NEW YORK, NY--(Marketwired - September 09, 2015) - The following is a White paper by Milton Pedraza, CEO of Luxury Institute, LLC:
The objective and independent New-York based Luxury Institute recently held an intimate and confidential focus group with top performing, veteran, expert, in-store sales associates of top-tier global luxury brands. Associates averaged more than 10 years of experience, and most perform supervisory roles. Many of them are Millennials, with diverse cultural backgrounds. They represent the future of luxury and account for a major portion of sales in their respective stores, serving the brand's best clients by developing intimate relationships.
In serving over 1,000 luxury brands and working with tens of thousands of front-line associates, most in luxury retail, over the last 12 years, the Luxury Institute has noticed an alarming growth in communication breakdowns between the top-tier luxury brands' headquarters and the front-line associates, resulting in a significant loss of sales, high employee turnover, poor morale, and most importantly, severed or damaged client relationships. At a time of growing turmoil and slower growth in the global luxury industry, brands cannot afford these breakdowns. Here are the top 10 critical areas for improvement directly from the mouths of the top performers. Ignore them at your own peril.
1: You are recruiting people who do not share our values or a passion for serving clients.
Recruiting sales associates who will ramp up quickly and stay the course is extremely difficult. That is why having a passion for serving others matters so much. Top performing sales associates believe that client relationship builders are born, not made. They suggest that the recruiting process must focus on attracting people who have the values and personality "to want to want" to help people. They believe that an extremely rigorous interview process that identifies people who love to help people is critical. And if you hire an associate, everyone in that store or call center must own them and take responsibility for developing them. These people are not rare, but they are not abundant. Find a way to identify them and attract them, and you have a major competitive advantage.
2: The compensation schema discourages high performance and loyalty.
A standard sales commission compensation model creates a negative and overly competitive environment that top sales associates describe as "brutal" for associates and clients. A team-based compensation plan is even less desirable as some slack off, and the top sellers will be demotivated. By providing a competitive base salary plus a combined individual and team commission, sales associates work in an optimal environment that is neither competitively hostile nor overly dependent on a few individuals to carry the group, thus creating a fair, inspiring and rewarding environment they are less likely to want to leave.
3: Your training program is formulaic, robotic, and strips me of my personal touch and humanity.
Robotic sales ceremony training is obsolete. Today's top sales associates want learning and mastery of relevant career skills with the freedom to be their best human selves. When this is missing, retailers are not only at risk of losing customers, but also their top sales associates.
"Personalizing for the associate, as well as the client, has disappeared," one associate tells the Luxury Institute. "We all play the game and memorize the formulaic sales equation, but it's not realistic." Strict training regulations prevent expert sales associates from taking the client experience to the highest personal level. Sales associates prefer structure and guidelines that empower for individuality, creativity and personalization. Without flexibility the process will "strip you of personal touches, individuality, even personality." What suffers most in a rigid system? The client relationship.
4: I am an entrepreneur within your brand, so give me the real-time client insight tools I need to grow my business.
Top sales associates know their clients well, but want to know them far better. By providing sales associates with a real-time database and easy-to-use query tools where they are able to search clients based on defining characteristics, such as size, past purchases, or region, they become empowered to perform more meaningful clienteling. In addition, the best sales associates work backward from available inventory and match it to suitable clients. Failure to provide support and smart tools is one major driver of client and sales associate attrition. Associates can earn more in a technologically advanced relationship-building environment.
5: I spend almost half my precious client relationship time on operational issues.
The back-end and operational functions of the store take up to 40% or more of a top sales associate's time. Tasks related to back-end maintenance create a sense of inefficiency and lack of focus on their true purpose. It is also a source of tension as associates notice that those who don't assist with operations are often rewarded with a sale or new client on the floor. Furthermore, the process of stocking and consolidating merchandise becomes extremely chaotic without a highly involved and organized manager, creating frustration and stress for little gain. Sales associates tell us that dramatic improvements to operational support would be extremely valuable in freeing their time to focus on client relationship building, thus driving conversion and retention.
6: Be fair about how you measure and inquire about my client relationship results.
Top performers understand better than anyone that you cannot improve what you cannot measure. However, they insist on having a say about what metrics really matter in building client relationships and how they are used. Several associates recounted being embarrassed about being called out in meetings to explain why some clients refuse to provide data when they do not have full control over this process.
Associates also resent having infrequent headquarter staff visits where they're expected to memorize all client details, a task that no headquarters staffer would ever be required to do if they had as many clients. A humanistic approach to measuring and using performance for development, where an honest, open dialogue occurs and appropriate action is taken, will go a long way to inspiring rather than pressuring and coercing sales associates into higher performance.
7: Give me a mentor, coach and floor leader, not a back-of-the-house manager.
Sales associates depend on their managers not only for coaching, but also to help close a sale. When a high performance manager is on the floor, sales associates are on top of their game and use the manager's guidance to elevate the customer experience. One associate describes the manager as "the host of the party," and laments that managers of that caliber are very hard to find. When a manager shows an associate the value of their work, coaches them to develop skills, while leading by example, they add far more value to the company and the associates than "back-of-the-house" managers. Top sales associates crave managers who have both the skills and the time to be inspirational floor leaders.
8: Show me you care about me as a human being; how you treat associates as people drives client relationships.
Selling, no matter how rewarding, is a grueling job where you are always "on." Top performers tell us you cannot have an off day in sales. Simple acts of gratitude, kindness and recognition for a job well done keeps sales associates engaged, motivated, and less likely to switch to a new brand. Associates strongly agree that "we're the first person the client thinks about, and yet the last people whom corporate thinks about." One sales associate tells us that having their experiences and opinions heard is the best way to make employees feel valued. Associates feel that headquarters staff look down upon them and make them feel inferior. Sincere listening to sales associates, and respecting the critical role they serve, are skills headquarters staff need to master in order to retain the best associates and the best clients.
9: We all need frequent coaching and touch-bases to develop professionally.
Sales associates say that formal education and professional career development create a strong sense of empowerment and loyalty, allowing them to feel valued by the company. Associates report looking forward to a touch-base with their manager and state that they "always leave a touch-base with extra enthusiasm" after gaining insight to allow them to develop professionally and improve their sales.
While many companies require a monthly one-on-one touch-base between manager and associate, these rarely happen, and when they do, top sales associates believe these touch bases fall far short of what is needed for true professional development and high morale. Luxury Institute research shows that the most effective one-on-one coaching frequency is once a week and that a manager must learn the critical skills to coach the critical skills.
10: Give me fair opportunities to grow beyond sales positions into headquarters positions.
Many retailers overlook their front line employees for headquarters positions and choose to hire externally, rather than providing promising internal employees with the opportunities to interview for headquarters positions despite their obvious potential, skills and loyalty.
Many associates feel offended when a corporate role that fits their strengths, or they can grow into, regardless of the compensation, are not communicated and made available for, at minimum, a fair interview. They feel the company should look internally to fill corporate positions first rather than hiring from outside. A change in policy that opens the door to corporate positions for high potential front-line employees is one key to sales associate retention.
In our interviews we found sales associates who may not have entered luxury retail as a first choice, yet are passionate about the career they have chosen to nurture for many years. They told us emotional stories about managers and colleagues who made a huge difference in their lives by mentoring them and helping them to succeed, and yet they lament how rare these critical elements are in luxury today. Millennials are a rare breed of professionals that will quit without having a new job if the brand lacks a worthy human purpose, good values, freedom, critical skills development, effective coaching, and opportunities to grow. Luxury is at a major crossroad. It is time for luxury brands to question their antiquated, irrelevant command and control assumptions and rules. Client relationships are critical to your success.
A game-changing mind-shift is required, where you, as a luxury brand leader, profoundly understand that your front-line associates are not human resources, they are human beings. Extreme empowerment is essential, and is just the beginning of a transformation that companies such as Zappos are adopting, which leads not only to top-down and bottom-up empowerment, but also a revolutionary new way of leading companies known as "self-management." Familiarize yourself with the term and see how it may question all of your assumptions about how human beings need to be led in the 21stcentury, especially in luxury, where extreme client relationship building is the name of the game. Listening to the voices of your front-line associates is a great start in the transformation process.
About Milton Pedraza and Luxury Institute, LLC
Milton Pedraza is the CEO of the Luxury Institute. Over the past 12 years, Milton has established the Luxury Institute as the most trusted global luxury research provider, and the proven high performance luxury client relationships consulting firm. Known globally as the foremost resource for affluent and wealthy consumer insights and client experience best practices, the Luxury Institute has served over 1,000 global luxury goods and services brands across dozens of luxury goods and services categories.
Milton advises and coaches luxury CEOs and serves on the Boards of top-tier luxury and premium brands, and luxury startups. He is sought after worldwide for his practical, innovative and humanistic insights and recommendations on luxury and is the most quoted global luxury industry expert in leading media and publications.
Milton is also an authority on CRM Technology, Analytics and Big Data. Prior to founding the Luxury Institute, his successful career at Fortune 100 companies included executive roles at Altria, PepsiCo, Colgate, Citigroup and Wyndham Worldwide.
Milton was born in Colombia, raised in the United States, has lived in several countries, conducted business in over 100 countries, and speaks several languages.
For more information and additional insights visit www.LuxuryInstitute.com, or contact Luxury Institute CEO Milton Pedraza directly with questions (mpedraza@luxuryinstitute.com).
Contact Information:
Katherine Sousa
ksousa@luxuryinstitute.com