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This question has been closed, and points have been awarded.
Spiffs - Yes Or No
Posted By: adammjw on 3/5/2007 6:46 AM (CST) 250 Points
What are your experiences with spiffs? Is it a typical short-term quick fix or you think it can work long-term?
How would you arrange for spiffs when buying is done centrally and you cannot say for sure who is really pushing your stuff? Have you found distributors cooperative and honest in sharing their knowledge with you who is really the best sales person sell the products?
Last but not least, do you find it morally justifiable to use spiffs when dealing with distributors" sales force?

Thank you for you ideas.

Adam

Posted by: Steve Hoffacker Member Response
3/5/2007 8:32 AM (CST)
Spiffs are great as another form of compensation and as a way of creating competition in your sales force. I have seen and personally been a part of sales organizations where even when the actual money amount of the spiff was not significant, it was the idea of actually competing against others on the team and knowing that you made the sale to qualify for the spiff that made the difference. Only pay a spiff to the salesperson who produces the sale. If you can't determine the person responsible for the order, no spiff is paid. If you want to award a bonus or a discount for large orders that are not attributable directly to any single salesperson, that can work also as another form of compensation and as an incentive to increase business - if you think you need to use such incentives. As for the spiffs, don't use them all the time. Use them only on special occasions, such as when you need to move a particular product, when the manufacturer is offering a special promotion, or when you need an all-out to push to meet a sales goal.
 
Posted by: CarolBlaha Member Response
3/5/2007 8:54 AM (CST)
My companies (in my rep agency) use spiffs often. We run at least once a year, and the salespeople look forward to them. Use them before the special promo, then they'll be significant when you do something for a special. We pick a handfull of products, and not the whole product line.

It doesn't matter if the distributor shares their best salesperson or not. The goal of the spiff is to make aware of your the salesperson who hasn't been pushing it.

Salespeople go store to store and individually sign up each salesperson at the beginning of the spiff. Its a great topic for a sales meeting, and gets them enthused. In our latest spiff, the central location doesn't send the invoices and our paperwork to the individual stores. I tracked it myself, and went to the stores to help them fill out the paperwork. Make sure everyone is paid-- you will break all your goodwill if a salesperson discovers, after the fact, they had a sale that could have made them dollars.

Spiffs are designed for the salespeople. A good way to get the distributor on board is to build in something for them. Coop advertising dollars is one way.

Hope that helps, Carol
Sell Well and Prosper tm
 
Posted by: adammjw Author Response
3/5/2007 9:00 AM (CST)
Steve,

Thanks for your comments. My client is thinking of using spiffs for his distributors' sales people. Again I would ask to what extent it will be politics-free when the info is given by companies' owners or managers when and if you cannot determine whose order it is.

Adam
 
Posted by: adammjw Author Response
3/5/2007 9:05 AM (CST)
Carol,

Many thanks for your good points.

Rgds

Adam
 
Posted by: Phoenix ONE Member Response
3/5/2007 9:50 AM (CST)
This is a great topic, here are a few points. We use spiffs with our clients on a regular basis.

Depending on Industry, some are very effective, much depends on your ability to get 2 "buyins", especially critical at distribution levels:

1- get the distributor management and sales management to "buy in" both politically and support to their sales personnel.

2- get buyin with the sales manager - make certain he will support the energy and synergism of the goal you are trying to reach with the spiff.

NEXT,
Make certain you have a sharp, exciting "kick off" of the campaign. Make it fun, and the sales people will love it, surround it with a few inexpensive giveaways hats, tee shirts, etc

NEXT,
Make certain you have a regular followup with the people involved at your company, and the distributor - simple email updates is not enough - we make certain people visit the distributor post current results and create a bigger hype - sometimes even increasing the Spiff.

LASTLY,
make certain no one feels cheated but a spiff, you will loose them for the future ...

Work with the distribution management to present the spiffs with you and everyone will be happy.

Spiffs can be a great sales asset when done properly.

Hope this helps

Good Luck & Happy Marketing
 
Posted by: Steve Hoffacker Member Response
3/5/2007 10:10 AM (CST)
Adam,

When an individual salesperson produces an order (sometimes called the "procuring cause") he or she is eligible for the spiff - whether it's cash, merchandise, or points toward merchandise or a trip. When there is no single salesperson but rather a group order, a house account, or a company order submitted directly, there is no spiff payable. Don't worry about trying to pay an incentive for each order. Use the spiffs as incentives for your sales force and mix it up - double points or dollars on sales for a single day or for a few hours or the first sale of the day, etc. Whoever is named as the salesperson on the order is the salesperson due the bonus. No name, no spiff.

Steve
 
Posted by: adammjw Author Response
3/5/2007 10:34 AM (CST)
Thanks, Bill for your great ideas.
Steve pls bear in mind the the program is meant for distributors' sales force, though it does not change the idea, does it?


Rgds

Adam
 
Posted by: adammjw Author Response
3/5/2007 10:37 AM (CST)
Once again let me ask you is there anyone who finds spiffs unethical or immoral way of doing business?

Adam
 
Posted by: BARQ Member Response
3/5/2007 12:05 PM (CST)
I find incongruence with spiffs that are offered to those distributors who profess to be consultants that provide the BEST solution to their customers' challenges. That is only possible if all things are equal. Spiffs give incentive to the salesperson to consider a particular product or line exclusive of its performance, availability or price, unless the distributor carries two product lines that are of equal quality, price and availability. There are few distributors with that kind of redundancy in their lines.

Spiffs are often referred to as incentives, but in my opinion are a mild (or sometimes overt) form of bribery. Would a salesperson hesitate to disclose in the proposal the fact that he or she gets a free gizmo if the customer buys this widget? If so, then the spiff is placing unfair influence on the recommendation.

Just my opinion.... I could be wrong!

BARQ
 
Posted by: ethnicomm Member Response
3/5/2007 1:48 PM (CST)
You are trying to modify behaviour with a SPIFF.

In my experience working with distributors and reps, SPIFFs work. They are not considered unethical or a bribe - just an incentive to work on MY business to generate sales for both the distibutor/rep company as well as my own.

Most distributors or reps have multiple lines. They obviously work on those that are easiest to sell with the least effort possible. This is human nature. They will not focus on other lines unless it is worth their while. Having PK sessions and other training support helps but at the end of the day, they look at what they can sell to maximize their income. This is where SPIFFs come in.

My experience also suggests that ca$h is the best spiff. Following that are cash-like things like gift cards/gift certificates. Then come the logo'd clothing or discounted product purchases.

The principal of the company or the senior management would also like to get a spiff but for them, it's other non-monetary benefits like a lunch/dinner/golf or other outing. They don't actively push a particular line other than ensuring that their staff work on the high margin lines. They like spiffs because it's a motivational tool that they can in turn trumpet internally.

ethnicomm inc.
 
Posted by: Phoenix ONE Member Response
3/5/2007 1:56 PM (CST)
Adam,

Spiffs are NOT , I repeat Not immoral or unethical. The only time you need to concern youself with that theory, is when:

1- they are run in an unfair or unethical manor
2- the prize/reward or bonus are "over the top"-
3- all participants do not have a "fair means" to achieve a like goal.

One other consideration is to have a spiff that occurs too often the sales reps then take them for granted and if you ever stop having them, they feel cheated.

Spiffs when done properly can launch a product, increase sales, build a brand, support a team, or simply get your fair share of mind with distribution sales people.

Hope this helps

Good Luck & Happy Marketing
 
Posted by: W.M.M.A. Member Response
3/5/2007 2:47 PM (CST)
Spiffs are not immoral or unethical...they are business. As far as the political aspect, you will never overcome that. Distributors are tied to various companies in numerous ways, if you can figure those out, and work through them, GREAT.

Money talks...etc.

Randall
WMMA
 
Posted by: W.M.M.A. Member Response
3/5/2007 2:47 PM (CST)
Spiffs are not immoral or unethical...they are business. As far as the political aspect, you will never overcome that. Distributors are tied to various companies in numerous ways, if you can figure those out, and work through them, GREAT.

Money talks...etc.

Randall
WMMA
 
Posted by: BARQ Member Response
3/5/2007 3:18 PM (CST)
I'm not claiming that spiffs are inherently immoral or unethical. Take this scenario:

A customer calls his material handling distributor to order ten pallet jacks for a new warehouse, and asks him to recommend a good product for a good price. The distributor carries the Best Mover brand and the Prime Lift brand, which is identical to, and made by the Best Mover company, just private labeled to sell at a lower cost so as not to dilute the Best Mover brand.

If the customer ASKS for Best Mover, the salesperson could ethically sell them that brand. But if Best Mover is offering a spiff or other incentive, and the salesperson is just a $few thousand short of his quota, the spiff will influence the salesperson to recommend Best Mover at a much higher price, even though the buyer asks for the best value -- and don't think this doesn't happen VERY frequently.

I contend that if you cannot launch a new product or increase your market share or recover your quarterly sales losses without regularly stuffing cash in the sales reps' pockets, (over and above commission) there is something much more serious wrong with your marketing.

Distributors all over are scrambling to demonstrate value add to keep manufacturers from selling direct or online. The proliferation of spiffs are just one more reason for end users to WANT to go direct, and stuff their own pockets with the difference.

Just my opinion!


BARQ
 
Posted by: Steve Hoffacker Member Response
3/5/2007 3:24 PM (CST)
Adam,

I think we're talking semantics a little bit here. Spiffs normally are a form of incentive to use with your own salespeople. Since you're talking solely about a distribution network of independent representatives and companies, forget about the term "spiff" and just offer a short-term enhancement in the commission schedule. Then it doesn't matter who in the distributor's company makes the sales or if you even know - it's not your concern. Let them pay their people as they decide. Unethical - no. You simply are offering more return for them selling your product that perhaps another one of their lines - as you certainly have the right to do.

Steve
 
Posted by: adammjw Author Response
3/5/2007 4:59 PM (CST)

Steve, to me it would make a difference who pays a salary or even a part of it to my sales people, myself or my supplier. Am I right?
Jeff, I do share same doubts you have, hence my question.
So, Randall, for as long as it's effective I do not have to worry too much, correct?
Bill , I got your practical points.
Thank you guys for your opinions.
If your own sales people were on spiff program from a supplier would you find it absolutely ok, perfect or detrimental to the way you think your business should be run and customers ought to be treated?

Rgds

Adam
 
Posted by: Steve Hoffacker Member Response
3/5/2007 7:06 PM (CST)
Adam,

I am confused. How can a supplier be paying your salespeople? How can they be considered your salespeople if they don't work entirely for you? If they are being compensated by more than one entity and are not independent contractors, they would seem to have a divided loyalty and fiduciary responsibilities, among others. If this really is the case, then the issue is much larger than compensation. Am I missing something here?

Steve
 
Posted by: adammjw Author Response
3/6/2007 4:17 AM (CST)
Steve,

Spiffs typically are paid by employer or manufacturer directly to a salesperson for selling a specific product.
The latter i.e. spiff paid by a manufacturer is the case in question here.
Easily can I image that due to spiffs sales persons are pushing not so excellent products on customers.
Hope it makes it clear.

Adam
 
Posted by: Steve Hoffacker Accepted Answer
3/6/2007 7:51 AM (CST)
Adam,

Thanks for the clarification. All of the spiffs that I've used, suggested to my clients, and been on the receiving end of have either been paid directly by the company (employer) or by the company when the manufacturer was funding it. This is the first I have heard of a manufacturer paying people directly and I don't think this is a good policy from a corporate accountability standpoint. You asked about ethical issues. Now your point is much clearer. If your salespeople (or any salespeople) are "pushing" a product simply for the compensation without regard to the merits of that product or the needs of the customer, this would seem to raise professionalism issues - if not ethical ones. Is there a reason you need to use these manufacturers? Can you switch lines or require that they can't pay your salespeople but only go through you? If you are concerned about lower quality products being sold by your people, you are the one who can make that change by not allowing specific products or brands to be sold by your staff.

Steve
 
Posted by: adammjw Author Response
3/6/2007 8:22 AM (CST)
Steve,

Thank you for your thoughts.
I do feel and think same way. The idea struck my client as a way to push slow-moving products from his collection.
My suggestion is rather to start a loyalty program where participants- distributors' sales persons accumulate points towards non-monetary rewards.

Rgds

Adam
 
Posted by: CarolBlaha Accepted Answer
3/6/2007 8:38 AM (CST)
Manufacturers run spiffs all the time to their dealers and distributors. There is nothing wrong with giving an incentive to give the distributor's salespeople TOMA-- top of mind attitude.

No salesperson is going to recommend a product that doesn't suit the customers needs because of a spiff. They want a customer for life, they are compensated for the sale via their regular plan.

Don't split hairs-- its a great idea -- run with it. As far as tracking the orders and who's sale-- that is why the manufacturer sales people sign each distributor sales person up individually. The sales people then know what products qualify and keep track of the manufacturer invoice #. At the end of the spiff-- you supply a form they fill and submit requesting payment (and this form requests their social security # as you'll have to report anything I think over $650 to the IRS-- and yes the salesperson will pay taxes on this). Its all very above board.

There are some manufacturers that run year round incentives. In the flooring biz, its even an added layer. The yarn manufacturers, who are not even the OEM's -- pay dealer salespeople cash via a debit card. (These are not small companies to those scared we are not being ethical here-- co's like Honeywell (now Shaw) and Dupont!)

Sales people love the convenience of this. This $ adds up, I know people making $500 a month in spiffs on this program, some a lot more.

Carol
Sell Well and Prosper tm
 
Posted by: CarolBlaha Member Response
3/6/2007 8:44 AM (CST)
One more thought. I have worked with manufacturers offerings distributor sales people points for trips and other items. Feedback is, they have enough of those programs with cards, etc and it takes too long to accumulate points to matter.

My advice-- "Cash is King". No matter how small the amount. I had a thank you over a $20 cash payment that was so gracious, I thought we were giving the guy thousands!
Carol
Sell Well and Prosper tm
 
Posted by: adammjw Author Response
3/6/2007 8:51 AM (CST)
Carol,

You got me thinking. Of course the idea is run it over board.
I agree that money talks best if anything can.
Ok, again I want to thank all of you guys for your time and efforts. Special thanks and points go to Carol and Steve for giving "why" rationale.
I will have a showdown with the client soonest possible.

Regards

Adam
 


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