Abramson\'s Jewelers has established a strong niche market in the upscale jewelr

Question

Abramson's Jewelers has established a strong niche market in the upscale jewelry store segment. Abramson's was founded in 1871, and its current single-store location is owned and operated by John Wickersham, who bought the firm from its namesake founders in 1985. Over the last 15 years, Mr. Wickersham has narrowed the company's product offering considerably to focus only on high-end watches like Rolex and Piaget, custom jewelry, and estate jewelry. Mr. Wickersham stresses that this is an appropriate focus for his business since each of the products lends itself to relationship selling, and price rarely comes into the discussion. Despite the narrower offering, Abramson's floor space has doubled, and clients are intensely loyal to the good taste, design skills, and personal service level provided by Mr. Wickersham. After evaluating several expansion options, Mr. Wickersham has decided to open another store in a neighboring city. While it is likely that some of his existing customers may begin doing business at the other location, thus lowering sales volume at the original store, Mr. Wickersham sees this as a desirable increase in the level of service and convenience he can provide his existing clientele. At the same time, he believes that he will be able to grow the overall business faster with two locations. He has identified another reputable gemologist, Jill Diamond, to run the other store and is now considering how to compensate her.

1. What compensation structure would you recommend? Why?

This is a strategic management question

Explanation / Answer

The Compensation structure should have two parts: fixed pay and variable. Fixed pay constitutes 70% of total agreed payment while Variable pay constitutes 30 % of total agreed payment. The company can provide other incentives also on achieving certain target or bringing business from repeated customers. In this type of structure, Jill diamond will perform better for two reasons first to have its variable pay and second to achieve more payment by increasing sales. The business has nature of repeated business then volume so a special bonus on achieving sale from repeated business or referred business should also be provided.

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