Double Dipping is Dumb

Many organizations break their Sales teams down into 2 functional groups: Business Development (sometimes called Outside Sales) and Account Management (sometimes called Inside Sales). While the names might be misleading (for example, Inside Sales reps might actually travel to see Customers and Outside Sales reps might spend a considerable amount of time on the phone, depending upon the industry and the organization's needs), what we really mean is that one group consists of Hunters and another group consists of Farmers.

Hunters find new Customers. Farmers grow the spend of existing Customers.

Some organizations add a 3rd layer: Sales or Account Administration. Typically, this layer appears when the organization's internal processes have become so dysfunctional that you need a whole other - and cheaper - person to make sure orders are entered, processed, completed, and delivered. If your organization has this layer, usually everyone agrees that it's a necessary evil. "We have these extra people," goes the argument, "because our Sales Reps' time is too valuable for this type of work, plus it would cost too much to improve our processes to make a change."

So you teach your Salespeople that certain tasks - like entering and following through on the orders that they are paid for - are beneath them? That certainly is an interesting culture you're building. Of course, it inevitably leads Salespeople to believe that other tasks might be beneath them, too, like returning Customers' calls, but hey - it's your business, and you can make everyone who actually does those tasks resent the Salespeople who have been taught to dump on them if you really want to.

But let's look at that second excuse a minute, shall we? You don't have enough money to improve your process. Fair enough. It might even be true. But just to be sure, let's kick the tires of that argument. Let's say you have just 3 Sales Admins (3's not too bad, right?), and you pay them $30,000 a year or, by the time you add healthcare and other overhead, let's conservatively say $45,000 each. Per year. For as long as your business exists. Which won't be very long if you keep paying 2 people to do one job.

Get the picture?

If you apply just one year of what those 3 admins cost to process improvement - even if it means investing in a much better CRM, accounting system, or whatever it takes to make that job practical for a single person to do - you have $135,000 to work with. And, after the first year, that savings (plus any cost-of-living adjustments you would have had to add on) goes right to your bottom line.

Friend, you can't afford not to be lean. And you never will.

Now let's look at another example of paying 2 people to do one person's job. Let's say you have Hunters and Farmers. Do you pay your Hunters only for a new Customer's initial purchase, or do they receive some type of residual pay for each order thereafter? If the latter, for how long? If you continue to pay a Hunter after they have handed a Customer over to a Farmer, you're double dipping.

Never double dip.

"Okay," you say. "Fair enough. But let's say a Customer took a long time and a lot of work to land. Plus their initial purchase was small, but later purchases weren't. How do I motivate a Hunter to hunt if we immediately take a Customer away from them?"

The issue isn't comping your Hunter for landing the Customer. The issue is paying them a) when they no longer have any connection with the Customer, and/or b) making it easy for Customers to keep going back to their Hunter, preventing the Hunter from hunting.

The secret to handling this situation properly is as follows:

  • Bring in the Farmer on the day the Customer signs with you. Identify them as the Customer's Account Manager. Never for a moment suggest that they are the Hunter's assistant, or allow anyone else to suggest this (especially the Hunter).
  • Pay the Hunter for the initial purchase, and for every subsequent purchase for a maximum of one year. (If your margins and/or commission percentages are high enough, you can and should gradually wean this amount down. If not, just cut them off after one year.)
  • After one year, only the Farmer gets paid for this Customer's purchases.


This approach keeps your Hunters from being able to live on residuals - every year, they have to completely replenish their Customer base. This will encourage them to help make the transition to their corresponding Farmer as smoothly and as quickly as they possibly can. The quicker and the smoother this happens, the more money both reps make, and neither one feels subservient or entitled.

And, since we're on that topic, anyway, if you are like most organizations, chances are that you pay your Hunters more than your Farmers. Am I right? But if a Farmer retains Customers and grows each one's spend beyond their initial purchase, don't they typically make more money for your organization than your Hunters?

Then why do you pay your Hunters more?

The argument that I hear most often is that landing a Customer is harder than keeping one. This hasn't been true for awhile, and it's time that your culture caught up to reality. Keeping Customers is harder than it's ever been, and it's much harder than taking Customers from a competitor. Landing a Customer is a finite period of time, no matter how long it seems. Plus, if you follow the model above, you get to walk away from any problems after the initial order or two and wine & dine the next Prospect.

Am I saying that you should pay Farmers more than Hunters? No - but only because I don't think you're ready for that yet. But paying them in such a way that they end up making about the same if they hit their respective goals? Yeah. If anything, I think you're overdue for that one.

And if you think this was fun, just wait until we talk about the right way to split a territory.

No comments:

Post a Comment