Creating rewards for great customer service

The story is told of a young boy named Johnny. He walked into the corner drug store and placed four $1 bills on the counter, asking the pharmacist to give him dimes so he could make phone calls. (It is a very old story.)

Johnny sits down in the phone booth in the back of the store and begins to make calls. With each call, he tells the person that he cuts grass for a summer job, and for a very cheap price, would like to cut their lawn.

The pharmacist watches Johnny as he makes each of the 40 phone calls. And in hearing one side of the phone conversation, the pharmacist can tell that none of the 40 phone calls have resulted in a sale as Johnny closes with, "Thank you anyway. Goodbye."

As Johnny walks back through the pharmacy he has a big smile on his face. The pharmacist is curious and asks how Johnny can be so cheerful when he has failed to make a single sale. The explanation by Johnny was, "I already cut each of their lawns. I just wanted to call to see if a cheap price could buy their business away from me. I must be doing pretty good."

Surely, this was not the very first customer survey, but it may qualify for being the most original. While we do not know the details of how Johnny ran his business, or what he did later on to continue to keep his customer's loyalty, we can assume he worked very hard. Johnny has probably grown up and is giving great customer service wherever he works today.

Yet, when he walks into our business to apply for work, how would we know him? Several years ago, the Seattle Post Examiner newspaper ran a story about a company wanting to find a way to determine who would be the exceptional employee. It was their hope that they could create an aptitude test that could be administered at the time a person is applying for the job.

They asked other companies to allow them to test and interview their very best employees. Yet, when they were through with the more than 200 exceptional employees of these companies, they were unable to detect any traits that they could test for.

You are not going to be able to test applicants for having good customer service habits. Instead you are going to have to develop a system of rewards and penalties for providing, and failing to provide, customer service that people will want to return for - much like Johnny's lawn service.

When this writer spoke at the AQUA show, I mentioned the value of a reward system. Someone left a note on their review card stating that they refused to pay an employee a bonus for doing a job they were already being paid to do. In the following session, I mentioned that while I would agree with that idea, I was also looking for the first business that had found a way to make their business work without incentives.

If your business has a system of rewards, is there still a need for having a penalty system? The answer is yes. Let's look at how to make rewards and penalties work for you.

Creating a successful reward program begins by your determining what you want to achieve. Your goal may be increased average ticket sale, overall sales increase, or decreased callbacks on service calls.

You will also need to establish a number to go with the goal; a number by which you can measure the results. Using the three goals we have already mentioned, let's use examples of a 7% sales increase, a $1 increase in the average ticket, and a 15% decrease in service callbacks.

The third step is to calculate the dollar value of achieving your goal - how much you profit by your company having achieved this goal. Knowing the expected amount of profit, you can then determine what part of the profit you are willing to share in the form of the reward. And of course, the reward should be given to the individuals who will achieve the goal on your behalf.

The last step in setting up your reward plan is gaining personal information and determining the interests of each of your employees. Are they married? Do they have children? You may have those with hobbies, those who enjoy certain types of recreation as well as those who may enjoy home improvement projects. With this information in hand, we are ready to create the reward and penalty system that will drive your business where you want to go.

Our first goal today is to increase our average ticket. We have seen the average sale for the industry and recognize that we are below that figure. We will establish a goal of increasing our average ticket by $1.00 over the same month of last year.

Because our business is open 7 days a week, and we have an average of 200 customers each day, we can calculate that an increase of $1.00 per sale will bring an extra $6,000 for the month. If our gross margin averages 40%, then our achieving the goal will bring an extra $2,400 in gross profit.

As a reward, this business is going to have a party for all employees and their families when the goal is achieved. If the total cost of the party is $700, then you have increased your gross profit by $1,700 and your gross sales by $6,000 with an investment of $700. See how this type of reward works? This is an example of a team goal as it includes all of your selling staff.

Let's take a look at an individual goal to see how we can make it work as well. We are going to create a sales contest for the month in which the person with the highest average sales per hour wins their prize. Because we are using the highest average sales per hour, we are able to include part time and full time people.

The key to making this contest work comes in our knowing about our employees. In our example, the winner of the contest is a movie buff. Therefore, we have designed her prize for her. As we give the award, we are giving tickets for two to the movies, dinner for two at a nice restaurant, and enough cash to pay for the gas for the car, babysitter, tips at the restaurant, and snacks at the movies.

With this contest you can imagine the conversation between the employee and their spouse. "Why is the boss paying for this?"

The response will probably include how their working late several times has paid off as it has allowed them to win the contest. You can expect the spouse to be a bit more understanding of spending extra time at work as they enjoy the dinner and movie.

The system of rewards can also be used to solve problems. In our example store, they have experienced cashiers who are out of balance much too often. There are checks rung as cash, charges rung as checks, and cash balances that are over or under because of tickets not being properly documented. They are paying their office manager, who earns much more per hour than the cashiers, to work several hours to solve the problems.

An option of solving this problem is paying a bonus to each cashier for a cash drawer that checks correctly. The bonus can be as small as 50 cents per hour. When you compare this to the cost of a more expensive office manager, this is a much better trade off.

When you are creating reward systems, not all of them lend themselves to being an immediate financial reward. And, not every situation where there has been an exceptional performance should be immediately rewarded.

The idea of rewards of other types, as well as the penalties we mentioned earlier, work together. To make a reward and penalty system work, you will need to have a job review system in place. And the job review will need to be at least annually if not semi-annually.

Utilizing a 4 x 6 index card, develop a format where you enter the employee's name, date, and the task to which they were assigned. The tasks can range from cleaning and restocking a shelf to successfully making a delivery or service call. Upon completion of the task, you invite the employee to rate their performance on a one to five scale.

Then you rate their performance using the same scale. After taking a moment to review their performance with them, place the card in their employee file. As you perform the job review, you can calculate an overall performance rating.

Some of the best managers and owners we have observed have also created a chart that gives the guidelines for raises. Using a chart like this, a job review and raise are seen more as a fair and objective evaluation as compared to a subjective one.

This same system of cards can be an excellent form of job penalty. As an example, you assign an employee to rebuild and stock a display of pool chemicals. With the assignment you have also given a deadline for completion. As the deadline passes, you find the job poorly done as well as incomplete.

Again, the use of the cards provides you with material to include in the job review process. You will probably be tolerant with a couple of unsatisfactory cards so long as there are many more positive cards to offset the poor performances. The key to making the cards work in a reward and penalty system is that each situation is evaluated and reviewed immediately.

Using the combination of the incentives we first discussed, as well as the reward and penalty system, these tools can be the key to your increasing the profitable of your business and building the staff that is the envy of your fellow dealers.

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This article is copyrighted by Tom Shay and Profits Plus Solutions, who can be reached at: PO Box 128, Dardanelle, AR. 72834. Phone 727-823-7205. It may be printed for an individual to read, but not duplicated or distributed without expressed written consent of the copyright owner.