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How to Manage and Motivate Your Sales Team
Any behavior which gets rewarded will tend to be repeated. So we advocate paying close attention to how employees are rewarded for performing (or not performing) the various aspects of their jobs.
Performance-based compensation is nothing new. Commission plans for salespeople are common because their productivity is so easy to measure. But small business tends to eschew these compensation plans thinking that “we’re just a mom & pop store. We’re different.” In the competitive environment you’re faced with today, you have no choice. You must use every management tool available to maximize your marketing firepower.
Guerrillas are not only intolerant of non-performers, they lavishly reward their stars, setting ever-higher standards for the whole organization. The problem is how to reward your people appropriately, particularly if they’re not directly responsible for easy-to-measure activities like sales revenue. Some simple guidelines can put this powerful management tool to work for you.
The foundation of an effective performance-based compensation plan is a set of clear and specific goals for your organization as a whole, for each functional department, and for each individual employee. These goals must be objective and quantifiable. For example, “Increase walk-in traffic by ten percent, or to 650 shoppers per month, by the end of the year” or “achieve an average rating of 4.5 of 5 on monthly customer satisfaction surveys.” Subjective factors, like attitude or good work habits might be included in review criteria, but if you can’t measure them statistically, you can’t use them as a standard for performance-based compensation. Then devise methods for gathering data to measure progress (or lack of it) toward these goals. What you measure is what you get, so inspect what you expect.
Salary
The advantage is that it’s easy to calculate: punch in, punch out, so much per hour. The disadvantage is that it doesn’t motivate.
Commission
Commissions can be computed on the gross sale price (good), or the gross profit margin (better). One important factor to consider when designing a compensation plan is that it must be simple. Paying commissions on straight gross sales is easy, and if you put the table below up on the wall in the break room, everyone can quickly estimate what they’re earning if they know the overall gross margin of the store.
Do not pay commission on any gross margins below 13%. If they’re selling at less than 13% margin, they’re giving away the stock and putting you out of business.
Generally, the lower the gross margin, the easier the product is to sell. So guerrillas recommend paying commissions based on gross margin, to reward your sales people for working harder to maintain higher profits, not just sales.
Commission Based on Gross Sales:
| Overall Gross Margin | % of Gross Sales |
| on Sales for the Month | Paid as Commission |
All above 27%…………………………………………… 2.8%
26.0 – 26.99……………………………………………… 2.6
25.0 – 25.99……………………………………………… 2.4
24.0 – 24.99……………………………………………… 2.2
23.0 – 23.99……………………………………………… 2.0
22.0 – 22.99……………………………………………… 1.9
21.0 – 21.99……………………………………………… 1.8
20.0 – 20.99……………………………………………… 1.7
19.0 – 19.99……………………………………………… 1.6
18.0 – 18.99……………………………………………… 1.5
17.0 – 17.99……………………………………………… 1.4
16.0 – 16.99……………………………………………… 1.3
15.0 – 15.99……………………………………………… 1.2
14.0 – 14.99……………………………………………… 1.1
13.0 – 13.99……………………………………………… 1.0
Less than 13.0%………………………………………… none
Basing commissions on gross margin rather than gross sales is harder to track, but it motivates salespeople to sell higher-priced and higher-profit items, accessories and extended service contracts, as well as to follow up with prospects and customers for referrals.
Commission based on gross profit discourages discounting. It can also produce competitive rivalries between salespeople, (which is not necessarily a bad thing).
Commission based on Gross Margin:
| Overall Gross Margin | % of Gross Profit |
| on Sales for the Month | Paid as Commission |
All above 27%…………………………………………… 15.5%
26.0 – 26.99……………………………………………… 15.0
25.0 – 25.99……………………………………………… 14.5
24.0 – 24.99……………………………………………… 14.0
23.0 – 23.99……………………………………………… 13.5
22.0 – 22.99……………………………………………… 13.0
21.0 – 21.99……………………………………………… 12.5
20.0 – 20.99……………………………………………… 12.0
19.0 – 19.99……………………………………………… 11.5
18.0 – 18.99……………………………………………… 11.0
17.0 – 17.99……………………………………………… 10.5
16.0 – 16.99……………………………………………… 10.0
Less than 16.0%…………………………………………… none
Of course, you have to adjust these percentages to your business and your market.
Bonus
Bonuses can be paid on a monthly sales quota, or on reaching a target profit margin. The whole sales team can qualify for a bonus for reaching a collective goal. Managers often receive a bonus for exceeding key performance targets. Some retailers offer year-end bonuses, but these are not really very motivating. Bonuses are more effective if they cover shorter cycles. People need to be able to envision their progress, either on a regular report, a reader board, or a United-Way-style thermometer.
Spiffs
An acronym for “sales promotional incentive funds,” spiffs are paid for specific sales events. Some spiffs are funded by manufacturers to move specific SKUs. Or they can be paid by the store for selling an unwanted, obsolete or damaged item.
Guerrillas never allow the manufacturer to pay spiffs directly to their salespeople because you want the credit for paying the reward. Also, you don’t want the manufacturers to control what products sell on your floor. You need to manage that mix based on your niche, your identity and your business model.
Sales Contests
It’s important to include all the support people, the back office, the warehouse, cashiers and delivery.
You can run a sales contest on any number of metrics. First Sale of the day, Biggest Ticket of the day, Most Line Items in an order, Most Orders written in a day, Order with Highest Gross Margin.
You can also run contests on product knowledge. Devise a simple test and give a certain sum for every question they get right.
The best sales contests combine performance with an element of chance. For example, every qualifying sale wins a ticket dropped into the hat, then a weekly drawing determines the winner of a cash prize, a merchandise prize, or the trip for two to Hawaii. The more you sell, the better your odds of winning.
An effective variation is every qualifying sale gets to draw a playing card from a deck. The best poker hand at the end of the contest wins all.
Wiltshire TV, in Thousand Oaks, California, has developed an unusual variant of Bingo. Each month, each square on the bingo is assigned a different product. Instead of letters and numbers, their Bingo card is laid out with brands across the top and model numbers down the side. Sell a qualifying product and you mark that square on the card. Sell any five qualifying items in a row, and BINGO!
LOTS more Guerrilla Retailing strategies in our book, Guerrilla Retailing – How to Make Big Profits from your Retail Business. Order it today on Amazon.
How to Lose a Loyal Customer in 12 Seconds
This weekend I traveled with Denise to New Orleans to speak at the City & Regional Magazine Association conference. I was doing break-out sessions on Guerrilla Selling and Guerrilla Marketing with Social Media.
We were nearly next in line to check our bag when a burly ticket agent turned on the crowd and barked, “WHO’S BAG IS THIS?!”
“Mine,” I said, sheepishly raising my hand. I had scooted it under the queuing strap so as not have to carry it an extra 20 feet, and was standing less than 6 feet away.
“YOU HAVE TO ATTEND YOUR BAGGAGE AT ALL TIMES!” he shouted. I was like, SO busted.
“I AM attending it,” I pleaded. “I’m standing RIGHT HERE!” demonstrating that I could almost touch it.
He shouted like a marine drill sergeant, “YOU HAVE TO BE WITHIN ARM’S LENGTH OF YOUR BAG AT ALL TIMES!”
“OK, Ok, ok . . . “ I muttered as I slinked forward in line, cutting ahead of four other people to hover, humiliated, over my bag for the next 12 seconds.
Keep in mind that I have enough frequent flier miles on United Airlines to qualify for the next Space Shuttle. They have always been gracious, accommodating and helpful. That’s why they’ve been my favorite airline for two decades. And I concede that I was breaking the rule, but a little courtesy would have gone a long way. Anyway, I love this airline so much that I can over-look one rules-happy power-crazed ticket agent who’s having a bad day.
The topper came when we arrived in New Orleans. We were waiting by the baggage carousel when Denise realized she had left her purse on board. She dashed back to retrieve it, and was stopped at the concourse security desk (of course). A call was made and within minutes a friendly United representative returned with her purse. So far, they’re 1 and 1.
In the cab she discovered that her cash was gone. We called. We got transferred. We got a lecture about how, “We’re not responsible for lost items.” Of course, that wasn’t the point. We assumed SOMEONE would share our concern that one of their employees was stealing. Seems no one at United was even interested. So we shrugged it off and didn’t let it ruin our day. It was only a hundred bucks.
But it DID ruin a twenty-year relationship. United has just joined Northwest and Air France on my “Do not fly” list. How can you trust them with your life if you can’t trust them with a purse?
Guerrilla marketers spend years and years and millions of dollars building customer loyalty. Everyone in your organization can do everything exactly right in thousands of transactions spanning decades. Even so, a single moment of carelessness, impatience, or greed can destroy it all. And you know what? It didn’t surprise me that someone took the money. People are desperate. The disappointment was that we cared more about United Airlines’ security problem than they did.
Never make your customers feel wrong or stupid, even when they are. Good manners are simply good business. Make certain that your commitment to your customers is demonstrated at EVERY touchpoint, EVERY time, and that EVEY customer experience is CONSISTENT across the board. And when there is a problem, give it your undivided attention, whether you mean to fix it or not.
–Orvel Ray
Grand Hyatt Launches New Weapon in the Amenity Arms Race
Rapid Repair, a little company In Kalamazoo, Michigan, will install a 240 GB hard drive upgrade in your iPod. I can’t make this stuff up, folks. For about the price of a NEW iPod, you can expand your old iPod to 240 GIGS! For cryin’ out loud, the IBM laptop I’m using here only has 40 gigs. Two-Hundred-Forty GIGABYTES is enough disk space for 20 hours of MP3 video or 60,000 songs! What on EARTH would anyone DO with THAT much content? Whatever they want, wherever they want, whenever they want. That’s what.
In advance of Team Summit, I was doing Guerrilla sales training for DISH Network’s National Sales Meeting at the Grand Hyatt. A video billboard just outside the ballroom promoted the hotel’s newest room amenity. They have replaced the typical (and SO last millennium) bedside clock radio with a HI-FI iPod docking station. (And I’m old enough to remember when having a coffeemaker in the room was a big deal!) What do you do with a HI-FI iPod docking station? Well, you listen to your 60,000 songs. That’s what.
So now, you can take exactly the music you want, listen to it whenever you want, wherever you want And when you’re a guest at the Denver Grand Hyatt, you can play it right in your suite, and even wake up in the morning to your favorite (is this beginning to sound a lot like SLING?). No more annoying all-country stations to sift through. No more of those poor people at NPR of nagging you to donate a car. Hyatt has found yet another weapon to deploy in the room-amenities arms race.
Alvin Toffler predicted this kind of made-my-way-on-demand economy way back in 1970. Today’s consumers have more choices than ever, and they still demand more and more options. Ragu now offers 36 flavors of spaghetti sauce in 6 varieties. (Watch Malcom Gladwell’s short video on TED about this phenomenon!)
What this means is that guerrillas can create a competitive advantage by offering their customers hyper-customized versions of their product or service. These same customers will pay more, and they are more loyal.
Training Doesn’t Cost – It Pays
We have this argument with our clients all the time:
“Oh, we can’t afford to spend money on training.”
“Why is that?”
“Well, what if we train them and they leave?”
“What if you DON’T train them and they STAY?”
Savvy Guerrillas know that marketing is an investment, not an expense. Skills training, and particularly sales training, is one of the most conservative guerrilla marketing investments you can make.
At a “Guerrilla Selling” seminar I was conducting recently, we were discussing creative ways to get through to reluctant prospects, especially C-level executives. One of the participants got up and walked out. He returned a few minutes later to announce, “I didn’t think it would work, so I stepped out in the hall to prove you wrong. Not only did I get through; I got the order!”
Later I learned that the profit from that single transaction was more than enough to cover my fee for the day. We can only guess that the return on investment for this client was hundreds of times their investment in guerilla training.
How do I protect my copyrights if the client publishes my video?
Continuing my discussion with fellow professional speaker Suzannah Baum, she shared some concern about how to approach the client after they have already videotaped her presentation.
As a Guerrilla Selling Speaker, I often have clients video my keynote for internal publication. Guerrillas believe in the power of Investment, so they invest first in their customers and clients. Explain that your copyright attorney had advised you that you need to write a letter specifically granting permission to use the video, because it may otherwise infringe on unforeseen future uses of the material in books, magazines, pay-per-view, etc.
Prepare the letter on your stationary, using the language, “[Your Company] hereby grants limited, non-transferable License and permission for [Client] to publish the [length] minute video, ["Title of Your Training”] recorded on [performance date] at [location], hereinafter referred to as “the video.” [Client] may publish an edited version of the video, subject to approval of the author, on their company website at [http://www.clientswebsite.com] for viewing by employees of [Client] and the general public, for a period of [one year should suffice, but not more than three]. Commercial use and mechanical distribution are specifically excluded.
“[Client] agrees to indemnify [you] from any action which may arise as a consequence of this publication. [You] reciprocally indemnify [Client] and affirm that [your company] posses all rights to the video content, and have the authority to grant such license.
“In consideration of this license, [Client] agrees to surrender to the author all original master video tapes of the video, together with a DV or QuickTime version of the finished product on DVD within 30 days of completion of their edits. All Other Rights Reserved.”
Sign and date two copies, and have them countersign, date and return a copy of the letter. That should do it.
Then point to it from your website, your one-sheet, your bio, your eSpeakers listing, your bureau listings, etc. Here’s the guerilla twist: why go to all the bother of hosting a long demo video on your own servers when they will do it for you?
–OrvelRay
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