffs and from which manufacturers. You also should control the type of information shared in the vendor-requested reports and how much time is spent by your staff in filling out those forms.
I suggest showrooms institute a mandate that owners must give approval before any spiff program can be initiated and that they should be provided reports that show how much each employee is generating in spiff sales. Since this is essentially additional income for employees and if you want to continue with spiff programs, you can use these extra dollars to your benefit when recruiting new employees.
If your base offer is $40,000 and you can show your employees earn an extra $5,000 in spiffs every year that may help you convince top talent to join your team. And for the record, I have seen employees earn more than $10,000 in spiffs annually.
It’s proven spiffs can drive the behavior and increase the motivation of a sales team. If your showroom chooses to continue operating with spiff programs, you must build the behavior you want to see in your showroom. To do that, it would be wise to consider putting a few things in place:
- Set up a commission program that drives the behavior of gross profit, no matter what is sold.
- Establish a spiff program based on the products you want sold. You should determine which faucet and how much of a spiff is given. Brand “D” shouldn’t be more important than brand “R.”
- Be able to easily run a report on the program’s status from your ERP system. Data doesn’t lie, especially on the gross-profit side.
One other consideration is to drive behavior to manufacturers that support independent showrooms with a solid MAP policy and products dedicated to our channel. If you aren’t currently asking your employees to sell these products and changing the way you display to support these products, you are doing a huge disservice to the manufacturers risking growth in hope you will change your own behavior.
To all the showroom sales teams and employees reading this, I am sorry if I’ve upset the norm. Recently, I have been holding meeting with showrooms I represent and the amount of concern expressed by showroom leaders about this topic is the most I’ve ever witnessed. I want to see showrooms operate in a smart and more healthy way — and I don’t see how spiffs help ownership. Spiffs are an unnecessary time waster and those resources would be so much more effective if used for updating displays, training customers and marketing.
Let’s fix this together.
