We discuss why commission-based incentives damage your business, and what alternatives you could use
Salespeople and sales managers everywhere: listen up. Whether you're on the floor yourself or just overseeing your team, it's time to consider a major shift in incentive strategy.
Commission-based incentives for salespeople might be what's hurting your brand.
We've all been conditioned to believe that offering commission-only based incentives will increase sales and revenue. The idea is that the more you pay your people, the harder they work to sell and therefore, the more revenue they will generate for your organisation.
Surely there's some truth to this, but there’s a number of important factors it doesn’t account for - namely customer satisfaction and customer loyalty.
After all, if you solely concentrate on increasing sales further, you'll almost certainly lose sight of the importance of genuine customer happiness. And without it, your consumers may not be inclined to purchase from you again in the future.
Let's use an example to put it into perspective: Assume you work in the automobile industry and that your salespeople are paid solely on commission. A potential customer has their requirements, but your salesperson promotes something that doesn’t quite fit because they gain a larger amount of commission from it. What happens if a client bought a car that wasn't really the right fit for them?
Chances are, the customer will feel like your salesperson didn't respect them and how important their needs were. And as a result of that, you’ve massively decreased your opportunity for repeat business in the future.
Even worse: what happens if the same thing happens more than once with different customers? With word of mouth being one of the most trusted marketing tools, at some point people are bound to hear about this issue and you'll lose revenue from unsatisfied customers who informed their friends of the poor service they received.
In fact, a study found that up to 80% of dissatisfied customers never return to the business that they initially purchased from. And, if a client is unsatisfied once, there's about a 50% chance he or she will be dissatisfied again in the future (that's because of permanent damage to their expectations of your brand).
Just ask anyone who has ever complained about their estate agent and how difficult it was to get a satisfied outcome from them. Now imagine using only commission-based incentives with employees like these: can you see the problem?
The bottom line: commission-only based sales incentives may lead to moments of increased revenue but likely won't give you sustainable growth because consumers won't trust your brand anymore.
Without consumer trust, you'll feel the consequences when people stop buying from you and tell friends and family not to do business with you either. Online reviews make it easier than ever for one poor experience to turn off your future customers - in fact around 70% of consumers look at reviews before deciding whether to purchase.
Now we’ve established that companies need to look for alternative incentives that are more likely to grow their customer base in the long run. Let’s look at some ideas to get you started:
With this approach, you might end up seeing lower revenue in the short term but much higher revenue in the future because customers will be satisfied and loyal. You therefore create loyal customers and advocates for your brand that will be more likely to return and buy from you again.
Do what's right for your business and staff: abandon commission-only based incentives once and for all and use data-driven decisioning that is based on real customer data.
Reduce the burden on your agents created by them having to interpret and calculate which product is best for them to sell, and have your customers benefit from receiving the right sales pitch every time.
Better yet, the technology we use for our customer orchestration platform is also used to maximise customer lifetime value once you've acquired your customers and can also be used to intelligently guide your agents to solve non-revenue focused queries such as complaints, returns and more complex issues.
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