Spiff
From Wikipedia, the free encyclopedia
A spiff is a small, immediate bonus for a sale. Typically, "spiffs" are paid, either by a manufacturer or employer, directly to a salesperson for selling a specific product.
There is a reference to a spiff in a slang dictionary of 1859: "The percentage allowed by drapers to their young men when they effect sale of old fashioned or undesirable stock." It seems to be connected with the use of the word in that period to mean a dandy or somebody smartly dressed (hence spiffy, and to spiff up - to improve the appearance of a place or a person), but nobody seems to have been able to disentangle the threads of which came first, or what influenced what, or where the word originally came from.
Contents |
[edit] Legality of a spiff
In 2007, the The U.S. Department of Justice characterized spiffs as kickbacks, and illegal if the purchaser is the government.[1]
[edit] Spiffs in specific industries
While difficult to trace, during the 1900s the term "spiff" was used heavily in the furniture retail business, and was thus re-invented to be defined as Sales Performance Incentive For Furniture (nowadays it is used as Special Performance Incentives for Field Force). The process included manufacturers providing sales incentives directly to the sales force, bypassing the management of the store.
The cell phone industry uses the term spiff very heavily. Cell phone companies and retailers often reward sales staff based on how large of a cell phone plan a customer signs up with or how many "add-ons" (e.g. text messaging) a customer adds to their account. A new cell phone plan generally has a spiff value of somewhere between $20-30. An added line is usually around $10 and "add-ons" are usually about $1-5 apiece, though this is variable. There may also be spiff opportunities on accessories, and the salesperson often can make an actual sales commission on the phone itself, as well as accessories. This works separately from spiffs.
[edit] Spiffs in the Major Home Appliance Industry
The spiff incentive is also used widely in the major home appliance industry. Many manufacturers use the spiff to encourage salespersons to influence a customer to purchase one product instead of another for various reasons. Primarily spiff are used to encourage preferential sales tactics, so that the manufacturer offering the spiff will have more sales than the manufacturer who did not offer a spiff, or who offered a lower spiff. Sometimes a manufacturer will offer a spiff in order to push an outdated or discontinued product, hoping to lower inventory or stock.
The use of the spiff has become increasingly influential in the major home appliance industry, as spiffs can sometimes run 10% or more of the sale price. In some instances, a spiff can heavily outweigh the amount of commission received on a sale; in this way the manufacturer is able to have a very strong influence on the decision of the salesperson to encourage one product instead of another, even if the alternate product is of a higher value, or has a higher profit margin.
[edit] Origin
Several acronyms have been proposed as possible origins of the term, but they are all certainly backronyms, as these phrases would have had no meaning in 1859, when the usage was first documented.
- Sales Persons Incentive For Fun
- Sales Performance Incentive Fund
- Special Performance Incentive Fund
- Specific Price Incentive For Final Sale
- Special Pay Incentives For Fast Sales
[edit] Ethical nature
The use of the spiff, while widely accepted in some industries, is of questionable ethical nature. A spiff can sometimes encourage salespeople to push a less satisfactory product upon a customer, or allow manufacturers to circumvent the instructions or intentions of managers and owners by paying the salespeople directly. While commission-centric sales tactics are often transparent, based on the price of the product being pushed by a salesperson, spiff-centric sales tactics are less noticeable, and may be perceived as honest salesmanship by consumers who are pushed towards a product when there is no evidence that the salesperson might be biased or influenced by monetary gain. It should be noted, however, that not all commissions are transparent based on ticket price. Many retailers pay employees different percentages on different products, based on the gross profit margin of the item.
