“We want our salespeople to work as trusted advisors to our clients.”
The VP of sales who shared that idea has a noble vision, and he’s not alone. Building customer trust is inseparably connected to building shareholder value. Not surprisingly, there's great interest: searching the phrase “how to build customer trust” returned 3,890 results on Google. But the VP has a conflict: his sales team is “coin operated,” vernacular for “they earn commissions based on revenue.” Could that undermine the platform of trust that’s core to his strategy? After all, his customers don’t know his company’s sales commission plan, and it’s no secret that clients don't always benefit.
In the US, commission-based arrangements for sales forces come in many flavors and varieties. And they're widespread, according to Barry Trailer of CSO Insights. His company's research found that of companies responding to their 2008 sales compensation survey, 98% included variable pay as part of their compensation plans. I know from personal experience that a commission-earning salesperson walks a fine line as a Trusted Advisor, and there's an ethical morass on either side.
Variable pay by itself doesn’t destroy trust, but the opacity that commonly accompanies it does. The headlines we've read about AIG and Madoff remind us why. In The New York Times, Frank Rich wrote “The question in the aftermath of the Madoff calamity is this: why do we keep ignoring what we learn from the black boxes being retrieved from crash after crash in our economic meltdown? The lesson couldn’t be more elemental. If there’s a mysterious financial model producing miraculous returns, odds are it’s a sham—whether it’s an outright fraud . . . or nominally legal, as is the case with the Wall Street Giants that have fallen this year.” And Republican Richard Shelby of the Senate Banking Committee, quoted in The Wall Street Journal (March 17), said of AIG's widely-condemned bonus payments “There’s been no accountability, no transparency to speak of. . . Whatever we’ve gotten, we’ve had to extract it piece by piece, little by little. There’s too much secrecy.”
Agreed. Secrecy stinks. But Madoff committed deception. AIG . . . didn’t. And in what way do these issues relate to an Account Executive who sells professional IT services to companies in the Midwest? Fair question. There is a connection. Customers think salespeople have something to hide—and that’s a trust breaker. In a March 2, 2009 issue, InformationWeek reported the results from their survey of 345 technology professionals. The participants were asked “if you could get vendors to start doing one thing, what would it be?” Thirty-four percent of the respondents indicated “being up front about how their products do and don’t meet customer requirements.” That was more than twice the percentage for any other response.
In our technology-rich world, it’s humbling to think that good old fashioned honesty exists at the top of the list of customer wants. If only we could easily give our customers what they’re begging for. But for a salesperson with money on the line, “being up front” presents a wide ethical strike zone. And companies use variable pay to influence a myriad of actions, which include the ethical decisions the sales force makes. (Specific ethical dilemmas salespeople face are discussed in an earlier CustomerThink article, "On My Honor As a Salesperson: Why Sales Ethics Matter") Similarly, in my selling past, there were many background situations I didn’t disclose, but they influenced the advice I offered. For brevity, I’ll list just four:
Service plan revenue generated 8% commissions (at the time, the highest percentage category)
Selling direct to customers (versus through a channel partner) credited 40% more revenue toward achieving my sales quota
There was a quarterly bonus of $10,000 for achieving the quarterly revenue goal
Competitive displacements earned higher commission than installed account sales
In March, I decided to investigate this issue in more depth, and through LinkedIn I asked salespeople “Do you think prospective customers should know how much their salesperson might make in commissions and/or bonuses from their purchase transaction?” Although the number of responses received wasn’t large, they supported the idea that for salespeople, such transparency was not needed—with one notable product exception: sales of financial securities. A few nuanced views discussed the importance of disclosing to a customer how much a broker might make selling Security A versus Security B. But why draw a boundary around financial services? Shouldn’t customers of other products and services demand equal levels of transparency from their sales advisors?
Some companies believe so, and in the name of increasing shareholder value, they have adopted a progressive view for creating sales trust and transparency—and been rewarded for the effort. The Wall Street Journal reported on March 16th (Best Buy Confronts Newer Nemesis) that Best Buy CEO-designate Brian Dunn “opposed (Best Buy’s) 1989 decision to do away with commissioned sales in favor of salaried staff, which was widely opposed by sales workers who feared losing income. He now concedes it was the most important shift in company history, lowering worker costs, and changing the core model of electronics retailing. Best Buy expanded across the US, and Circuit City eventually followed by eliminating sales commissions.” To the victor go the spoils. Analysts believe Best Buy will capture half the business of now-defunct archrival Circuit City.
There’s more to that story than just sales commissions, but it’s worth pondering how—for a business as complex and dynamic as electronics retailing—elimination of sales commissions was granted such honored recognition. As one who eschewed buying from high-pressure Circuit City salespeople, I know the decision had as much to do with improving customer experiences as with lowering labor costs. According to Mr. Dunn, “we want our stores to morph into a series of experiences . . . to do that, you need to go where the rubber meets the road, the sales floor.” For Best Buy, eliminating sales commissions makes it easier to foster the transparency required for creating valuable customer relationships.
Outside of electronics retailing, improving customer experiences doesn’t mean eliminating variable pay, but it does mean looking at sales compensation differently. Are the right outcomes rewarded? Does rewarding revenue achievement alone work at cross purposes for maintaining excellence in customer experiences and building loyalty? Does increased transparency matter to customers? When it comes to trust, what changes would be most valued? If transparency is increased, what additional changes would cascade throughout the sales organization? Would those changes be positive for building shareholder value?
Best Buy, which now has a new major competitor in Wal-Mart, has the right perspective on trust, transparency and customer experience. I hope others will follow their example.
Thursday, March 19, 2009
Friday, March 6, 2009
When False Expections Lead to "I Don't Think There's Anybody Back There"
If you’re old enough to remember Wendy’s Where's the Beef? commercial, you’ll recall Clara Peller, the woman on the right of the skeptical customer trio, slipping in one final barb, “I don’t think there’s anybody back there,” as she struggles to peer across an oversized sales counter. I doubt if anyone reading this hasn’t wondered the same thing at least once after clicking “submit” on a customer support web page.
The commercial parodies the frustrations of customers trying to squeeze a plaintive request through a monolithic corporate bureaucracy, and it would be even funnier if it weren’t so true. The ladies’ voices echo off stark, confining walls, ominously distorted by the camera. It’s unclear who they are talking to. There’s no response to their now-iconic question “Where’s the beef?” Dancer Fitzgerald Sample, the ad agency that created the commercial in the early ‘80’s, might have been unintentionally prescient of Voice of Customer (a yet-to-be popularized term at the time) challenges in the age of the Internet.
Technology hasn’t made us any better at hearing customers. But the issue is greater than companies using simple email services and Web 2.0 to craft a “we’re listening to you” image for their customers and prospects. That over worn approach has now become a cliché. It’s about companies taking action when they’re creating the expectation that they are going to take action.
In the last two weeks, I’ve requested support from two companies, CraigsList, and a communications service called DimDim. Both companies offer an online feature that enables a person to send questions and other information from a web page. In both instances, I carefully composed a written explanation of my support question and clicked “Submit.” Then—nothing. It’s more than a coincidence. It’s happened with other companies enough times that when I see Clara trying to peer over that counter, I know exactly how she feels.
What should customers expect? Well, at the very least, to receive a response. In the case of CraigsList and DimDim, an auto response such as “Thank you for your question. Because our support manager decided to take two months off to go mountain biking in the Andes, it might take a week or so to answer your question.” would be better than to hear nothing at all. A few websites offer a great service that requests my phone number online. Within one second after clicking “submit,” my phone rings! Then, an agent gets on the call. At least I know there’s someone on the payroll!
Failure to support breaks trust, and breaking trust is fatal for successfully selling anything. In an era when so many past truths are called into question, the certitude of “no trust, no sale” might even be half comforting.
I don’t care how cool a company’s technology is. When they belly flop on customer support, what message does that send about how they care about their customers? What information do consumers receive about the capabilities of their operations? What do they convey about their ability to provide value in the future? I don’t think there’s anybody back there!
The commercial parodies the frustrations of customers trying to squeeze a plaintive request through a monolithic corporate bureaucracy, and it would be even funnier if it weren’t so true. The ladies’ voices echo off stark, confining walls, ominously distorted by the camera. It’s unclear who they are talking to. There’s no response to their now-iconic question “Where’s the beef?” Dancer Fitzgerald Sample, the ad agency that created the commercial in the early ‘80’s, might have been unintentionally prescient of Voice of Customer (a yet-to-be popularized term at the time) challenges in the age of the Internet.
Technology hasn’t made us any better at hearing customers. But the issue is greater than companies using simple email services and Web 2.0 to craft a “we’re listening to you” image for their customers and prospects. That over worn approach has now become a cliché. It’s about companies taking action when they’re creating the expectation that they are going to take action.
In the last two weeks, I’ve requested support from two companies, CraigsList, and a communications service called DimDim. Both companies offer an online feature that enables a person to send questions and other information from a web page. In both instances, I carefully composed a written explanation of my support question and clicked “Submit.” Then—nothing. It’s more than a coincidence. It’s happened with other companies enough times that when I see Clara trying to peer over that counter, I know exactly how she feels.
What should customers expect? Well, at the very least, to receive a response. In the case of CraigsList and DimDim, an auto response such as “Thank you for your question. Because our support manager decided to take two months off to go mountain biking in the Andes, it might take a week or so to answer your question.” would be better than to hear nothing at all. A few websites offer a great service that requests my phone number online. Within one second after clicking “submit,” my phone rings! Then, an agent gets on the call. At least I know there’s someone on the payroll!
Failure to support breaks trust, and breaking trust is fatal for successfully selling anything. In an era when so many past truths are called into question, the certitude of “no trust, no sale” might even be half comforting.
I don’t care how cool a company’s technology is. When they belly flop on customer support, what message does that send about how they care about their customers? What information do consumers receive about the capabilities of their operations? What do they convey about their ability to provide value in the future? I don’t think there’s anybody back there!
Wednesday, March 4, 2009
What Makes a Social Network Valuable? The Answer Might Surprise You
“What do we know about the networks of high performers? What promotes knowledge worker productivity? What would you do if you could see the networks? What would you do differently?” Rob Cross, author of a new book, Driving Results through Social Networks, shed light on the answers to these questions and others in a webcast I attended on February 19.
These questions are especially important because the answers lead organizations away from practices that worked a year ago, but might not today. For example, if you really want to know how your firm won a new client, what’s the value in knowing that your marketing team began by mining a database? As Mr. Cross shares, “when you look inside teams and see networks that are forming around an idea, you get a totally different perspective about how value is getting built in organizations.” And that perspective offers killer insight for sales teams.
The Social Network Analysis (SNA) tools Mr. Cross describes identify bottlenecks and gaps that hinder customer relationships. They also identify where “value is built out,” and where cross-selling occurs—insights particularly important for large, multi-division global organizations. Adding more Web 2.0 connectivity won’t help. According to Mr. Cross, “we don’t need more calls, meetings, and emails.” The key strategic and tactical changes result from learning where and how organizations need to add social network connectivity, both internally and externally.
Mr. Cross offers a social network taxonomy and fascinating statistics that upend entrenched views about how ideas are created, sold, and implemented. Three types of people hold critical importance:
Central Connectors: Leaders, experts, long-term employees. Central Connectors represent 3% to 5% of the individuals in a company, but account for an astonishing 25% of the value-added ties—relationships that foster the transfer of best practice knowledge, innovation, and revenue. Unfortunately, when it comes to information flow and value exchange, the same people can also create bottlenecks and impediments.
Brokers: The “unsung heroes” of an organization. Brokers drive change through organizations through their cross-division, and cross-department connections. Mr. Cross discovered that a paltry 30% overlap exists between these enablers and the “top talent” that corporate HR departments identify through traditional contribution measures such as revenue achievement. Ignore the insight at your own risk. Many know from painful experience what happens when a company lays off a critical inside resource who was viewed as “overhead.” “We’re sorry about Tom. He just didn’t have the numbers to justify our keeping him on board.”
Peripheral players: As the term connotes, peripheral players have few connections, and 40% are newcomers to their organizations. This issue presents special challenges for distributed sales forces. When new salespeople are brought into an organization, their companies suffer from long periods of low productivity as salespeople assimilate the tacit knowledge required for the job. But as Mr. Cross points out, social network analysis identifies opportunities to more rapidly connect peripheral individuals—and the knowledge [i]they[/i] bring—into their organizations.
So given these archetypes, what [i]do[/i] we know about high performers and their social networks? One thing is clear: bigger is not necessarily better. Through his research Mr. Cross found that high performers
Develop networks that minimize insularity
Maintain balanced ties across organizational lines
Nurture relationships that extend individual expertise
Mr. Cross demonstrated how to identify these individuals through looking at actual network diagrams. In one instance, using just one mouse click, he subtracted them from the network. The remaining people in the network appeared almost free-floating in space, untethered to Central Connectors in other divisions remaining on the screen. Through this representation, the real-world result becomes chillingly apparent: a company that doesn't know its key liasons with its customer community can become virtually isolated if--and when--those individuals leave. Does the possibility that this could happen (slowly [i]or[/i] quickly) keep you up at night?
Advances in Social Network mapping will enable companies to examine collaboration for sales and business development in a new light. What are the strategic opportunities? The risks? The costs? Mr. Cross frequently points out the irony that companies scrutinize routine travel expenses to the penny, but don’t often track collaboration costs such as time spent in meetings—possibly a far more significant expense for many corporations.
Mr. Cross shows that the energy that flows around the creation, development, and implementation of ideas can not only be documented, but that social network analysis yields new ways to model how enterprises create and transfer value. As the state of the art matures, it's exciting to think about how companies will use this insight. Which new strategies, tactics, and processes will result?
These questions are especially important because the answers lead organizations away from practices that worked a year ago, but might not today. For example, if you really want to know how your firm won a new client, what’s the value in knowing that your marketing team began by mining a database? As Mr. Cross shares, “when you look inside teams and see networks that are forming around an idea, you get a totally different perspective about how value is getting built in organizations.” And that perspective offers killer insight for sales teams.
The Social Network Analysis (SNA) tools Mr. Cross describes identify bottlenecks and gaps that hinder customer relationships. They also identify where “value is built out,” and where cross-selling occurs—insights particularly important for large, multi-division global organizations. Adding more Web 2.0 connectivity won’t help. According to Mr. Cross, “we don’t need more calls, meetings, and emails.” The key strategic and tactical changes result from learning where and how organizations need to add social network connectivity, both internally and externally.
Mr. Cross offers a social network taxonomy and fascinating statistics that upend entrenched views about how ideas are created, sold, and implemented. Three types of people hold critical importance:
Central Connectors: Leaders, experts, long-term employees. Central Connectors represent 3% to 5% of the individuals in a company, but account for an astonishing 25% of the value-added ties—relationships that foster the transfer of best practice knowledge, innovation, and revenue. Unfortunately, when it comes to information flow and value exchange, the same people can also create bottlenecks and impediments.
Brokers: The “unsung heroes” of an organization. Brokers drive change through organizations through their cross-division, and cross-department connections. Mr. Cross discovered that a paltry 30% overlap exists between these enablers and the “top talent” that corporate HR departments identify through traditional contribution measures such as revenue achievement. Ignore the insight at your own risk. Many know from painful experience what happens when a company lays off a critical inside resource who was viewed as “overhead.” “We’re sorry about Tom. He just didn’t have the numbers to justify our keeping him on board.”
Peripheral players: As the term connotes, peripheral players have few connections, and 40% are newcomers to their organizations. This issue presents special challenges for distributed sales forces. When new salespeople are brought into an organization, their companies suffer from long periods of low productivity as salespeople assimilate the tacit knowledge required for the job. But as Mr. Cross points out, social network analysis identifies opportunities to more rapidly connect peripheral individuals—and the knowledge [i]they[/i] bring—into their organizations.
So given these archetypes, what [i]do[/i] we know about high performers and their social networks? One thing is clear: bigger is not necessarily better. Through his research Mr. Cross found that high performers
Develop networks that minimize insularity
Maintain balanced ties across organizational lines
Nurture relationships that extend individual expertise
Mr. Cross demonstrated how to identify these individuals through looking at actual network diagrams. In one instance, using just one mouse click, he subtracted them from the network. The remaining people in the network appeared almost free-floating in space, untethered to Central Connectors in other divisions remaining on the screen. Through this representation, the real-world result becomes chillingly apparent: a company that doesn't know its key liasons with its customer community can become virtually isolated if--and when--those individuals leave. Does the possibility that this could happen (slowly [i]or[/i] quickly) keep you up at night?
Advances in Social Network mapping will enable companies to examine collaboration for sales and business development in a new light. What are the strategic opportunities? The risks? The costs? Mr. Cross frequently points out the irony that companies scrutinize routine travel expenses to the penny, but don’t often track collaboration costs such as time spent in meetings—possibly a far more significant expense for many corporations.
Mr. Cross shows that the energy that flows around the creation, development, and implementation of ideas can not only be documented, but that social network analysis yields new ways to model how enterprises create and transfer value. As the state of the art matures, it's exciting to think about how companies will use this insight. Which new strategies, tactics, and processes will result?
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