Sales Commission/ Referral-Based Programs

Contract Sales People can be a win - win or a very frustrating use of energy. I have had both experiences. The best management strategy is to find a person who is interested in the product/service being sold and develop a "partner" feel to their position. Just hiring them as a contractor and saying "go sell this and you will get money" isn't the most effective way. If they feel they are a part of your business, have influence on the offerings of your company, and can grow with the business you will have a better working relationship and I am confident that your sales will increase.

This is a great topic BTW, I've been looking at these very same issues lately and am curious to hear what else people have to say!

Being on the agent side of commission based programs I can tell you a few things:

1. Make the signup paperwork simple, quick, and keep restrictions down to a minimum
2. Ensure the reward is worth the sales/referral effort
3. Have good recordkeeping and pay commissions promptly on schedule

What I'm looking at doing is a referral program for direct salespeople of local ISPs and telecom providers to be able to refer my phone systems and make a cut. My concern is the companies they work for may prohibit this.

I am also considering a freelance sales person - commission based situation as well (for selling advertising).
I'm not even sure at this point what an appropriate commission percentage would be! I'd love to hear about any answers you receive Jessie. The 'building a relationship with your salesperson' seems like a best practice to me, for sure.

Thanks all, Krista NWweddingplace.com

Krista, This isn't much of a definitive answer, but I can tell you both sides must be considered.

From the salesperson's side, you have to consider the time involvement in finding and closing a deal, how many they could reasonably do per month, then what percent would make the effort worthwhile.

From your side, you have to consider how much of the sale you can afford to give to the salesperson to bring in the deal. Obviously you have to consider if other methods will yield more bang for the buck.

50% of something is so much easier to spend than a 100% of nothing. Continue looking around, and if 50% is normal for your field, you might even consider offering 5 or 10% more as added incentive. I'm trying to sell my art work (or get it sold) -- Galleries today get between 50% and 90%. Well 90% from new artists, not from more established ones. But galleries have a tremendous overhead, paying rent, staff salaries, advertising, treats for openings, etc. While not having the same overhead, an agent still must spend some significant time developing clients, and showing portfolios. While most commission agents are used to smaller percentages, it is worth it to me to offer 40% if the agent is going to put some real effort into sales. And yes, the agent must understand and agree with the value of the product, and be as excited about the prospect of sales as you are. Otherwise it's a waste of effort on everyone's part, and no forward motion is no place to be.

I'm still looking for my agent -- one who can make us both, if not rich, at least reasonably well to do.

Ken

Hi Jessie,

Setting up an affiliate program to drive sales, if done right, is an extremely high touch indevor. It is not one I recommend for small business unless the product you are promoting is in an exclusive niche.

Not that you won't get people signing up to be affiliates. You will. Not that incremental sales won't occur if you just throw a software like Direct Track or join a network like CJ. You will gain some sales that way.

It is attracting professional affiliates that is difficult. They are the ones that drive real growth. The question professional affiliates will ask is why should they take time on your program when they can promote merchants with large inventories like Overstock or specific to your niche Guthy-Renker. The product you are offering will have to compete for the same space on their sites as larger merchants.

To be successful you need to: 1) Offer a great product 2) Be able to convert customers affiliates send you to sales at a high rate 3) Be flexible in terms of technology requests affiliates may have (custom landing pages for example) 4) Be competitive in your commissions 5) Have a dedicated staff focused on this channel

I highly recommend ABestWeb.com as a good resource for questions on the affiliate channel.

Feel free to field other questions if you have them.