Thursday, October 09, 2008

Watch out for Sins of Commissions

There's a great article in this month's Inc. magazine called Sins of Commissions. In a nutshell it says be careful not to provide sales incentive plans to employees that can be achieved at the expense of customer service, morale or goodwill. The author provides an example of a sporting goods store pushing $12 sneaker spray and how employees at the register told customers the spray was free but then discounted sneakers by $12. The net gain to the sporting goods store was ZERO - but someone at the corporate office was getting high-fives for boosting sneaker spray sales.

Some examples of incentives that could have adverse affects on sales are:
  1. Contests to see who can achieve the "Most Number of Anything." Quality usually trumps quantity. Think through short cuts or business that might be sacrificed just to achieve the "number."
  2. Short-term programs. Closing a quick deal can be done at the expense of customer service. Make sure an incentive program keeps the big picture in mind and promotes long term customer loyalty.
  3. Complex incentive plans that frustrate employees. Keep programs simple.
  4. Taking too long to provide the incentive program reward. Give people their stuff FAST - the faster the reward is delivered the greater the enthusiasm will be.
Even if you are a solo-preneur (like me) you could fall into these "sins." For example:
  • If you are focused on the bottom line you may cut costs in areas that give your customers less value.
  • If you are desperate for some sales revenue you make make promises that are hard to keep or make deals that don't provide adequate profit.
  • If you need to increase your client base you may take on a new client/account that isn't a good fit or drains your energy.

Watch out for the above sins and your chances of having long term happy clients will increase.

1 comment:

LEADSExplorer said...

Margin are important, not the revenue.
If commission would be based on margin, then less sins of commission would happen.
- LEADSExplorer -