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Paying Sales Reps for Customer Satisfaction
Ways of measuring satisfaction should be sound, understood clearly by the reps and consistent with company strategy

By Joseph DiMisa and Elyse Rinaldi, Sibson Consulting  12/22/2010
 

The customer has always been right, and now, more than ever, the customer is king. Given the state of the economy and the increased availability of product comparison information, a key sales differentiator is the consumer experience. In a buyer's market, it is critical to ensure that customers leave the purchase situation confident with their choice and satisfied with the service and attention they received.

It will benefit a company's sales organization and its bottom line to start thinking more about how to influence and increase customer satisfaction. Many compensation plans drive representatives simply to "hit their number." While this is undeniably important, it might make sense to complement the plan with a metric that assesses a customer's satisfaction with the sales experience and ultimate purchase decision. This can help prevent buyer's remorse, improve product retention and generate a more positive customer experience, all of which can help bolster sales.

On the surface, measuring customer satisfaction might seem like a relatively simple component to add to an incentive plan. The challenge is in determining how much emphasis to place on the measure and how much prominence to give it in the plan. The operations team must ask, "At what expense do we cannibalize other incentive dollars from the current plan to pay for customer satisfaction?" Additionally, organizations struggle to choose the level at which to measure and pay for customer satisfaction (e.g., rep, division or corporate accounts). If these issues are not sorted out first, including customer satisfaction in the incentive plan can turn out to be extremely costly. It might even demotivate the sales force.

To help begin the design process, companies need to answer three questions posed below.

How Important Is Customer Satisfaction?

Often, focusing on customers and their satisfaction requires an investment in organizational resources as well as a financial commitment. Resource investments can range from modest to major organizational changes. Simple changes include adding job role competencies, hiring screens and/or training. A newfound emphasis on customer satisfaction might require the sales organization and job roles to shift their overall focus toward specific customer segments. Financial commitments might include an investment in new or enhanced systems and infrastructure or additional account care personnel.

It is critical to understand how important the customer satisfaction initiative will be when deciding how best to adapt the organization. The answer lies somewhere in the organization's strategic objectives. If increased customer satisfaction will help it achieve its strategic goals, it is more likely to pay for itself in the form of sales and profits. This increase in productivity will help justify additional costs or the investments needed in organization-, systems- or compensation-related investments.

What Is the Best Way to Measure Customer Satisfaction?

While it is easy to decide that customer satisfaction is important, thinking through fully how and when to measure it is much more involved. If an organization decides to base part of its sales reps' pay on customer satisfaction, it must make sure that the approach to measuring satisfaction is sound, understood clearly by the reps and consistent with company strategy. Measures of customer satisfaction should be accurate and timely, focus on areas that are key to the company's success and provide line of sight between an employee's efforts and the incentive payout.

Speaking directly to customers. An organization can obtain the clearest measurement of satisfaction and the most direct feedback by surveying or interviewing customers (and "lost customers"),in person or by phone. Although such feedback is direct, quick and clear, this approach is imperfect. When someone asks directly about his or her organization's customer service, most people tend to give a positive response, often to avoid confrontation or hurting someone's feelings. Additionally, when feedback is verbal, a certain amount of precision is lost. This can weaken the link between customer satisfaction and a rep's efforts. If an organization is considering this approach, it is best to get a third party to survey customers to ensure candid feedback and a consistent process.

Analyzing customer purchase data. Performing a consistent review of customer habits and purchase data is another approach that can be used to measure satisfaction. A customer's behavior typically is a strong indicator of how happy he or she is with the overall sales process. Product returns, repeat purchases, cancellations and length of the buying cycle are strong proxies for satisfaction and dissatisfaction.

This approach can be more accurate than others in the long run because it measures customer behaviors rather than opinions. Additionally, it allows the organization to focus on a process step in the customer experience. When an organization considers individual sales process steps and subsequent customer behaviors, it makes it easier to tie a rep's effort to customer satisfaction. For example, if an organization has a high level of returns because of poor product quality, it is clear that a rep should not be held accountable for the loss. If the returns are attributable to misrepresentation, however, the rep who introduced the product is responsible directly for the customer's dissatisfaction.

Linking rep contribution to customer satisfaction. The most comprehensive approach a company can use to measure satisfaction is to link a sales rep's role requirements to a customer's satisfaction scores. This approach customizes a part of the job responsibilities to those related to the customer experience. It makes it a part of a rep's job to be accountable for tasks or outcomes that affect customer satisfaction.

If the rep completes the assigned tasks and the result is a positive outcome (high customer satisfaction), his or her performance is measured positively. If the results are negative (low customer satisfaction), so too is the performance measurement. Examples of such tasks might include on-time response to questions, easy-to-understand product descriptions, clear communication about pricing and timely order processing. This is the most effective and comprehensive approach for measuring satisfaction.

Understanding the amount of direct impact that a single contributor has plays an important role in selecting the right measurement approach. Additionally, after selecting an approach, an organization needs a benchmark against which to compare its performance.

Where Does Customer Satisfaction Fit in with the Organization's Incentive Plans?

Once an organization begins to track customer satisfaction data, one of the best ways to encourage employees to focus on increasing it is to tie pay to the metric. A company can do this by tying a share of target incentive to the satisfaction of their customers or by decelerating or accelerating pay based on scores.

The method to be used must be considered carefully based on the level of strategic emphasis to be placed on the measure and the ability with which satisfaction can be measured. By creating a separate measure to which a share of target incentive is tied, customer satisfaction becomes one of the most important strategic items for the organization and the rep. Using customer satisfaction scores to trigger an accelerator or decelerator places a more mild form of emphasis on the initiative.

Additionally, when choosing how to incorporate this measure into its plan, a company must understand how consistently and at what interval scores are obtained. If statistics are not available, not linked easily to a rep's performance or cannot be gathered on a regular basis that coincides with other measurement and payment periods, it might not make sense to hold a rep accountable. Instead, the organization might decide to design a district- or corporate-level measure. When choosing this option, it is important to remember that the rep has less influence and therefore less pay should be tied to this measure.

Monitoring the Strategy

Understanding how an organization views customer satisfaction is an ongoing exercise. Whether or not it decides ultimately to add it to the incentive compensation plan, asking the questions above periodically helps provide valuable insight into how the sales organization views the role of satisfaction at any time. World-class organizations review this issue regularly and make decisions periodically about how best to improve overall levels of satisfaction and financial results.

If an organization adds a customer satisfaction component to its plan, it is important to understand the impact on behavior and ultimate financial objectives. Continuing to monitor the reps' earnings on the measure while remaining flexible and open to adjustments as priorities change are the keys to long-term success.

Joseph DiMisa is a senior vice president and leader of the sales force effectiveness practice at Sibson Consulting as well as the author of Sales Compensation Made Simple and The Fisherman's Guide to Selling. Elyse Rinaldi is a senior associate and member of the sales force effectiveness practice at Sibson Consulting.

Reprinted by permission of The Segal Group, parent of The Segal Company and its Sibson Consulting division.

© 2010 by The Segal Group. All rights reserved.

Related Articles:

Improving Sales Force Performance with MBO-Based Pay, SHRM Online Compensation Discipline, December 2010

Most U.S. Companies Expect to Revise Sales Comp in 2011, SHRM Online Compensation Discipline, November 2010

May the Sales Force Be with You, HR Magazine, September 2010

Sales Compensation Planning for HR Professionals, SHRM Research, June 2007

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