Could discounting be skewing your measure of staff performance?

When asked about the recent Easter bank holiday weekend, one of our team shared a tale that can only be described as pure retail therapy but there was one part of her story that especially caught our attention. It went something like this:

We were in a clothes shop where I’ve bought many things from before, both in-store and online. After about 5-10 minutes looking around (and perhaps as an attempt to hurry things along), my husband reminded me that I probably had a discount code back home, so we could just leave and make an order later. In the back of my mind, I remembered seeing a brochure that had come through from this particular brand with an offer that gave various amounts of money off depending on how much you spent (along the lines of £10 off for over £75, £15 off for over £100 and so on).

Clearly overhearing this, a shop assistant approached us to let us know that any discounts or online offers were being matched in store and pointed out the promotion signs that were placed at various places around the shop displaying the same offer I had remembered – signs which we’d all failed to notice before!

Because of her quick intervention, we decided we might as well buy the items we’d been looking at there and then, resulting in an instant sale for the shop, and avoiding the risk of us leaving and possibly never making that online order.

With further bank holidays approaching and the high street practically raining deals, this got us thinking about the traditional models used to measure staff performance (sales-per-employee for example) and whether the use of discounting has the potential to distort that data.

Sales-per-employee figures

Let’s start with a quick reminder of the sales-per-employee metric.

Understanding who is bringing in the most revenue (the top performers) compared to those whose sales figures are less than exciting can definitely be useful: for example, by helping you to set schedules where the highest performing employees are available at peak times, or identifying what kind of people you want to hire in the future.

With a retail POS system like Goodtill, a sales-by-employee report can give you all the data you need – total sales count, average sale value etc.

That said, imagine now that you have a staff member whose sales-per-employee figure is the highest but this is also someone who is applying frequent or high-value discounts – seemingly performing well by generating a high amount of income but at the cost of an eroded profit margin.

The point we’re trying to make is that, while the amount of revenue generated by a member of staff is a useful measure of their performance, it should never be their only key performance indicator (KPI) and to get a fuller picture, the ways in which discounting is used as a sales tactic must be factored into the equation.

What kind of data should you be looking for?

At its simplest level, you’ll want to know how many discounts different staff members are giving out and obviously make an assessment as to whether these are in line with your company’s policy. More than this though, it’s really important to get a drilled down view of how your discounts/ promotions perform and how this relates to staff performance.

For each member of staff, some of the metrics you might want to look at are:

• The total number of discounts they have applied (compared to non-discounted sales).
• Revenue earned from orders where they have applied a discount
• Average sales value where a discount was applied
• Average discount value and total discount value

On top of these, you may want to make overall comparisons between different types of discounting strategies (e.g. percentage versus money off) and compare periods of high revenue with the gross profit margin during those periods – a reduction in the margin indicating a high amount of discounting is occurring.

Understanding the data

While all of these sound like great ways to improve your understanding of both your company’s sales and employee performance, do you really have time to interrogate the data this way?

Probably not but, if you have a modern iPad POS system like Goodtill in place, it can automate the process, providing instructive performance reports straight to your desk.

Our system’s Discount Report, for example, shows you which member of staff authorises any discount, at which time and on which till and provides quick access to most of the metrics listed above.

Equally, the Product Reports produced by Goodtill can be filtered by staff member, enabling the manager to see which staff member upsells or cross-sells the most, sales tactics that can be more profitable than straight forward discounting.

Discount strategies

With retailers and hospitality businesses both facing ever-increasing competition and a climate where customers are coming to think of ‘getting a discount’ as normal practice rather than a bonus, the use of discounting can be a crucial part of your business’s success.

It’s really important, however, to ensure you have a strategy for this in place and that the impact discounting can have on profitability is not forgotten when it comes to measuring staff performance. To do this, Goodtill recommends:

• Start by defining the objectives of a discounting strategy carefully (e.g. to lure new customers or encourage loyalty), the ROI you expect it to achieve and communicate this information clearly to your team
• If you have an online offer, try matching it in store so that staff performance is not disadvantaged by aspects beyond their control
• Train staff well so that they follow any business protocols you set around discounting. This will help people understand the difference between acceptable and off-plan discounting and also ensure that every staff member’s performance is judged equally
• Remember to also train staff so that they confidently use other techniques like upselling, cross-selling or encouraging impulse buys (perhaps also offering incentives for these as opposed to purely revenue-based incentives)
• Use your POS software to pull off a combination of reports that help you assess your discount strategy and monitor staff performance simultaneously (sales-per-employee reports, discount reports, product reports and so on).

By pairing your discount strategy and staff performance management with an effective tool for reporting and analytics, Goodtill can help your business to more accurately identify what works the best and who works the best.

One final thing to remember is that, as a measure of staff performance, it’s not always the person who rings through the sale who has actually done all the hard work.

Going back to our team member’s experience in the clothes store over Easter, she also told us that, while one shop assistant was responsible for both pointing out the in-store discount and giving some helpful advice at the changing rooms, when she got to the till she was served by someone who had played no part in the sale.

Perhaps a truer measure of who makes each sale could be achieved by switching to portable retail POS terminals out on the shop floor – and, incidentally Goodtill can help with this too!

Contact a member of our team to find out more about how, as a user of Goodtill, you could access all the features and business metrics discussed in this blog.