I had an exceptional retail experience at the Apple Opéra store in Paris a few years ago. At the time, I was a PC user who had decided to switch to a MacBook Pro. After conducting thorough online research and settling on a particular model, I examined the in-store product lineup, searching for the model I had selected. A sales advisor approached me to help and inquired about my profession and the intended use of the MacBook, and I was more than happy to provide the information. Surprisingly, the sales advisor recommended a more cost-effective model to better serve my needs. He explained that, based on my usage, the specifications I had researched were unnecessary and offered training courses to help me become more familiar with the Apple ecosystem.
I was thrilled. Not only did I pay less than I had initially planned, but I also received a product that better fit my needs and was provided with training to accelerate my learning and facilitate an immediate start.
I kept wondering, why did that happen? Aren't Apple employees being paid commission? I found out that they aren't. This led me to wonder: Is the removal of sales commissions the secret to a good customer experience?
The topic of sales commission has been extensively debated. For many years, corporations have used sales commissions to compensate their sales workforce, yet opinions differ regarding their efficacy and impartiality. While some believe that sales commissions incentivize salespeople to perform at their best while promoting positive customer experiences, others contend they may encourage detrimental conduct and unethical practices. Deloitte, for instance, observes that although a commission-based plan can motivate sales advisors to close deals quickly and move on to the next potential customer, it "is not conducive to building long-term account relationships."
Let's take a closer look at the advantages and disadvantages of sales commission.
As mentioned, one of the primary benefits of sales commissions is that they can incentivize salespeople to work harder and sell more. Salespeople are encouraged to enhance their sales figures and boost their earnings by receiving remuneration tied to their sales. This, in turn, can increase the company's sales figures and, ultimately, its profits. Additionally, commissions can provide a sense of ownership and accountability for salespeople, as it ties into their sales performance.
Although sales commissions can be advantageous, they may also encourage adverse conduct. Sales personnel may feel compelled to promote products that are not in the customer's best interest, such as unsuitable items. As consumers, we have all encountered sales staff who have made erroneous or misleading statements to influence our decision-making. Furthermore, commission-based compensation systems can create an unhealthy competitive environment within a retail setting wherein sales staff prioritize their interests over the store and the customer.
I've found that salespeople's opinions on sales commissions vary depending on their experiences, their mindset, and the prevailing culture in their work environment. While some salespeople feel that commissions provide motivation, others might feel that commissions pressure them to meet unrealistic goals and counteract their objective of illustrating to their customers how their products or services can make a difference in their lives.
Commission-based roles can be challenging for employees who struggle with self-reliance, self-motivation, and active listening. These positions demand a high level of autonomy, which can create stress and hinder the ability of some individuals to perform at their best. Consequently, not everyone is suited for this type of job.
In a commission-based system, it is critical to carefully consider the commission structure and the key performance indicators driving it. For instance, a commission system solely focused on sales volume may temporarily motivate salespeople with the promise of reward. But it may not foster customer-centric behavior. Thus, it may result in a focus on quantity over customer satisfaction, potentially compromising the quality of service.
In contrast, a commission system that considers customer satisfaction, client loyalty, and other relationship KPIs can encourage salespeople to sell products that align with the customer's best interests and the company's values. However, linking commission to metrics such as net promoter scores or customer satisfaction could encourage short-term tactics to boost scores, potentially sacrificing long-term customer satisfaction and loyalty, so it's best to approach this cautiously.
I’ve recently been reflecting on how to ensure that a commission system is equitable should it be implemented. To create a balanced system, it is essential to consider the needs and goals of all stakeholders, including clients, salespeople, and the company. Here are some best practices to implement:
• Set KPIs that are in line with the company's values and goals, such as customer satisfaction. This includes identifying indicators that focus on building long-term relationships with clients.
• Develop a "basket of indicators" that reflects your brand focus. Sales objectives should be present but weighted based on the established customer experience and relationship goals.
• Provide transparency and clear communication of the commission structure and goals, emphasizing a team approach rather than an individual one.
• Conduct regular performance evaluations and provide feedback to salespeople to ensure the commission system is effective and free of biases that may develop over time.
By following these practices, you can ensure that your commission system is fair, balanced, and mutually beneficial to all stakeholders.
Originally Published on Forbes.