By George Tyler, Partner, CxO To Go

The world's oldest profession is selling. Before anyone can purchase or use any service or product, they must be sold. Everyone in your company should be selling, as they are an ambassador for the company, no matter where they are. This is very evident in today's social media world, where employees need to heed what they post on a public web site.

When we talk with presidents, CEO's and owners of a company, we tell them that they must be selling all the time, or they are just overhead. The head of a company must constantly sell to customers, partners, suppliers, bankers, investors and employees.  

Today's companies need a tool to track their successes, failures and interactions with their customers. Creating a process with a sales tool will increase your success, plus improve the efficiency of your sales force. This article describes a series of steps to take as you evaluate different sales tools.    

Selling is perceived to be difficult. Selling is just a process that you establish, follow and track. Michael Gerber, author of The E-Myth, has shown that everyday people create wildly successful companies with processes. One of the most important processes in sales is the follow up. Follow up should occur any time you and your customer interact. An interaction happens when you are either listening to them, or reaching out to touch them. Success comes from making sure that the right information flows to your customer at the right time.
Your customers go through a buying cycle. This buying process may vary, but the primary steps are need, information gathering and desire. Throughout the whole buying decision process, emotions direct the customer. People buy with their heart and then justify the decision using the gray matter between their ears. Therefore, all information that flows to your prospects and customers must guide their emotions at that particular point in time. Follow up is critical at each step.

As you provide information to potential buyers, you must focus on them. You need to please their requirements and wants. As Winston Churchill said: "If you want to profit, you must first learn to please." The sales cycle will focus on your customer and their buying cycle. You must identify their process, and find the steps your customer goes through. Then get the right information and right people involved to please your customer.

Most of us provide more than one product to a customer, as we can usually sell ancillary products and on-going services. Every customer should be looked upon as a future referral. The result is that we must focus on all customers for the long haul.  

From the owner's or boss' point of view, critical indicators to track include sales increases, number of customers, sales efficiency, and sales per customer (or better yet, profit per customer). Sales managers want metrics to measure their sales force efficiency - calls per day, close ratio, new calls, etc. Your customer only has so much money to spend, and you want as large a share of his wallet as possible. Systems should be put into place to track these vital indicators, plus others that you deem important.
       
Increased efficiencies for sales people usually mean more sales per day or week. The more that you can automate the tasks of the sales force, the more time they spent pleasing the customer, and more time in front of them. All sales tools must be easy to update from any wireless devices. Sales people want efficiency in their lives and they will spend as little time as possible entering data.  

Maybe the future sales tracking tools will allow voice entry and then be automatically transcribed for the database. Then the sales people would just speak into their phone for 1-2 minutes after a call. All future actions would be scheduled and the call report finished.     
Part of the tracking process is capturing information about the customer. Customer information includes customer dynamics, demographics, history of interactions between your companies, customer needs, buying habits and how often the customer is touched. Touching a customer or prospect includes face-to-face discussions, phone calls, emails, ordinary mail, your website, blog postings, tweets, and other information your customer can find out about you. Do you know what your customer is posting on their blogs, websites or in tweets?

The focus of your selling cycle is to match the buying cycle of your customer. The first step the customer goes through is identifying that they have a need to solve a problem. Your sales force must identify the customer's problems before they can start their selling. Listening is an important attribute at this stage. By listening to what the customer says, types in an email, posts on a blog or a tweet, or places in printed material, you can learn plenty about your customers.
Once the customer has found that they have a problem, they gather information. During this stage of the buying cycle, specific information must be fed to the prospect. Too much irrelevant information forces the prospect to look elsewhere for a solution. The whole company can be involved in providing the right information such as product benefits and features, demonstrations, trials, customer support, referrals, etc. During this gathering stage, the desire for a solution builds within your prospects, as they want a solution. Experienced sales people will build upon that desire and direct it towards their solutions. Tracking the interaction with an automated tool will increase the efficiency of your sales process.  

Knowing the buying cycle is paramount for success and you need to map this cycle to your unique customer. Some significant points to know about your ideal customers are:

The more you know about your customers, the more you can please them during the buying cycle and after they have purchased your product. Knowing the correct information, you can follow up with them with the right information at the right time. Your touches to your customers will determine the relationship with them.

As you touch your customers, you need to understand who else touches them (departments and other employees in your company). In addition, it is important to know how and where the touches take place, and how these touches correspond to the buying cycle (need, information gathering and desire). Tracking this process is helpful for success, and today's automated tools can do just that.

You know your customer, you know their buying cycle, and you know what your company strategy is. The interaction between you and your customers is a series of touching and listening. Listening to your customers and prospects is getting more complex every day, as you must track what they are saying verbally as well as electronically (websites, blogs, Facebook, Twitter, etc.). Do you have a process in place to listen to your customers? The more listening you do, the better you can touch the prospect and provide what they need and want. The goal is to create a great flow of the appropriate information to capture a larger share of your customers' wallets.
Today's automated sales tools assist in expanding upon your success and improving the efficiency of your sales process. Tools for small one-person companies can be drastically different from those used by 100+ person sales forces. Before you implement any sales tracking and customer information systems, you need to understand what we have just covered.   

Having started several companies, I have found for a one or two person company, the simpler the tool the better. For one business, I started with Outlook and the business contact information. As we became more sophisticated and had to share knowledge, we used a free online CRM (Customer Relationship Management) tool. This allowed multiple people to track customer information, as well as tracking input from our hired telemarketing team. I know other startup companies have used Wiki's, or shared spreadsheets. The more customers you have and larger your company, the more sophisticated the tools must become to increase the efficiency of your sales efforts.      

Automated tools are wonderful to track the success of marketing and/or sales campaigns. Maybe you start with an electronic newsletter (using tools such as Constant Contact and SwiftPage). This is followed up with a special offer on your blog. Then you send out an updated offer announced on Twitter. Tracking the success of this campaign can be tied to your automated sales tool and help you retool the program to better focus and achieve grander results.

To start using a CRM tool, start with the simplest and easiest tools first. Then, find out what you like and do not like.
In your review of your own sales process, you have uncovered what your minimum requirements are, and you can eliminate some tools as being too simplistic for your needs. Have every department and/or person who touches your customer provide input, as they will be using the tool. Use a small segment of your sales force, if you can segment them, to test one solution for a short period. Then you can add a couple other departments to the testing phase. Eventually, you can find a tool everyone can use and accept. The usefulness of the tools will only be as good as the information kept, and everyone has to participate.  

With the proper tools, you can listen very carefully to what your customer says and touch them when needed. You can provide them with the appropriate information when they want it and create a desire for your product.  and keep your company name at the top of the customer's mind. The result is more sales, and a more efficient sales effort.  


References for further study and assistance:

Good information sites:
www.CRMGuru.com (goes to www.customerthink.com)
www.crmbuyer.com
www.comparecrm.com
www.bnet.com (good general business information)
www.business-software.com (comparison/ranking of vendors)
www.alimetergroup.com (consulting firm focusing on Social CRM)
www.forrester.com (good research firm, search for CRM on their site)

Search on web for terms: "CRM", "Social CRM"
Search on FlickR for term: "Social CRM" and find numerous diagrams of CRM systems. Here's a good example:

 

 George Tyler is a partner with CxO To Go, a national professional services company headquartered in Denver, Colorado that provides on-demand C-Level expertise and best practices to client companies on a part time, flexible, and affordable basis. George is an executive-level market developer with in-depth experience marketing new products and establishing strategic marketing programs that significantly increase revenue and capture greater market share. He is a serial entrepreneur with extensive marketing and sales experience for technology companies. Besides building and launching start up firms, George has developed global strategic alliance programs and successfully launched new OEM technologies, hardware components, and software products for leading Fortune 500 enterprises to increase revenue. Contact George at 720-259-1111.

 

 

Many small business owners after reading the title of this article will assume this will be a short diatribe.  After all (as noted in an earlier article), everyone knows that all you have to do to attract a great sales force is simply dangle a large bucket of money in their faces.  Right?  WRONG!

 

 

In that earlier article we covered how to attract and retain a high performing sales team.  Also, we touched on the importance of structuring an on-target role profile and effective recruiting engine in the attraction process.  Additionally, the role of education and career path were identified as two essential drivers of retention.

So what about the sales compensation plan?  How do you both compensate and motivate them?  An effective compensation plan is not the only factor, but clearly, it is a lynchpin.  If a winning sales team is a NASCAR racer then an effective compensation plan is its engine and motivation is the fuel.  Remember, salespeople are highly motivated (albeit not solely) by economic gain.  Getting the comp plan correct for your business is essential to success in the marketplace.  For the purposes of our discussion, we’ll wave our magic wands and assume you have found and have in place a great sales team.  Now your challenge is to create a sales compensation plan that will be the right mix of the three “M’s” of comp plans - motivation, money, and measurement.

  

 

Before diving into comp plan structure a few notes, guidelines, and beliefs:

1. There exists no “one size fits all” sales plan.  There are a myriad of permutations of comp plans.  Plans must take into accounts many factors such as:

a. Complexity of product/service – it’s generically a harder and longer sell to move data warehousing than it is pencils 

b. The sales cycle (how long from first contact to signed order) can be minutes or years.  Generally speaking, the longer the sales cycle, the stronger the requirement to have larger base salaries to “bridge” the sales person income until sales commission is realized.

c.  Pricing can be a factor.  If the product/service is a large ticket item that has a more elastic/higher margin, then the commission is likely to be larger (data warehouses).  Products and services which operate on razor thin margins (pencils) may have less elastic margins and therefore a large sales payout can only be realized via volume.

 

 

2. As a general rule, you should strive not to have caps on commission.  Caps on commission are an anathema to a sales team.  Telling a sales team that there is a limit to how much commission they can make destroys morale.  Rightly or wrongly, they believe that as long as they bring in revenue, they should get paid.  In the abstract, it’s difficult to argue with this simple logic.  Sales people would say no caps represents a win-win for the company and the sales person – if the company makes more money, the sales person should make more money.  There are a myriad of justifications that I’ve personally sat through behind closed doors over the years with expansive diatribes rationalizing why business owners are reluctant to pay big commissions to sales overachievers.  When you look under the covers, most of the arguments do not hold water.  All too often, if you peel back the onion, the real reason is jealousy and greed.  After all, a sales person should never be able to make more than their manager and certainly never more than the CEO!  I say garbage!  Logic dictates that if the sales team is all exceeding their goals, when aggregated, the company is exceeding its targets and everyone is celebrating.

 

3. As much as possible you want to use “KISS” philosophy (Keep It Stupid Simple or Simple Stupid).  When the plan is uncomplicated it’s easy to explain, understand, and administer/ measure.  I’ve seen far too many comp plans that read like a novelette.  Trying to get too fancy will only feed the fires of potential ambiguity and controversy.  You need to remember the poor people in the back office (HR, Sales Operations, etc.) who are trying to track, report, and pay commission on these plans.  

 

4. Make it a goal to have one plan against which all sales people are measured.  

 

5. A sales compensation plan should never be changed mid-year.  Only in the case of extreme emergency (changes to the business itself, ex. merger/acquisition, etc.) should a comp plan be changed mid-year.  Otherwise, the business owner should strive to keep sacred the normal (annual) sales plan revision cycle.  

 

6. Use “SPIFFS” to incent special behavior.  Spiffs are like a focused mini-incentive plan outside the confines of the main plan.  They can take the form of:

Whereas the main sales compensation plan tends to be largely cash based, spiffs can take the form of non-cash incentives such as trips, prizes, gift certificates, etc.  Spiffs are not a substitute for the regular comp plan but are an addition to, much like another layer on a cake.  Perhaps most importantly, they maintain the integrity of the main comp plan.

 

7. Comprehend how industry competition is aligned – what are “best in practice” sales motions?

 

8. There are always exceptions to the plan – but should be minimal and manageable

People enter and depart the organization:

 

Keeping in mind that sales plans can/should differ in construction and emphasis depending on factors such as the ones noted above, what are key sales comp plan drivers of a good plan and how do they work together to garner the desired results?  Take a look at the graph below.  The total compensation line has a funny looking shape to it.  Why is it not a straight line from bottom left to top right (as a sales person would argue)?  Why is it not a standard bell curve (as a financial comp plan administrator would argue)?  Let’s decompose what we are seeing as there is a lot going on in this chart.

 

First and foremost why the pretty colored bars?  They represent “bands” of total quota attainment.  By most standards, a sales person who has achieved less than 75% of their quota is having problems.  It is not my goal to get into why sales people succeed or fail.  Suffice it to say as a general rule, at year end, a sales person who has achieved less than 75% of their annual quota typically is in trouble or under scrutiny at least (barring extenuating circumstances).  Hence we have the RED zone.  

 



As we progress from left to right the color bars become more green (the color of money) with each bar representing a higher level of quota achievement.

Now, the two curves.  What do they mean?  The black line that looks like a hill or mountain is the commission acceleration curve.  This line represents the commission earned for each sales dollar as a function of the sales multiplier.  If, for example, the sales person earns $1 for each $1000 sold, then this is the base multiplier (a multiplier of 1 as seen in the red zone).  In the blue band, you see the multiplier has doubled.  This means that the sales person is making money at twice the rate as the red zone.  It follows that the slope of the curve is steeper in this range reflecting the accelerated earning rate.  

 

Clearly sales people are motivated to get into this range as they are earning more money for each dollar they sell.  Continuing this pattern in the range up to 100% attainment, the more you sell, the more you earn.  This is great alignment between metrics and rewards and between company goals and individual sales person goals.

But wait a minute.  The curve continues UP between 100% and 125% in our example.  Why is that?  Remember, the company goal should be to have every sales person exceeding their quota.  If all sales team members exceed their quota, then the company has achieved its annual sales goals.  Therefore, it behooves the company to incent sales people to get above 100% achievement.  Therefore the multiplier goes up to 3!  The sales person is drooling to be in this range as they are making buckets of commission in this range.  Life is good.  It should be a goal of the commission plan that every sales person is above 100% attainment and the payout plan should incent this behavior.

 

 

Hold on another minute.  The curve then turns down after 125% attainment.  Why is that?  Although I’m not a believer in caps on commission (above discussion), and some industries and situations do lend themselves to a “the sky is the limit on commission” scenarios, it is often prudent from a total cost of commission plan scenario to control or curtail boundless commission.  In any sales year, a few sales people will hit it out of the park or get a “bluebird” (sales speak for having a monster order drop in your lap from out of nowhere).  Especially in the case of the bluebird, it is nonsensical to pay a large bucket of money for little or no work – pure luck.  Also, the world is not running short of sales people who know how to manipulate a quota setting exercise when (for instance) they know they already have a large order essentially in the bag but hide that fact until after quotas are set.  Indeed, the balance of the sales team can get bitter and unmotivated if they perceive that another member of the team is getting a large payout for little work.

 

Therefore, the key above 125% (in or example) is to continue to make it possible for the sales team to make more and more money (no cap), but after 125% they do so at a decreasing rate.  That is, as you can see in the chart, the multiplier goes back down.  This way, we’ve met the goal of not capping commission – a sales person can always make more money, but keep commission plan expense in perspective (I’ve just pleased our friends in the Financial Department).  Now you will understand the reason for the dotted blue line in the chart.  This total commission curve continues to rise forever.  That is, sales compensation will always rise for the sales person.  The acceleration slows past a certain point (125% in our example), but ALWAYS goes up.

 

This is but one example of a commission structure.  The take away from this example is not the chart per se, but the discussion and points made are food for consideration as you construct a plan to motivate the sales team.  Some compensation plan reality as reminder and take-away:

There is no such thing as a perfect plan

Worry when sales people stop complaining about the comp plan

It is imperative to match comp plan (behavior incentives) with how our prospects/customers in industry traditionally/typically make purchase decisions

 

Hopefully you now feel better equipped to face the challenge of creating a sales compensation plan that will be the right mix of the three “M’s” of comp plans - motivation, money, and measurement.

 

By Mark Francischetti


VP Marketing & Business Development



http://www.CxoToGo.com


937-272-6868 cell


This e-mail address is being protected from spambots. You need JavaScript enabled to view it