Losing Customers? Time to Examine Your Compensation Plan!

Shelley F. Hall, Managing Director, Catalytic Management

Losing Customers? Time to Examine Your Compensation Plan!

When sales people fail to retain customers, the first thing to investigate is the signal management sends via compensation plans. Compensation plans tell the sales person where they should spend their time and effort. Human nature drives us to do what delivers rewards and money is a big reward. So if the compensation plan tells me that I get a higher commission for new business versus retained or repeat business, guess where I’m going to spend my time?

Examine what motivators are in place to foster long term customer relationships. What incentives does the sales person have to spend more time deepening and broadening their current customer relationships? If your goal is to cultivate long-term relationship, then either build the compensation program to support that activity or consider a different sales team structure that separates hunting for new business from cultivating and growing existing customers.

If your compensation plan has the correct drivers in place to encourage and reward the right sales behavior, the next level of investigation should be focused on the individual sales person.

Failure to retain customers is the direct result of one overarching problem – the sales person has stopped focusing on the customer. If your comp plan rewards the sales person for focusing on growing business, then the loss of focus is a people problem. Are your sales people treating existing relationships as if they are a “given”? The attitude becomes:  “They’ve been a client for years, we own them. I have a great relationship with purchasing, we’re solid.” The customer’s business is taken for granted. Sales people become arrogant and/or lazy.  

Sales people lose focus because they fail to:

Understand the Customer’s Goals -- TODAY!

Markets are constantly changing and as your customers change to adjust to market demands, their goals change. Sales people must have regular conversations with customers about goals, and align their products or services to meet those goals. Consistently demonstrating how your products or services help your customers meet their goals is a fundamental skill of successful sales people. 

Introduce New Ideas

Customers for life are the result of your contribution to their success. How often do your sales people share new ideas with your customers about how their business could be better? Do you share best practices from your operations with your customers? Do you help them remain relevant and current? Your sales team should be viewed as a critical resource for your customers, and not just as a provider of a product. Helping the customer discover new ways to remain competitive by using your product or service in a new way solidifies the relationship, and demonstrates real value beyond just making the sale.

Network within the Customer Organization

One of the biggest reasons sales people lose a customer is because their one contact leaves the company, falls out of favor politically, or moves to a new position in the company. Networking beyond your original buyer is critical. Building consensus for your product or service throughout the company is crucial. The need may come from an end user but the decision to buy and from whom, is often made elsewhere in the company. It is vital to understand and know all the stakeholders who influence the purchase of your product or service. Ignorance is not bliss – it is lost customers!

Keep Promises

If you make a promise, then you’d better keep it. A sales person’s reputation can extend and strengthen a relationship or doom it to failure. Whether it’s describing the capabilities of a product, customizing a solution, or promising a delivery date, promises must be kept. Trust is established on the big and small promises sales people make, and failing to keep those promises erodes that trust and makes your customer vulnerable to the pitch of a competitor.

In the final analysis, lost customers may be the result of misguided compensation plans that focus on the wrong drivers. Building compensation plans that drive the right behaviors is fundamental to retaining customers. Being customer-driven is a message sent and modeled by management. Encouraging the sales team to make decisions and take actions that foster existing relationships is management responsibility and the faster way to do this is through a compensation plan that supports both new and existing business.

About the Author

Shelley F. Hall, author of the forthcoming book "Brick Wall Breakthrough – What The @#$% Do I Do Next? Actions for Exceptional Sales and Service" (Page Court Press), is a highly successful entrepreneur and corporate fugitive who has built, reinvented and turned-around numerous companies. Shelley is Principal, Managing Director of Catalytic Management LLC, a leading management consulting firm delivering consulting and training that accelerates business growth through improved sales, service and process improvement and she is considered a leading expert in the field of "customer-focused management." As a thought leader, Shelley writes frequently for major business journals such as Business Performance Management Magazine, CEO.com, The Handbook of Business Strategy, Women's Business, ManageSmarter and Sales and Service Excellence, Chief Learning Officer and is a sought after business advisor and speaker.