The Human Side of the Spiff

There are always two sides to every story. Even if you don’t care to see or hear the other side, it’s there, waiting to be uncovered and considered.

A recent major media outlet published a guest editorial entitled “Have spiffs run their course?” which ignored the other side of the story of a spiff. It was written by Jeff MacDowell, the director of the Luxury Products Group, LLC (LPG). This group is a collection of showrooms established in 2009 that  “meet the needs of decorative plumbing and hardware member distributors and their showroom professionals.” The organization was created by the members of Omni Corporate Services Ltd., Inc., one of the premier buying groups in the plumbing industry.

Knowing that, it seems natural that anyone who heads up a luxury showroom group is going to be anti-spiff. His editorial point of view supports that belief. We encourage you to read it. However, the real point is that the editorial fails to consider the other side of the spiff story – the human side. Thus, it misleads the reader to a dangerous, incorrect belief: spiff should be eliminated[1].

Spiffs Work

MacDowell’s position is that he’d like to see manufacturers do away with spiffs completely and find other ways to use marketing funds. While everyone is entitled to an opinion, logic dictates to gather as many facts as you can in order to formulate an informed point of view. I think Camus said once that it’s not the soundness of the argument that counts, but for it to make you think.

MacDowell’s argument certainly makes you think. In doing the thinking, it’s my opinion that his position is misguided since he fails to take into consideration how spiffs really work.

In his eagerness to ban all spiffs, he totally ignores a simple fact: spiffs work. In fact, a spiff run properly is one of the most effective branding tools a manufacturer has available in his marketing arsenal.

But, that’s not his opinion. It’s obvious when you read the piece that he’s probably been the victim of poorly run spiff programs. That’s because there are many that are poorly run.

A properly run spiff program is an effective conduit between manufacturers, showrooms and consumers/customers. And while so are display programs…or co-op advertising programs…or other tactics companies use to try to move the needle, banning one in favor of another is an over-reaction. Run poorly, even a display program or advertising will deliver bad results and hurt bottom-line income.

Where’s the Logic?

MacDowell writes unproven, undocumented provocative statements like, “I have observed situations in showrooms where the consumer was steered toward products that had a hefty spiff, and while the consumer walked away satisfied, the bottom-line consequences for the showroom were painful.” His proof of this statement is absurd: an employee good at selling and social media can create a demand with a non-partner vendor. He implies that when this happens, the showroom’s ERP system begins stocking the item “unbeknownst to the owner.”

Huh?

Think about that. He is saying that owners don’t know what is going on in their own businesses. I find that not only difficult to believe – I find it an absurd statement.

Worse, his implication is that owners have no control over their employees. I’ve been in this business a long time, and distributors and showroom managers are some of the most astute business people I’ve met, exerting often micro-control over their business AND their employees.

Can an owner  be fooled sometimes? Nothing is perfect. However, writing an editorial condemning all spiffs because you saw something one or two times is an over-reaction, especially if you do not consider the other side of the story.

MacDowell’s conclusion: “I don’t see how spiffs help ownership…are an unnecessary time waster and those resources would be so much more effective if used for updating displays, training customers and marketing,”  is simply wrong. His suggested alternatives to a spiff do not fix the perceived problem either. His alternatives simply substitute another tactic instead of the spiff – tactics which, if mis-managed as he charges happens with spiffs, will also produce just-as-poor results.

Problems are in the Eye of the Beholder

Spiffs help drive a manufacturer’s brand. This conclusion comes from MacDowell’s own words: “that the customer leaves the showroom satisfied.” The whole idea of sales is to satisfy a customer and that satisfaction is not spiff dependent. I’ve been involved in the business for many years and I’ve also been a consumer for many years. I don’t remember a time I purchased something I didn’t really want, do you?

Manufacturers spiff for a variety of reasons, including the wrong ones. But, the right ones should outweigh the wrong. The right ones include boosting sales in a product category or categories. More important, the spiff gives the manufacturer unduplicated knowledge of the market, his products’ movement in those markets, and builds manufacturer brand loyalty with showroom consultants. Run properly, a spiff will demonstrate ROI beyond any other marketing tactic for both the owner and the manufacturer.

The proper spiffs are a win-win-win-win (that’s right, 4 wins!) The showroom wins by moving product. The showroom consultant wins by learning and helping move the manufacturer’s product gaining the spiff. The manufacturer wins because his product is sold. And last, but certainly not least, the consumer wins because they get what they wanted. And because it is a 4-win scenario, the owner wins automatically because his employee pleases a customer and he chalks up a sale!

Rebates versus Spiffs

The crux of the problem in MacDowell’s mind seems to be that buying groups get rebates on products, if they buy enough of them from a manufacturer, and a spiff goes to a showroom consultant. In a perfect world, those rebated products are also spiffed. But even in an imperfect world, owners can control where and how a spiff is rewarded to their staff.

Spiffs exist to help guide the offering for manufacturers and showrooms. A spiff has never guaranteed a sale. And spending money on other tactics like displays doesn’t guarantee a sale either. As Aristotle said: everything in moderation.

Part Deux

Interestingly, MacDowell published another Guest Editorial: Is it time to eliminate spiffs? Part deux because as he put it, “Quite a few not-so-happy showroom employees expressed their displeasure at the idea — and at me. So I thought doing a follow-up editorial that dives a little deeper would be beneficial for everyone.”

Obviously, he got a lot of flak. But, it didn’t do much to change his mind, which is unfortunate. His position stayed from the owner’s point of view. However, as any owner will tell you, the employees of the business comprise the success or failure of a business, and that includes their activities.

Implementing what MacDowell calls a “spiff-less plan” is inviting unnecessary complications to the path to sales. His argument – that “commodity brands will fall off the map” – is silly.  What brand isn’t a commodity today? The basis of a spiff is to drive a brand from commoditization to preference throughout the path to purchase via the spiff. It lifts the brand up from the mud of brands.

Do some people abuse the spiff? Of course, if the program allows it. Having run in our opinion some of the most successful programs, we not only catch abuse; we stop it in its tracks. There is always someone trying to test the limits of a system.

Besides, a brand that’s a commodity doesn’t have the stamina to use a spiff anyway. Why would you even consider spiffing a commodity? MacDowell concludes his part two with this advice: “Focus on being the best at selling fewer lines and I guarantee your profitability will go up.”

Fewer lines? Huh? Pardon me, lest we forget this is the Age of the Customer. It’s not about us, it’s about them.

Taking an extreme point of view like MacDowell only impedes the understanding and nature of a spiff program or any other marketing program. I remember pitching a prospect with a direct mail program. He was trying to reach contractors who install fire sprinkler systems, a very identifiable segment. After the pitch he said, “I don’t believe in direct mail.” Curious, I asked why. “I used it once and it didn’t work,” he replied confidently. “I see,” I said. His competitor was pounding the very-identifiable list of sprinkler contractors each month in an advertising campaign AND direct mail. We didn’t get the business and he was out of business two years later.

Like everything else, sometimes you can’t see the forest for the trees.

What do you think? Please express your opinion! Thanks for reading this.

[1]Full disclosure: our company runs spiff programs – some of the most successful in the industry. But, our company also runs other programs that he suggests can be used as “marketing funds.” In our work, we see the pros and cons of each, and I think we all can admit that ANY program – spiff or otherwise — run improperly is a waste.

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