One of the companies I ran had one, smaller division with a sales force of 10. They sold the same things day-in day-out to the same customers. Their job was to prevent other companies’ sales people persuading regular customers to switch supplier. This kind of selling is soft selling; very different from the hard sell.
A previous CEO had ran the numbers and decided that the company should pay the sales force 1.15% of the turnover they generated. The average annual sales turnover per sales person was £800k so the sales people earned £9,200 per annum on top of their salary.
It made very little difference to the sales people what price they charged their customers as they only received 1.15% of any price increase they won and that tiny personal reward wasn’t motivating enough to risk annoying their long-term, regular customers.
We thought that the sales force had got to know their customers inside out because they visited their customers so frequently and would chat about everything under the sun. We thought if we designed a scheme that rewarded higher prices with a worthwhile increase in take home pay the sales people and the company could win a healthy profit improvement. We therefore decided to move to a profit based reward/commission scheme.
We sat the team down and explained that their commission for the next 12 months was guaranteed at a minimum of the previous years level. This was decided to comfort the sales force and to take away any fears the sales people might have about earning less overall under the new profit based scheme.
We announced to all our customers a general, widespread price increase which would be explained by their individual sales person. We gave the sales force training in negotiation and gave them the power to decide their new customer pricing policy account-by-account. We then introduced a new notional cost for each product. The sales people would be paid 10% of the £ value between the notional cost and the actual selling price they managed to negotiate. This geared the potential, improved reward much higher and encouraged the sales force to make the effort to get a higher price and improve their take-home pay.
The sales team did a superb job over the next 12 months. They did indeed know their customers inside out and knew where they could increase prices without risking too much. They subsequently earned an average of £11k instead of £9,200. The company enjoyed a 5% margin improvement that cost absolutely nothing except training and developing.
If you’d like to chat with me about commission/rewarding people selling on your behalf please get in touch