The truth is that many companies today give out sales incentives to customers. Let’s take a good look at incentives and how it motivates Salespersons and representatives to do the right things.
According to a discovery by Michael Baker, the erstwhile owner of Pet Foods Experts, He found out that his present sales team gives top priority to make sure that independent pet retailers get natural pet foods and supplies. The sales remuneration structure was designed not to have any commission, incentives, bonuses or monthly SPIFs-their sales team is remunerated like the staff of every other department.
In the year 1936, Herbert Baker, the great-grandfather of Michael Baker founded Rumford Aquarium which was into retail fish supply. Rumford Aquarium in due time expanded and within nine decades became what is now Pet Foods Experts which is a major hub for independent pet retailers.
Herbert Baker 1942
Herbert Baker founded Rumford Aquarium in his basement in the year 1942. His main specialty was in the supply of live fish and aquarium supplies.
Michael Baker having risen through the ranks to become President and VP of Sales in 2003 and in due course taking over the company from his dad in 2005, became suspiciously circumspect of the sales team commission-based compensation plan. Under his father’s term, He had noticed some of the firm’s top salespersons defraud the firm through this plan. When they visit stores of their clients, they would inflate the supply orders in order to increase their commission. They would always do this whenever they were taking inventories.
In his own words, Baker would later say: ”These guys had spent a career mastering this old-fashioned art of getting away with things and clearly took great pride in exploiting their strongest relationships, I had grown with these set of people, they trained me but I knew in my heart of hearts that there was no way I was going to curve that behavior. I thought it best for the business that we go cold turkey.” He finally let them off.
The Agony of Change
After taking over the reins from his dad, completely overhauling the sales team was not the only change he had to make, he also had to review the company’s mission and revenue sources. At that instant, up to 93% of the firm’s revenue had been coming from a single independent vendor and this made him recognize the need to broaden the firm’s scope of operations.
“Having one vendor had never struck me as a threat. Every year we grew, and it seemed like it would never end,” Baker says. “But I began to consider our success in the long term, as I was the fourth generation in our business. I didn’t want to be the one responsible for destroying the family legacy.”
Spurred on by the inherent fears and uncertainties that may arise in the future. Baker began acquiring more companies and then building and developing the firm’s own sales strategy and relationships.
In the course of rebuilding his sales team, Baker tried out a variety of compensation methods to ascertain the best and most suitable for the firm. He brought about a system called base-plus-bonus for the first trial of his new team, and he then generally reinstituted monthly and quarterly bonuses based on sales growth in the territory. He at one time began to offer SPIFs to salespersons who met the monthly short term goals. Through this system of monthly SPIFs, Baker found it to be the most disastrous.
Totally changing to a full-fledged salary based remuneration was not easy as the majority of his sales team and vendors did not take it lightly; it did not go down well with them.
Soon after Baker broke the news of the change in the remuneration system to his team, many gave their notices. A few became upset with the imminent change that would make them lose the ability to make extra money, other did not want to operate in the new system and some couldn’t get used to the change.
Baker discovered too much of his surprise that those who resented this new form of remuneration willfully admitted that to the fault of the original system that is, that they were selling for the money and not because they were passionate about the products, the firm they worked for or the customers involved.
The Switch has been good to Pet Food Experts.
“We’ve experienced growth, but we’re most proud of the way we’ve done it,” he says. “My next goal is to fortify our company culture, people, and systems.”
Excelling in the face of competition is not Baker’s main objective but serving his customers and meeting their demands is. Pet Food Experts has over the years built a very robust relationship with their clientele, who support his decision to do away with commissions and incentives for Salespersons.