Pull the plug on commissions, then listen up

If you want to pick a fight with salespeople, start talking about getting rid of paying commissions. They are quick to point out that it’s the lure of the commission that drives them to “get the fish in the boat.”
At the same time, cracks are appearing in the commission system. The real estate industry long has laid claim to its piece of the sales pie as a near-sacred right. It took the Internet to break the hold on the non-negotiable percentage.
It’s the same story with equities. The stockbroker as gatekeeper is gone and trading prices have dropped.
In the life insurance industry, the Internet has turned term life insurance sales into a commodity, while more and more automobile sales are moving to the Web.
Here’s the point: customers have complained about having to deal with salespeople who were less than helpful, pushy, uninformed or fail to pass the trustworthy test. There was little they could do, other than taking their business elsewhere. Now, buyers are free from having to deal with unwanted salespeople because of the Internet. To think otherwise is to deceive yourself.
In an effort to stem the relentless tide created by the Internet, a number of Web sites, books, seminars and sales trainers provide “solutions” for salespeople who find themselves confronted with customers who are taking charge of the sale, aided by information that might surprise you.
While the Internet has increased every customer’s knowledge base, it is customer-generated feedback that has the greatest influence on the buying decision. Whether consumer or corporate customer, it makes no difference. When making a purchase, a buyer’s first step is to go to Web sites offering customer comments and ratings.
Much of buyer doubt and indecision comes from “salesperson suspicion,” which comes from a basic distrust of the salesperson’s motives. Tuscaloosa Hyundai lets customers know it understands fear. It addresses the issues on its Web site: “The sales professionals at Tuscaloosa Hyundai are paid a salary and a volume bonus … Let our sales professionals show you why the Tuscaloosa Hyundai experience is so much better.”
It’s no accident that Best Buy enjoys such extraordinary success even in difficult times, while its major competitor, Circuit City, is on life support. Best Buy salespeople are not on commission and they are incredibly well trained to take time to inform and educate customers.
At the same time, one “sales consultant and professional trainer” says that the way to overcome price objections in an Internet age is to move the customer from “price-conscious” to “value-conscious.” But when dissected, what comes out is the “old sales strategy” of persuading customers of the value of the product or service. Yet, that’s the problem. Persuasion is what drives customers away. They want to make their own decisions. Dressing up persuasive selling tactics with a new coat of terminology only means more frustration and failure for salespeople.
There’s more to the impact of the Internet on sales. Customers balk at persuasive tactics for one reason: they want to be understood. They expect salespeople to make the effort to discover and align with their objectives.
Recognizing that most salespeople and companies may be fierce defenders of the commission system, here are four issues that deserve thoughtful discussion in light of customer attitudes:
• It should not take a sales guru to recognize the need to create value on the customer’s terms. Yet, as Neil Rackham and John De Vincentis pointed out in their book, “Rethinking the Sales Force,” salespeople take pride in communicating what they think the customer should value. The results are predictable, and negative.
• The salesperson as “independent operator” is an anachronism. There’s a tendency for some salespeople to think they are doing their company a favor. Mark Marone and Seleste Lunsford point out in “Strategies that Win Sales” that service reputation, product reputation, financial stability, competent after-sales support and flexibility in negotiating price and terms are what B2B buyers value most in making purchasing decisions, not an individual salesperson’s characteristics.
• Salespeople must have support and recognition. While many companies make a point of rewarding their salespeople with valuable perks, most fail to do what’s most needful: to provide recognition and support for salespeople so customers recognize that they are working with experienced and competent professionals. Salespeople deserve far more marketing support than most receive today.
• Everyone is a member of the sales team. Everyone in the company needs to have “a line of sight” to see how what they are doing contributes to the success of the business, including sales.
Microchip’s Vice President of Worldwide Sales Mitch Little has a staff of 600 spread around the world in 40 sales offices. No one is on commission. He has said, “We don’t have to waste time on the games. My peers spend 40 percent of their time figuring out how and what to pay, and on arguing who gets paid or what.”
What they do spend their time and resources on is supporting customers. Personalized Web sites are just one example. They allow customers to tailor the delivery of content to their needs. Little points out that “this is another way in which Microchip is here to help,” which is the Microchip mantra.
Helping the customer succeed is the Microchip goal and it’s also the reason why every employee participates in a company performance-based bonus plan. •
John R. Graham is president of Graham Communications, a marketing and sales consulting firm. He can be reached at j_graham@graham.com.