[How to Compensate Salesmen, 1950s?]

the dealer panel discusses the subject of sales Personnel now all this as you know there are any number of ways you can compensate your salesman straight salary straight commission draw against commission straight commission with guarantee salary plus commission profit sharing plans first of all let's find out which of these systems you use and why you favor it Earl how do you compensate your salesman well well being that I'm more or less new in heavy sales end of it uh I tried originally a base salary plus a 2% commission and then also give them a few extra bucks on dogs that I wanted to get out of the store itself but since then I've changed it to a straight guaranteed salary I mean guaranteeing the serviceman a a a good base salary whether he's sick or not if he should be off with any type of flu or sickness he still has that guaranteed annual salary and you said serviceman did you mean salesman salesman and then I also consider servicemen salesmen so we compensate I've instituted a 1% commission to all servicemen on Direct leads that result in sales that are sales not on uh just leads that don't pan out then also another thought that I've had uh that maybe the board could kick around because I I'm thinking of instituting it I never uh have tried anything like it but I'm thinking of paying the the salesman where they're working on a guaranteed base like they are there's actually very little incentive there in a sense which they could tear apart so say that we're shooting for a certain gross profit anything that is made above that I've thought of an idea of reimbursing back to the salesman a certain percentage of it to get them the shoot for the higher Dollar on an appliance and I was wondering what the board thinks about if they think it would work out or if there's any pitfalls to it actually it would give me a bigger margin of profit which would increase my uh actually my monetary value to coming back to me so that even a smaller percentage of it someone have experience along those lines could we have originally uh started out on commissions but uh we find through the years and you have your older salesmen we have found that most of these salesmen prefer uh more security and a salary they know what they're going to get and they've actually already proven theirselves as to their ability and what they can do and you'll find most of your salesman whether on commission why we'll earn about the same amount and uh of course there again it's a different situation in a small town where all your salesman know most of the people and there's always a question on Whose customer it is and it takes away dissatisfaction uh we have found a contest among salesmen their sales with the better salesman having a little higher quota has really paid off I mean they that's when they work and we uh make it a point to conduct these uh contests maybe several times during the year for uh different seasons Sherm I believe you had your hand up well he said daughter daughter sales at is higher price merchandise or higher margins no higher margins say that Sher that if I I would set a 30% margin on my appliances over and above my cost now say if the salesman over a period of the year or break it into a six-month span if they would work and try to maintain it and say gross a 32% margin give them a percentage of that extra 2% above my gross that I actually you ought to have something to get them out of that are you thinking ear all about staying on just a standard wage or are you thinking about that no keeping the standard wage I mean b salary additional commission set up and then having something as an added incentive for them to shoot to get more profit we started out years ago with just a commission on um the gross sale and of course we found uh that uh that's a very simple way to uh pay commissions but uh of course most dealers that are on that system they adjust to a lower commission when the grow profit is shorter mhm and uh now on the system we're on now we pay 15% on our gross profit of course that automatically adjusts to the uh lowers the commission as you lower the gross profit and that is a real simple way of doing as far as the bookkeeping end of it goes I think it's important that we keep the bookkeeping simple well I mean maybe there you have a larger staff but I'm thinking of a mediumsized store similar to mine to where you well actually I have two sales besides myself now it would be very simple for me to take and figure my gross profit on a six-month basis and if it's above what I've set as a goal take and pour back a percentage of that to them for their extra it'll give them a chance to work extra hours to shoot for that higher dollar when a customer comes in and he's really horse trading they're going to still try to hold out to get above that margin of profit that I've said on that Appliance you mean to tell me tell me you f you see you laugh because I understand you pay your salesman on a basis depending on what your profit is is your percentage profit goes up the salesman make more sure what better salesman what happens to a little old lady in the shaw well we take care of her too yes you sure do she pays you your overhead we give her an honest dollar value for every piece of merchandise we sell yes but how about the you mean to tell me two different people coming into your store on two different times or encountering two different salesman May two but pay different prices for the same piece of merchandise could be and that to what are we going to do be like the doctor charge just what the market will bear the person can stand morg can I ask you a question no if a customer come in and offered to pay you list price for an appliance with no bargaining whatsoever would you sell it I would not I would sell it at the price everybody else paid let's get back gentlemen to discussing compensation plans something you mentioned to me in the past few days off hand George what other incentives do you use to attract the type of man you want on your sales force uh GL J asked that John we uh have added to our uh a percentage of the gross profit uh by adding a retirement plan we put quite a little bit it's actually 4% of the gross of the salesman's gross pay in uh to retirement and um this uh we've found uh gives us a whole lot better chance of hanging on to our employee rather than giving him a real big Commission in uh then at the end of the year if things fall off of course you haven't got anything but by building this Reserve in this retirement plan I think that it tends to uh make your employee more stable also we have uh a vacation plan of course and we also have uh Blue Cross hospitalization and that type of thing do you get out of your profits George or out of his as PID uh we ours is a profit sharing plan and uh we so long as we make a profit well we pay this 4% in we make a substantial profit you found that that uh through your experience that type of incentive is becoming a necessary thing to attract I think so I think so by giving a Salesman a whole lot of money doesn't make him a loyal salesman let's talk about the type of man you want uh Mart what would you look for when you go out to hire a Salesman what do you wanted what do you expect of him well first I'd want a mature man who was able to take Direction probably not too young between maybe 25 and 45 but I wouldn't draw the line at 45 but younger than that I don't think inspires confidence in our customers that buy the type of equipment that we sell i' want a man in good health I want a man that had confidence i' certainly want a man that was enthusiastic and liked the business above all if I'd leave for one characteristic it would be a man who can get along with people every successful salesman I ever knew he was successful if he could get along with people and I'd want him to be ambitious want to make money hungry I would call him without outside uh interests or Investments or I hope that his wife wouldn't work so that he might have the incentive to want to make money and grow with our organization you believe there's such a thing as a self-starter I'm afraid not I think most salesmen need motivation their paycheck motivates them contest motivate them competition between themselves motivate them and it takes a lot of constant training and constant uh motivating in different ways one day I may coax them another day I may Pat them on the back and another day May really give them hell but uh by varying that uh technique and varying it to suit the different temperaments all our men aren't alike I can get out of them a pace that I don't think that they would maintain themselves Kur how do you supervise salesmen well actually in supervision to salesman I think it's got to be a close control even though they are on a commission or whether they're on a salary or whatever it might be because salemans have a tendency to take and go to their any Direction they want to go at any given time because they have feel like it if they're they're free to go and do as they please that's the reason that most people are salemans this uh Martin was talking about down here a minute ago that they had to be there were not self starters well actually if a man is a selfstarter 90% of the time he'll be admin for himself so in supervising Salan I found that you have to stay close with them and work with them and to actually keep a Salesforce in F and then you'll have better salesman we all agreed on this panel that you need training of sales Personnel how do you go about training your personnel well first we take uh advantage of all of the AIDS that the uh the different uh factories make available to us they come out and we have sales meetings at which time we take and present a product we tear that product apart take it and show it and to present it uh we found that if we present the product if we know the story of what the product will do for the customer and the saleman knows that then he can make the sale a lot easier Stan does that fit in with your line of thinking I think he's absolutely right on knowing the product uh there is some disagreement on how much a Salesman should know about the product and Technical aspect but uh first of all in getting a Salesman you've got to have a father that has the aptitude to be a Salesman under close supervision and training regular Trail sales meetings and so forth you usually come out pretty well with them there is some uh uh however however you compensate him has a lot to do with it he's got to be be able to make a good living if he's going to be on your side of the fence and work for you and uh there are different methods according to the different localities of how this can be done it's a very type of thing and in each C circumstance it's a little different but we hold regular sales meeting with ours we have Factory Representatives that come in from time to time and uh we let the salesman know as much about the product as it takes to sell the product but there is a fallacy if he knows too much and that is that he gets service minded instead of sales-minded Tom on salesman I uh like to delegate responsibility to each salesman make him feel that he is part of the organization now in making a Buy on we'll say a quantity of TV or washers or dryers I always get them in if I make the buy or and then bring it in and they're they think they're forced to sell it but if they help me by it then there's no problem moving it I think that's important uh what Tom mentions there another thing it uh is covered at these meetings we have at least one good meeting a week and that is Communications these uh salesman sort of advises you on what his problems have been during that week and uh also it does certainly help you in buying they like to be a part of the picture that's right it gives them as part of the picture and it's certainly a morale building thing to have these meetings every week this is what eight dealers say about sales Personnel I'm how do you feel about that well we have tried doing our own service for many years 31 years to be exact and today start well starting last April we went Central service and we're more than pleased we are exclusive RCA whirpool in our area and uh we feel that the RCA Service Agency is us and we tell our customers that they call us for service they do not call RCA because they're 58 mil away so as far as our customers are concerned we're we're still servicing but actually we're not mhm and it's good Don and Don and Sherm what would you think if you had a service department and could make a profit in it with the service department still get your reconditioning done the boys help on deliveries now we at our store I happen to have my profit and loss statement here we make 29.6 gross profit after labor and parts cost you're smarter than I am me too I couldn't do it I could take the same same time Tom why couldn't you I'm not smart enough I could take the same time that you're spending on that uh fiddling around with that service put it in sales and work into promotions and another thing I I think you're making a when you ever whenever you talk service to a customer you're doing nothing but making her wonder about service well am I going to have service this guy he's scaring me to death oh sh you must have you must put it over to the customer these Factories do a good enough job but making people think that they're not ever going to require Service uh I think that it's up to us when we're selling to indicate that this thing is a very complex thing particularly television and that they may require service and that you uh somebody's going to be there to back it up if you duck the issue completely you're kind of uh uh could ween well I know you wouldn't do that you know one thing too that I found out here I think I'm about the youngest dealer here on in sales actually on the panel but I found that Services was definitely a help and helping me build all and come up through the ranks with it one of the biggest things that I found it allows me to get the bigger Dollar on the item than I'd say than the majority of the other dealers using factory service we can charge a higher dollar make a better gross margin of profit and still come out much better than it gives you the actual contact with the customer it's like a personal relationship and a lot of people now that I have found most of them are going into what they call a second Appliance they've already had their initiation especially in laundry and they found that the biggest Factor there was good service I mean without it what good is a washing machine if he waits 5 to 7 days for a service department to come out and get it running for you and if you can get out within 24 to 48 hours you will maintain a customer and she'll come back to you for that second Appliance or many many more Earl let me ask you what percentage of sales do you feel you can attribute to the existence of your own service department well I I'd attribute my complete growth to it but actually like Mart says I I contribute a good 40 to 50% mm do our our service department I'd say at least you pinpoint that you can get 30 to 40% on your coming up from people that if I had a tape that would be running in that store when people walked in 99% I'd say a good 50% that would walk in would say we've heard about your service and that's one reason that we're here not our advertising we don't do that much of a volume in advertising 90 or 50% of those people that walk in say they've heard about our service department and we're so proud of that department we'll take them down into the basement and we'll run them through the complete Department and show Earl how many service calls a day do you handle roughly somewhere around 60 to 70 calls a day I'd say in an average Tom how's that fit in with you just about well about 10 less 40 to 50 is our but our salesman on the floor time and time again with a stress when you buy this Appliance we're going to service it and we've got the best darn service in Seattle and that makes sense do you have any uh in view of the figures that Earl mentioned there do you have any uh figures that you could come up with us an approximation well mine isn't as much I would say 20 to 25% I can attribute to our service directly attributed well I think in that case he is a lot older than our organization our organization grew as I say from service and we're still feeling the biggest half of our uh sales from our service department and I think will for a few years excuse me uh lyand uh what are your thoughts along these lines well of course we don't have access to centralized service and I'm sure a lot of the small dealers that are going to see these homes that won't be a problem for them to make a decision whether they're going to have centralized service or their own service department but I would like to make this point that you've got to have service you've got to have some kind of service to offer your customer or you better get the hell out of the appliance business that's all there is to it you've got to have service to offer and it doesn't make much difference how you do it now Earl over there he built his business on service and that's what makes his business different than U than Sherm but uh you just got to have service if you're going to sell appliances sh has got service that's right he he has service there's no uh there's no discussion uh I mean no uh uh saying that he doesn't have service he has a man and uh I think that any business being built today sales-wise has got to have service there's no question about it in one form or another Sher have you noticed by going to centralized service that you increased your sales have you been able to make more profit because of it now these other gentlemen have indicated that their profit picture has looked a lot better because they' developed their own service departments what's thinking where he gains 20% I'd lose 40% just fiddling around with the service have you ever had a have you ever had a mad woman on a Monday morning call you up and upset your whole sales for the whole day I let her do that I've had a lot of mad women and let me say that some of the madest ones when they are properly handled if it wasn't for service if we didn't require this service it'd be no reason for my existence my service department by satisfying that woman and by uh having that man get there promply she appreciates our service and she will remember the service she gets long after she forgets the price she paid for the product I dare say you couldn't tell me what you paid for your automobile and it's a major purchase but if you're broke down sometime or if you've had a minimum of of uh inconvenience from waiting for your car you're going to remember the name of the service agency and probably buy that same car at that same place the next time now these are the only men too who are invited into our customers homes your salesmen are not invited in but my servicemen are in that home every day they're looking around when they're fixing a television see how what kind of old range they have or if they're wash fixing that washing machine in the basement they get a glance at the refrigerator in the kitchen and these men are the ones that provide us with the leads also instead of building up if if if a central Service Agency gets into a woman's home with an old automatic washer or one that's been Troublesome and the Bill's going to run 60 70 $85 you'll never know it maybe she spends the 85 and there's some other thing in it week goes bad like an old automobile if you put the rear end in maybe the engine's bad and then after she spends that money she finds it's not operative or she's going to have more trouble then she goes to trade it into you she said I just spent $75 on it she still create any more trade my service department would say I don't believe you should put in any more money into this uh automatic washer that you'd better trade it you can still get a little bit of allowance on it and you would be cheaper if you would purchase a new one and there's where we get our leads and we think we're rendering a service to our customer and I think maybe to the industry because we're obsoleting this equipment faster we're getting the faster trade-ins and getting people to buy things rather than put money in these old ones cuz the new ones certainly have more features sheram don't you still get a mad woman on the phone on a Monday morning anyway even though you don't do the service on the machine say you've sold it to her and she gets it out there and even though the factory service is hooked it up and it's not operating properly do you think that the majority of them may call factory service but there's still women that'll call you because you purchased it to you so you're not eliminating that part of the operation of it I'm eliminating a greater part of it however my salesmen are on the floor selling and not taking service calls because this the service is in the hands of an expert and in our instance we have the finest serviceman he's an expert at it he concentrates on he works on it he knows how to to to take a when he works on a television or a washer to lay a canvas on the floor and has gentleman people they're out at our store working with us all the time but believe me when you do have centralized service the mistake and the problem comes in not working close enough with him give him the well let me put it this way so the guy says centralized service and then you just give him the the bum ones just the ones that are problems well no actually if you subscribe to centralized service they get everything inway all the way across the board that's the secret of the success of the you the ones that are no good won't help you no would say you would work close with the service manager of the organization that does not put you close to the outside servicemen and they're the ones that are representing you in the home but I bet a dollar biller isn't the one of them that knows it we don't know who sold that machine where it came from we work very close we have the same man every day he's in our store every day well you're in an outside area but he's in a metropolitan area where most Factory servicemen do not even know who sold the machine to that customer and they have his interests at heart nothing whatsoever how about the time element supposing a woman buys a washing machine from you or uh somebody that doesn't have uh their own service and they call up on a Monday morning at 9:00 and say my washer is busted I have four children and I got to get this washing out this morning supposing you call Centralized service and he said okay I'll be over tomorrow morning what happens then he'd more likely say I'll be be there Thursday be there Thursday whereas a man that handles his own service can be there you can route a man there within an hour maybe what if your serviceman's sick you've only got one man well we have two all right what if they both sick then you grab those are the views of various dealers on the panel with respect to handling service