By Marty Hollingshead
Let’s discuss the future role of commission-based salespeople in our industry. One of the byproducts of the COVID-19 pandemic is how it has accelerated the shift to internet/e-commerce purchases. With the advances in information and technology that we have, anyone can find almost anything online in short order. There are usually many choices available to them. What does this mean for our business and for our employees? The obvious answer is, that we will all have to make changes in our business model. So the next question is what kind of employees will we now need?
My Definition of a Salesperson
One question I would put to everyone would be, do you have actual salespeople, or are they order takers? In my opinion, a salesperson will qualify a customer, get all of the proper information to ensure the accuracy of what the customer needs, communicate and set realistic expectations, as well as make a fair deal for all parties involved. This person would also have the experience and the knowledge to know when to pass on a deal that he feels is going to go bad.
The bottom line here is that this person is smart enough to be able to nip a problem in the bud. This person will also have a higher close-rate and a much lower return and discount rate than an order taker.
So, if your commission-based salespeople are order takers, aren’t you basically just paying them a commission to process an order?
One of the things I always tell my people is that no two deals are alike, and the number one rule is that you have to know your customer. With this being said, the decisions being made depend on the situation at hand.
The Future Undefined
I have been lucky to have had some very smart people take me under their wing and advise and mentor me when I was new to being an owner. One big piece of advice that I remember was, “Sometimes it is smarter, and you can make more money, by saying no.”
So, this will bring us to the present with what the future has in store, how we can keep these salespeople employed and what their new role will be.
If you look at your call volume, you will notice that it is trending downward. The amount of phone calls that you are receiving are probably decreasing, but the quality of the phone calls is actually going up. The quantity is down, but the quality is up. The obvious reason for this is that people have already sourced your part online and they are calling to verify availability and condition, as well as ask any other questions.
I had one real good vendor salesman that works for a national company that was told by his bosses that they are changing their model so the customers can directly order the parts online. He is obviously concerned if he is going to be put out of work because of this. I also remember one large recycler telling me that he wanted to get his e-commerce store up so that he could cut costs on sales commissions. I found this curious for the following reason: how do you expect to keep someone working for you if they are now going to be making less? A smarter approach would be to repurpose these salespeople to become technical advisors and customer service representatives.
Curse and Blessing of Technology
Technology is great. It has created more opportunities than ever before, but it also brings its own share of issues. The smart businesses will use technology combined with a human to ask questions, advise, qualify, and ensure a great customer experience. What this will mean for these businesses will be greater profits, less returns, and a brighter future for repeat customers. The thing to remember here, especially with e-commerce, are the transaction and transportation costs associated with the sale.
The advice being given is to “bake” these costs into the e-commerce sale price. This could be a challenge to remain competitive with your prices. Another thing to remember is that from a profit standpoint, it will be crucial to qualify your customer, especially with high dollar drivetrain components to ensure that they have the tools and the knowledge to properly install these items. Returns are the silent thief. We still have all of the cost as well as double transportation to return and not sell the part.
So, how can we keep these people and how should we pay them? The best way to keep good employees is to pay them what the job is worth. These people are your greatest asset and you will not be able to retain or attract good employees if you have a culture of “every man for himself” and you put your employees in an unsecure situation. By the way, isn’t this the definition of pay for performance? I don’t feel that this is a good model for our industry.
A better idea would be: pay an ample base for what the job is worth, and have a team-based bonus based on whatever quota or parameters that you would want to use. This would reward your people for making decisions and doing things that will make the company better and they will be rewarded in the process. This will help to promote a culture of teamwork and everyone working together. Just don’t set the bar too high. Be realistic with your expectations because once you put something on the table, you cannot take it off.
Always remember, good help ain’t cheap, and cheap help ain’t good. Your employees are a company’s greatest asset.
Martin “Marty” Hollingshead is President of Northlake Auto Recyclers, Hammond, IN, and is the First Vice President of the Automotive Recyclers Association.