Question

IN A DEPARTMENT STORE, SALESPEOPLE ARE REWARDED BASED ON THEIR SALES VOLUME. THE PROBLEM IS THAT THEY ARE GIVING SUBSTANTIAL DISCOUNTS AND PRESSURING CUSTOMERS TO MAKE UNNECESSARY PURCHASES What are the reasons for the negative consequences of these bonus schemes? Modify these schemes to solve the problems.

Answer 1

Answer:

This bonus scheme has two main problems:

1. consumer satisfaction will decrease because they are pressured to make unnecessary purchases and once they realize it they will not be happy with the store nor with their purchasing experience. This will damage the relationship between the store and its customers.
2. since salespeople are offering substantial discounts in order to boost sales volume, then the profits of the company will decrease.

In this situation both lose, the company and its customers.

In order to solve this issue, the store should award bonuses based on total revenue and gross profit margin, not volume. This way, the salespeople will try to sell their products at the normal price, which means that they will have to convince their customers through other strategies and not just low price. The sales technique will have to shift from low cost to differentiated product that can satisfy their customers' needs.

Answer 2

Based on the information given, the negative consequence of the bonus schemes is the reduction in profit.

It should be noted that a bonus scheme simply means an incentive scheme given to employees. It's used to boost the performance of the team.

It should be noted that the disadvantage of the bonus scheme is that it can lead to competition among the employees. Therefore, in this case, the bonus should not be based on volume of goods sold.

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