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Sales/Marketing Strategy: budget impact of new compensation strategy

You are the HR Manager for a retail store with 4 locations within one metropolitan area. The company's sales/marketing strategy has been to be the low cost leader (i.e. have lower prices than competitors), and therefore to pay its store employees just above minimum wage, in the first quartile. Your boss has just told you that he is changing the strategy and now he wants to provide "optimum service", and not necessarily the lowest prices.

What changes should be made in the company's compensation strategy as a result of this new direction?

You expect your boss will be surprised at how much impact the new pay strategy will have on the payroll budget. What could you suggest to reduce the impact?

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Dear Student,

At present, the company is paying just above the minimum wage as basically the prices of most of its products are lower than its competitors. It means, the company at present is positioned at the lower end of the market. Now the boss has decided to change the strategy and he wants to provide 'optimum service' which neither means lowest prices nor means the highest prices. So now the company wants to position itself in the middle of the ground a shift from its old policy when it positioned ...

Solution Summary

The solution explains a strategy that the HR manager could use to convince management to modify the measurement of compensation by instituting rather innovative changes in accounting and marketing.