How Employing Reps Based on Sales Commissions Could Affect Loyalty and Customer Retention
Your business is beginning to grow and you want to keep up the sales momentum but there’s only so much your small team can do. You’re considering hiring a couple of commission-only sales reps as it’s zero investment up-front and means you can cut them loose should it not pan out.
It’s easy to be tempted to jump on the “Commission only” bandwagon as only paying sales reps on what they sell seems smart. However, there are a few downsides you should consider before you do.
Here are 5 pitfalls to watch out for:
#1 – Misunderstanding what Motivates
While money is a powerful motivator, many sales professionals are motivated by more than just financial incentives – from stock options and profit distributions to more autonomy and freedom to work remotely without ever attending a meeting in person.
Commission only sales reps often do not believe in the product they are selling and are merely attracted to high value products and services, because they don’t need to sell a lot to make a decent commission. In the long term, hiring someone who just wants to make a few quick sales may not bring in the desired ROI.
It is important that you figure out what really brings long term ROI – it could be as simple as giving your full time sales employee a raise and more autonomy with some milestone-based bonuses.
#2 – Incessant Incentivizing
With a commission only sales rep, there is constant pressure to sufficiently incentivize them if you want to see consistent performance and sales that ultimately impact your profits. It’s a tricky balance to maintain as paying commissions too late (with longer sales cycles) means more time spent with each prospect and not on new sales opportunities. Paying too early (for leads only with you or someone from your internal team closing the sale) means less incentive for the rep to see the lead be successful (and actually convert to customer). To counter this, conversion ratios or other factors can be agreed upon and implemented to further incentivize successful outcomes. This constant effort monitoring however, is time consuming, exhausting and better spent on a more permanent internal resource.
#3 – Lack of Long Term Commitment
The lack of emotional or financial long term commitment in this kind of setup may seem mutually beneficial at first. No strings attached however doesn’t bode well as these reps aren’t invested in your organization’s success. Independent sales agents may bring in customers and make commissions but they may not necessarily care about your product, company, customer satisfaction or retention rates. This often results in reps that aren’t successful as they don’t believe in the product and prospects can and do pick up on this. High commissions alone don’t generate passion or loyalty for your product or brand, and this type of agreement may end up being a waste of time all around due to the lack of long term commitment on both sides.
#4 – Volatility and Risk
Commission payouts can be volatile as agents may have drastic swings of under or over performance in the short term This volatility may be hard to deal with not just for your finance team but also skew company reporting. In addition, there is also the negative Risk Perception for your Reps where having a commission-only job makes them appear as higher risk by banks or other financial institutions (say they need to refinance their mortgage or co-sign on a loan) which could in turn breed resentment. It’s essential therefore for organisations and independent reps to be aware of these if they are to build a mutually beneficial relationship despite the risks involved.
#5 – Lost Sales Opportunities
The most important downside to consider is how expensive hiring a commissions-only reps could actually be in the long run. Not just in terms of sales missed out on but also in terms of potentially ending up with a rookie communicating with your prospects and selling to people who don’t really need or want your offering.If you’ve got a low priced product, many commission-only agents will stay far away from such opportunities as they would have to sell a lot to make good money even if it is an easy sell.
If you’ve got a high value product or service on the other hand, it´s even worse as there’s more to lose and agents don’t need to sell large volumes to make a decent commission and after a few big sales, they may take their foot off the pedal. Unprofessionalism and damage to your brand’s image could mean future sales losses when this negative impression spreads by word of mouth.
Striking the Right Balance
So maybe you’re rethinking the commission-only strategy but that still leaves you contemplating what the best strategy might be. Working with fixed base salaries and throwing a bonus into the mix is one option. Another potential solution is to go the commission-only route but just for lead generation and have someone on your team close the sale. This maintains checks and balances on the quality of the lead, and ensures you nurture the right customer relationships internally. A third alternative is to hire an intern but you would need to invest a lot of time and money to groom this person and you still run the risk of leaving an important aspect of your business’ sales to someone with little experience which is an expensive gamble to take.
Remote Sales Team
If none of these seem to be sitting right, you’re probably wishing for trained, experienced sales personnel who generate quality leads but don’t charge crazy commissions, work passionately and have minimal need for someone to oversee their every move.
You’ll be pleased to to learn that such an alternative can exist in the form of a remote, managed sales team. With the remote workforce model, you hire a team of certified sales experts, trained in HubSpot and inbound, who are guaranteed to generate quality leads without commissions. Furthermore, remote sales experts love working in a flexible and dynamic work environment in the cloud, which ensures employee loyalty that you will be hard pressed to find anywhere else.