Buying or selling: The decision-maker's perspective

Today I spent several hours on telephone conference call meetings.  We were discussing choices regarding the websites for our imminent U.S. market rebuilding.  Much of the time, we focused on a well-crafted and designed proposal from a service contractor who proposed to deliver the new websites, in significantly enhanced format to our current sites, at a price approaching $10,000.

I didn't have a problem with the quote, the price, or the website developer's expertise, talents and relationship with one of the company's key contractors.  But equally I knew that our entire U.S. project depends on keeping costs rock-bottom low.  By the end of the afternoon, I had confirmed that we indeed have the legal right to "clone" existing sites (developed by the same organization seeking the $10,000 contract) for a price tag in the hundreds, rather than thousands, of dollars.

In fairness, we'll go back to the contractor and ask for a re-quote based on the simple "clone" model -- no extras, no goodies, no bells and whistles.  I'll probably be willing to pay more than the rock-bottom copy-cat service price for the work, and I want to allow our contractor to maintain good relationships with the service provider.

Meanwhile, almost coincidentally, I received a strange mass market email proposal from another service provider, who purports to have a list of more than 100,000 names of contractors and others, and who also designs websites and the like.  It turns out that the contractor who works with us closely -- and recommended the $10,000 contractor -- has had some previous business dealings with the other service provider, who I know from earlier communications.  Neither has much love lost for each other.

In this conversation, the competing service provider suggested an elegant and inexpensive solution to our website building process.  We could develop a scalable system with original designs and the like and all the bells and whistles, for a base fee of $1,500 plus $300 per additional website.  The system would be relatively easy to administer.  Much less expensive, of course.

But could I accept his proposal?  I need to live and respect the other people in this story.  The individual closest to me and my business doesn't have fond feelings for the service provider (and the feelings are reciprocated.)  

Of course, I can take this person's suggestion and then prepare a RFQ, and post it publicly on an international service like elance.com.  Or I can use my existing contractor who helped produce clones of the original site for a fee of about $200.00 each.  

Decisions.  Decisions.  Clearly, as well, the choices I'm making here are not shaped entirely by the good will and initiative of the company's employees or contractors, my own experience, and alternative service providers' recommendations.  Price is a factor.  If the original $10,000 proposal had been more like $3,000, I might have said:  "Let's do it -- it is more expensive (perhaps 50 per cent more expensive) than the lowest cost alternative; and may not even be the best choice technologically . . .but we know and respect the supplier and wish for a seamless experience."

But $3,000 is not $10,000 -- and the possibility of achieving a higher quality result, at least in theory, for $2,000 or even $1,500 remains in place if we are prepared to do some research, take some risk of failure or a bad selection decision, and possibly the need to ruffle some feathers.

I share these perspectives because they show the challenge of virtually any marketing or selling initiative.  You can't just "rely on relationships" and you may in fact be setting a fair price for your services (I don't doubt that for many businesses, the $10,000 proposed fee is quite reasonable).  You may be frustrated because you can't talk directly with the decision-maker or, even more frustrated because, when you speak with the decision-maker, he considers the relationships with staff, contractors, and your reputation -- and you can't overcome this baggage.  You may be in a situation where you provide enough information to cause the potential customer to ditch the original proposal, and take your information to achieve lower costs -- with work done by third parties.  (In other words, you've acted as a totally unpaid consultant.)

I don't think I had intentions of behaving unethically or playing people off against each other this afternoon.  In fact I felt quite stressed by the conflicts and would have liked to find a simpler solution.  Nevertheless, when I am spending company money, I want to be sure we are receiving the best value -- and at the end of the day, I felt that "none of the above" applied to the people who were trying to sell me their services.  We'll get the job done, but not the way the marketing script-writers had hoped.

Rules for paying salespeople

Michael Stone and I disagree on some things when it comes to compensating salespeople, and agree on others.

Stone believes all sales reps (for residential renovation/construction work) should be on pure commission.  He advocates switching anyone on salary to commission, perhaps allowing for a three month transition.  He says salary invites excuses for non-performance or at best, minimal performance.

In my publishing business, I've used salary and commission models and have concluded the ideal sales rep should be paid a salary, but evaluated and hired on the basis that the rep could function well in a pure commission setting.

The challenge with pure commission in the recruiting process, in my opinion, is that you really run into "barbell" problems in the competency bell-curve.  Really good and talented sales reps will, of course, be happy to work on commission.  Really bad ones will take a "commission-only" job because they can't get anything else.  Recruiting then becomes a real challenge.  You can advertise and advertise, and only a few respond, and of that few, only a smaller few are worthy of even considering.

I suppose these recruiting challenges remain in our salary-hybrid model (we expect our reps to get "above salary" once they 've built their client base and repeat business volume; this can take about six to eight months).  When we advertise (using the free Canadian government Job Bank employment service) we can receive hundreds of applications.  Fortunately, we have a simple system for weeding out the applications and narrowing the list.  In the end, the short list is small.

The salary model allows us to encourage our salespeople to think longer term and with a relationship/community service focus, beyond meeting immediate quotas.  It isn't perfect, but I think it provides more stability than a pure hunter-commission-only model.

So, there's the difference between my perspectives and Stone's.

Where do we agree?  Essentially, we both agree that salespeople need clear working guidelines and must follow some basic rules, essentially relating to ethics.  As well, Stone and I agree that once we set the commission and compensation package and territories/responsibilities, these must NEVER be changed without the salesperson's concurrence.  (No salesperson will agree to poorer compensation or smaller territories without some really good offsetting advantages.)

Sometimes the bean-counters get involved and think the sales reps are making too much, especially if they appear to be simply serving existing accounts and not attracting new business.  Short term efforts to bolster the bottom line almost inevitably result in a longer-range business disaster, as competent sales reps leave as soon as they can.

An important point to note is that while Stone advocates a commission-only hiring model and we will pay a base guarantee, we simply won't hire anyone who cannot prove their true sales competence and anyone who thinks they can coast without delivering meaningful results won't be around long.  You could argue our salary model is simply a variation of the "draw" -- designed to allow a starting salesperson the opportunity to get the bases established -- but I really think there is merit in providing some stability at the base; and then encouraging real performance beyond it.

See our advertising sales recruitment site, adsalessucess.com.