Spiffs. What are they? They've been called PMs, Push Money, Promotional Money, Bonus Money, Specials, etc. Call them what you want, they all boil down to the same thing: money given to salespeople for selling a particular item designated by the owner, manager or merchandisers. They work brilliantly for some stores and are ineffective for others. Let's examine why.

Spiffs work great but only on one condition: when salespeople are still encouraged to sell what will satisfy the customer first as opposed to a spiffed item that may not. When a spiffed item will satisfy the customer, sell it. But when the customer has a specific need or desire that the spiffed item cannot fill, it should not, and must not, be misrepresented or pushed.

It sounds like a simple principle but not all that easy to achieve in reality. Salespeople will naturally want to sell something that will make them extra money. And in some instances, management may want or need to move inventory. Ethically, what is right for the customer must always be the priority.

A recent situation at a large chain of stores will help bring this point into perspective. In a highly competitive market, margins are often maintained by spiffing items purchased in mass with higher margins to compensate for the traditionally lower margins. Pressure put on the buyers resulted in a message to the salespeople: push, push, push spiff items.

While some salespeople complied, the majority argued that it was unethical to push some of the items because they had definite drawbacks. They felt it was their responsibility to make the customer aware of these drawbacks to prevent inevitable returns and dissatisfaction. The situation created a great deal of dissension between management and salespeople; and rightfully so. There must be a balance between satisfying the customer and making a profit.

When using spiffs, you may need to break the rule about sending mixed messages to your sales staff. A mixed message is when you say one thing, then almost in the same breath, follow with something that contradicts the initial statement. For example, "We really need to sell these items, but do the right thing for the customer." If you follow this philosophy, you are bound to reach both goals. Salespeople will still take advantage of spiffs but always with the customer's best interest in mind.

One major mistake many retailers make is spiffing one item for too long. Spiffs are only effective in short bursts. One shoe retailer in New England has been extremely successful in maintaining high margins by their timing on spiffs alone. Prior to blowing out discontinued shoes or odd sizes, they spiff them. They generally do this two to four weeks prior to when they were planning to set up sale racks. The results have been successful to the point that they very seldom even need to set up the racks.

This strategy is brilliant for two reasons. One, it makes sense to give the discount you were willing to give the customer to your salespeople instead. For example, if an item sells for $50 and you anticipate marking it down to $30, put a spiff of $10 on it first. The salespeople benefit, and you only give away half of what you would have by marking the item down. The key is making the spiff substantial enough to give your salespeople an incentive to sell it.

The second reason this strategy on spiffs works so well relates to the customer. Today's consumers have become conditioned to sales. They know if they wait long enough, the item will go on sale. With less merchandise going on your sale racks, you avoid training your customers to wait for a sale before buying.

As mentioned earlier, when an item is spiffed for a long period of time the effectiveness can become diluted. Any type of sustained incentive eventually becomes perceived as regular pay. If a salesperson gets used to making $50 a week in spiffs, they will continue to make $50 a week regardless of which items you spiff. Use this to your advantage when setting up spiffs.

There is one other major benefit to spiffs that is often overlooked. You can use spiffs to teach your salespeople how to sell items they wouldn't normally sell or very rarely sell. It's a fact that salespeople sell merchandise they dislike with less enthusiasm as merchandise they love. Yet, the moment your salespeople can make what we call ShowTime presentations on any item, regardless of their opinions, that's the moment they become retail sales professionals, not clerks.

Some salespeople like certain items so much that they never even bother to show alternative items. Other salespeople may even go so far as to convince the customer not to buy an item that the customer likes and/or wants. You can combine spiffs with a contest as a method to encourage salespeople to develop their skills to sell every item equally.

A great contest to run to accomplish this is called: A Winning Pitch on a Losing Item. Very discreetly during the week, find out what item or items each salesperson likes to sell the least. Then at your store meeting that week, kick off the contest. The salesperson who sells the most of whichever item(s) they like the least gets the spiff. Or, to make it even more interesting, you can have multiple winners by setting individual targets. Depending on the item, if they sell x number of units, they get the spiff. It's fun, it's effective and it works beautifully. The salespeople realize that they are capable of selling merchandise they didn't think they could or chose not to.

Spiffs are great when timed right, changed often and never emphasized so strongly that they tip the balance between profit and what is best for the customer. Use them appropriately, and you'll satisfy everyone all the way around.