Written by Sean McPheat |
I received a great question from a sales manager about sales commission. They are in charge of the sales operation for a B2B engineering firm, and he was dipping their toe into employing some telesales staff to set appointments for their field sales teams.
“Sean, how do I set the commission levels for my telesales people? I’d like to offer them a % when a deal is completed, and the money is in the bank i.e they do not get paid by appointment but instead they get a % of sales revenue made from the deal if it is made from the field sales rep. Is this the best way to go around this? Look forward to your guidance as always”
My take on this comes from me being on all sides of the fence; a professional telemarketing executive setting appointments for someone else; an outside salesperson running appointments set by someone else and as a sales manager and owner who had to pay the commissions and costs all the way around.
Also, as a telemarketing services company where all we did was set appointments for other companies.
Here is my take on this:
As a professional telephone salesperson responsible to set appointments only, I would never, ever have my commission rely on closed sales or receipts from someone else. And as an owner-manager, I also found that to be the thing to avoid.
At first glance it looks like the most logical and cost-effective thing to do; but it is a mirage. I know it looks like that if you pay the telesales appointment setter out of closed sales and actual income, that you can’t lose, but it is the reverse. And most people start out their telemarketing commission structure with this thinking.
Let me try to give you a couple of the problems with this set up, from an owner/manager view:
First, when the telesales rep (TSR) knows that their real income depends on the direct salesperson (DSR), it causes a ton of problems.
1. First the TSR has no feeling of control over their destiny and income. This is one of the core principles we teach in our sales training courses, that you are in control and that you work via science, not luck. But if your income depends largely on someone else, it kills the whole concept.
2. Whenever the DSR misses sales that the TSR thought should have closed, a natural resentment and animosity develops. There will be times when the person on the phone sounds like a pure lay down, just waiting for the DSR to get there. The TSR is so excited, they mentally spend the commissions. The DSR does not close the sale.
There is a big problem, and this will happen every day. You and I know that what a prospect sounds like on the telephone really means nothing. With that in mind the reverse situation also causes problems.
3. The TSR does not do what we teach and tries one of the biggest mistakes in setting appointments: They will try to make the sale instead of just setting the appointment. Because their income is based on the sale, then the TSR has to think about that sale and will begin to make judgements about what prospects will buy and who will not. This creates two real serious, even detrimental problems:
a. The TSR, without the knowledge or experience of the DSR, lets tons of qualified prospects the slip away, because they don’t think the person will buy. The prospect did not SOUND good enough, so the TSR let it go. You will lose tons of money in lost opportunities that you could have closed.
b. Even those they go after strongly; they lose most of because they are trying to make the sale instead of selling the appointment only. The commission structure forces them to think that way.
4. The TSRs will begin to want to know what DSR will run their appointments. They will want to set appointments for the “best closer” for instance, and not someone else.
5. When the TSR is also paid on receipts, their fate also now lies in the hands of the firm’s billing and invoicing practices, collections, delivery systems and everything else. They MUST feel that although they are the ones who do the most important thing: get the prospect to agree to listen to your story, they get paid last and least.
There are a host of other serious problems with that system, but once you begin to think on these lines, you’ll see what they are yourself.
So, what do you do?
You want the TSR to do one thing only: Sell the appointment and pay them on qualified appointments that consummate only. Their job is to set a solid appointment with qualified prospects and that is what they get paid to do. Too many salespeople start their phone calls with completely the wrong mindset.
Now, you must “define” exactly what constitutes a “qualified appointment,” such as the true decision maker must be present, they must have one hour for a presentation, the company must have X number of employees, whatever.
But you do not want any qualifying issues that force the TSR to have to make a judgment call. Once the DSR walks in and shakes hands with the qualified decision maker – that’s it – the TSR gets paid.
Ok, so how do you do this without losing your shirt or putting up too much money in advance?
You want to calculate the “value” of a qualified appointment and pay the TSR a commission based on that. If you have not been out in the field closing like this, you will need to make some hypothesis, but I’m sure you can get close.
For example, if you figure that your field sales teams will close 20% (and you can start with low estimates) and that the average new customer will generate £5,000 on an initial contract, then you know that if you run 10 appointments, you will close 2 and bring in £10,000.
So, the average appointment brings in £1,000.
Hence the “SALE” that the TSR makes brings in £1,000. I now pay a commission on that £1,000 sale, which could be 10% or £100 (or whatever) per every good appointment set/consummated.
You can also figure in any salary, taking into consideration the anticipated closing rate of the TSR. In other words, if you think the TSR will set 10 in a month for a total of £10,000 and you already pay £1,500 a month in salary, you can adjust the commission to say £50 per appointment.
For additional incentives and bonuses, you want to direct the TSR toward more effective targeting: i.e., more appointments with targeted companies, or more set appointments in the same area within the same week, or appointments with companies who have over 50 people, etc.
Other bonuses might include paying them a bonus on the amount of qualified decision makers they get to do something else besides set an appointment; something that moves the prospect closer or at least keeps them in the fold.
For instance, perhaps they can get the prospect to open an account on the website or agree to have some of their salespeople take a “sample” assessment test online or agree to a newsletter or something else.
I know this may look like it is risky at first glance, but please believe the other way around is far worst.
When you set up a system where the telemarketing executive gets paid only for what they are responsible for then everything we teach comes true.
You get a TSR who is proud and confident and professional and who knows how to concentrate on just getting you and your people in front of the right people the right time. They sell the appointment only and not the service on the phone and hence they set a hundred times MORE appointments.
I did this so effectively with my company that I was able to guarantee to my clients the quality of the appointments we set for them.
When other telemarketing firms where charging by the hour, regardless of the number of appointments they set or the quality of those appointments, I was charging by the appointment and only those appointments that consummated.
The client paid only for the number of appointments they received and if any of those were not qualified as per our contract or if any no-showed, there was no charge!
I hope that was useful. Our Telesales Training courses will provide you with plenty of cold calling tips and you will learn how to overcome the I’m not interested objection so you can make more sales commission.
Updated on: 30 March, 2008
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