Unintended consequences of how sales people are paid.
Recently Ingrid Cliff of Heart Harmony (a great copywriter) wrote of her experience in buying a car on her blog. She had narrowed the choice down to types – Mazda 6 and Toyota Camry. However upon going to the Mazda dealership she had the following experience -
“He was selling beautifully till he sat us down. We told him we wanted to buy in the next week, we would be paying cash and wanted his best price so we could make a decision which way to go – Camry or Mazda. He wandered off to see the boss, came back and told us that he wouldn’t give us a price now as we were not serious, but when we were serious next week to come back and see him. He gave us a rough ballpark figure on the new car with the options we were looking for (after being pressed for the info).”
A number of years I had a similiar experience. As you can guess Ingrid did not buy from that dealership and I did not buy from the dealership were I had a similiar experience.
Why do some car dealers adopt this approach?
Now there are likely to be a number of reasons, one of which is a complete lack of understanding of customer service and also their belief of how to force a sale. However I believe that a significant contributing problem is how sales people at dealerships are paid.
The industry standard is for the majority of their package to be commission based. The logic of this is that the sales people will highly motivated to close the sale which will deliver results to the dealership. The dealership do not want their sales people standing around or wasting their time so the incentive system is used to show what is important and to motivate them. The trouble is the sales person that Ingrid met was doing exactly what the incentive system told him to do. The sales person did not waste time with a potential customer who was not going generate commission immediately.
But the dealership having spent money on advertising and marketing to get people into the showroom I am sure they would want to build a relationship with all customers so as to do with business over the long term. The management probably did not have the attitude of making the sale immediately. The commission based pay structure used to motivate the team is causing a business result which does not lead to loyal long term customers.
Another issue that the commission pay structure undoubtly has an impact on, is who is attracted to become a car salesperson. I have seen dealerships advertising sales positions highlighting the fact that a successful person can earn significant income. This will attract a certain personality to the business but is that the personality the business should have. If the business wants to deliver a great standard of customer service and build loyal customers then the incentive system will recruit people who are after the sale now.
Whats the point? The point is that pay structures with financial incentives can have unintended consequences. It will create certain behaviour but it is not necessarily behaviour which the organisation may want. Be careful about designing commission and other financial incentives as part of employee renumeration. If the car dealer want’s more loyal clients then it could be radical and remove this commission structure. There are car dealers who are going down this path. We need to carefully design our metrics and compensation systems to ensure it matches the strategic objectives of the business.
Remember be careful what you ask for as you may just get it.
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“good post”