Rewards VS Product Commission

Our Rewards System at Tangerine Salons

While many salon owners pay a commission on the retail that is sold by a hairdresser, I have an argument that paying a commission actually hurts the bottom line instead of increasing it. The motivation shouldn’t be in what the hairdresser gets out of selling retail, but what does the client get out of it. This mindset will be more profitable for the staff as well as the business.

Here are a few thoughts on eliminating retail commissions in lieu of a rewards program.

  • Those that sell will sell. Those that won’t, won’t.

  • By paying a retail commission, you are sending the message that educating their guest is not a mandate, but a voluntary action, thus the staff member gets to decide to do it or not.

  • Most seasoned hairdressers won’t care about a 10% commission on a $12 bottle of shampoo, therefore you are paying them a percent of your retail margin when you don’t have to.

  • If the hairdresser thinks the only benefit to selling retail is a 10% commission, then the battle is not going your way.

  • If a hairdresser sells only one item per year, and you give them a commission, you are rewarding mediocrity.

What We Do Instead

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It’s not that we don’t compensate retail sales with our staff, we just do it differently. My philosophy is to reward a job well done, rather than pay for what we consider to be a part of the service.

We had many ideas of how to reward and at first we gave “education dollars” based on the benchmarks. This worked moderately well, as we hire education hungry staff and require a certain number of classes each year. However, it was difficult to manage and it became an accounting nightmare.

I had an idea of creating a rewards program where our staff could accumulate points per unit sold, rather than dollar amount. Much like a loyalty program, these points could be cashed in at different levels and the ‘rewards’ were valued accordingly.

Awards range from education classes, tools of the trade, vacations and gift cards. Awards are meant to enhance the staff members expertise and growth and we believe vacations can do that as much as education.

We call our program Fresh Rewards and it has helped our retail bottom line by almost 25%.

How It Works:

Simply stated: a staff member gets 10 points per unit sold. For example if they sell a $12 bottle of shampoo, they get 10 points. If they sell a $78 liter of conditioner, they get 10 points. By awarding points by units sold rather than dollar amount sold, we keep our margins at about 4% of wholesale cost.

This means that we pay out an average of 4% on our total bottom line in retail sold by service providers. Beats 10%, doesn’t it? When the staff member accumulates 500 points, they are eligible to cash in their points for that awards tier. (See image below to see our tier levels)

There are many terms and conditions, so that every aspect of the program is clear to the staff. Here are our terms, but feel free to tweak for your own use.

The Details

One Product = 10 Points Accumulate points throughoutthe year by selling products toredeem for the prizes of your choice.

Rules & Regulations:

  • Family member and friend purchases are not eligible for points.

  • Only 8 units of $8.50 or less will be eligible per month for point accrual.

  • Points are not transferable from year to year.

  • If you redeem for a class credit, you will be given a voucher to be turned in at the time you sign up to attend the class.

  • If you redeem for a tool credit, you will be given a voucher. You may then purchase the tool and turn in the voucher with the receipts to be reimbursed.

    If your two outside class requirements have not been fulfilled by the end of the year - 1,500 points will be deducted from your total while the missed classes need to be made up within the first 6 months of the following year.

Travel Terms & Conditions:

  • All expense paid trips to Aveda Congress, New York Advanced Academy and the Salon International Hair Show - Include airfare, hotel, and a $50 per diem for food each day. Management will make all travel arrangements.

  • Carnival Cruise for two - Includes two cruise tickets for a 3-5 day cruise (up to $800). Management will purchase the cruise tickets.

  • Weekend Trip (up to $400). Management will make hotel arrangements. You will be given a per diem for food.