Why pay reps commission?
Like a lot of industrial companies, we use independent manufacturer's reps to aid in our sales efforts. They've made us more flexible and successful, while mitigating our risk (cost of direct people, limited coverage).
Recently, as we expand, we are excluding our reps from certain product lines. This is due to political and cost issues, as well as expanding outside their core expertise. Instead, we've instituted 'finders fee' payments for applications they may submit. We've also reduced commission for certain product lines that we think require less effort. Reaction to these steps is lukewarm, at best.
And it is bad when the client calls our rep to ask questions when he is supposed to be working direct with us. Also at play is the fact is that the web makes most new leads quote-requests, not literature requests.
All this wrangling leads me to ask the question "why are we paying reps commission, anyway?"
- To generate new leads?
- To maintain relationships with clients?
- To work on current opportunities and close sales?
- To close more small sales or to work on big projects?
- To be able to be onsite with the client frequently?
- To extract more value out of each relationship?
- To develop synergy between product lines?
3 Comments:
At August 17, 2004 2:14 PM, Anonymous said…
You can argue this a number of ways, but those in the 'sales compensation' circle will argue that persons in the traditional sales function are, by nature (or nurture?) driven in part by a variable financial elememnt to their work.
Whether or not it is 'bad' for a client to call a rep to ask questions is another matter, and one of role definition and how you've equipped your reps to effectively deal with the customer, and lastly, the customer - the element in the equation over which you have the least control. At the heart of your questions is the question "What is the purpose of the sales force?" To which, I pull an answer from Neil Rackham's "Rethinking the Sales Force" - Your sales force exists to "communicate the value of your offerings to the consumer." Vague, I know, but in essense, they have that direct contact with the customer to do just that.
Typically, sales reps are compensated with variable financial rewards for the value they bring, but that in and of itself is an inssue sustained over time, in large part, to sales' reluctance to engage in a value-driven process approach, leaving us to continuously question what sales is for, how to pay them, and how to quantify their efforts, while in contrast, we wouldn't dare think of challenging our manufacturing engineers and technicians with the same questions because we have relatively quantative answers for those questions.
Your issues, as I see them, are ones of process. Certainly, politics and history trump process if you let them, but if you clearly define and adhere to sales processes, like you adhere to manufacturing processes, you're on your way to answering many of the questions you posed...
At August 18, 2004 11:58 AM, Dave J. said…
Thanks Dana, you've just help fire me up on why CRM is important to me...to help with sales processes.
With our own people, it's realistic that they will conform. But how about those 'independent' sales reps? Somehow we need to make sure the processes benefit them, or they won't follow. And when I recently found out that one of our reps has no contact manager (and uses AOL, so not even Outlook), I'm worried about how far I can push it.
...The real question (to our sales manager) before any of this is 'what is our strategy?' From there we can build on goals, then processes, then buy-in.
At August 18, 2004 12:10 PM, Dana said…
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