The Cost of ‘No Sale’
A few weeks ago, I wrote about the negative impact of bonusing, discounting and weak pricing policies on sales rep confidence in the value they deliver. My friend Larry McInnis, Creative Director for CHUM FM, Flow 93-5 and TSN 1050 at Bell Media Toronto, commented “Another great one, Wayne.”
(Yes, I do read all of the comments we get.)
Here is my reply to Larry:
“Thanks, Larry.
I think I must be getting dumber every day because I see large companies in our industry do things I don’t understand. I see them cutting commission rates, attracting sub-standard talent and not investing in promotions, training, or creative to produce better results for their clients. They default to ‘selling’ via discounting rates up to 50% or more to ‘get the order’.
I know I didn’t learn ‘the new math’ some of these CEO’s studied, but by my ‘old math’, investing more in training, creative, and/or commission to get people who can sell at 100% of rate, and who can convert non-advertisers to advertisers, brings in more revenue than having inadequate ‘salespeople’ taking orders with huge discounts or bonuses.
I think I must be getting dumber every day because I see large companies in our industry do things I don’t understand. I see them cutting commission rates, attracting sub-standard talent and not investing in promotions, training, or creative to produce better results for their clients. They default to ‘selling’ via discounting rates up to 50% or more to ‘get the order’.
I know I didn’t learn ‘the new math’ some of these CEO’s studied, but by my ‘old math’, investing more in training, creative, and/or commission to get people who can sell at 100% of rate, and who can convert non-advertisers to advertisers, brings in more revenue than having inadequate ‘salespeople’ taking orders with huge discounts or bonuses.
My Old Math
A $100 rate with a 10% commission = $90 net.
A $100 rate at a 50% discount and a reduced 5% commission rate, = $47.50 net.
(a loss of 47%)
The Apparent New Math
Cutting commission from 10% to 5% = 50% saving on ‘cost of sale’ + less incentive for sales people + higher sales turnover, + less attractive compensation to capture the best recruits = less revenue.
I think it’s time to look at the ‘cost of NO sale’ or ‘cost of low sale’ instead of the ‘cost of sale.”
All across North America I see weak radio account executives grovelling for share of existing, and perhaps even dwindling, radio budgets. It seems to me if there was a bigger reward at the end of the process, we could attract the kind of professional sales people who could sell radio to new non-radio advertisers at great rates, rather than grovelling for existing scraps.
I think it’s time to look at the ‘cost of NO sale’ or ‘cost of low sale’ instead of the ‘cost of sale.”
All across North America I see weak radio account executives grovelling for share of existing, and perhaps even dwindling, radio budgets. It seems to me if there was a bigger reward at the end of the process, we could attract the kind of professional sales people who could sell radio to new non-radio advertisers at great rates, rather than grovelling for existing scraps.
