Innovation

Peer-to-Peer: What sales strategy should I use to break into a new market?

Written by PROFIT-Xtra

Question

“I’m trying to crack the B.C. market and am not sure whether it makes more sense to hire a full-time salesperson or to get part-time representation from someone there who also handles other accounts. I’m worried that hiring someone full-time will cost me a lot of money while that person builds up enough sales to justify a staff position. But if I have someone who’s also representing other accounts, I’m worried they won’t spend enough time on my business, or be passionate about it. How do I decide what to do?”

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Reader responses

Dan Cadieux, ACCOlution Accounting Solutions:

Many of my clients have found themselves in similar situations and have discovered that in both cases (hiring full-time or part-time employees), the sales results have taken too long. The most successful model has been arranging a very rich commission plan for either a full-time or part-time employee. You need to motivate them to focus on your product line.

If you hire a full-time employee with a low or no base salary but very rich commission plan, you pay only for results, which is what you want. If you hire a part-time employee and pay them a much higher commission than they make on their other product lines, they will concentrate on yours. Breaking into a new market can be more costly than normal, so pay more for the initial results via a high commission plan. Then scale back to a “normal” base and commission arrangement with the sales rep and future sales reps. Remember: document all this upfront so that changes later on are easy to do.

Dennis Jaeger, denjae Consulting Ltd.:

There are two ways to look at this:

  1. Hiring a sales rep will cost some in the short run. If you’re going to choose this option, before the sales rep starts his/her job, make sure you have a specific strategy you both agree on. Then implement the strategy and measure its results. Micro-manage this rep for a given time, but let the field rep set his/her own limits. You know what you need, but allow the ‘worker bee’ to set the pace. This means you are producing new clients just for your product, not someone else’s.
  2. If you use a rep with existing accounts, make sure you find out if the other accounts complement your business and don’t compete with it. Stratifying or layering commission and incentive will also encourage the rep to make your company a top priority.

Some other tactics you can use to break into the B.C market:

  • Look for reps who participate in their community — networking!
  • If product samples are affordable, consider using them to sponsor a community event.
  • Use Business In Vancouvermagazine and send product samples to people on the move. Then have your rep follow up.
  • Participate in local trade shows.
  • Contact your existing customer base and ask for contacts or referrals in B.C. — make those phone calls personally.
  • Be honest and realistic in your expectations.
  • If your relationship with your rep is working, do more to help.
  • If the relationship with your rep is not working and you have done all of the above, don’t procrastinate — move on!

Derek Gatehouse, Vendis Inc:

This problem is very common. If you could be certain of the return from a full-time salesperson — if you had a crystal ball — there would be no dilemma; you would be able to make an informed decision. Most managers, however, make an uninformed decision when it comes to hiring salespeople — both distant and local — because they have not established what returns (sales) are the minimum acceptable for the remuneration given. If you knew for certain that the salesperson would generate at least a certain amount (and hopefully more), then the salary is an investment, not a risk.

The trick is actually getting the desired return from the salesperson and, while management style, training and hiring practices are certainly factors, the most overlooked factor when hiring new salespeople is the establishing and enforcing of proper and reasonable quotas. Use your local salespeople’s numbers to find a monthly or quarterly quota that you know justifies the salary, and incorporate it right into the salesperson’s contract as a mandatory performance level. Be sure that it isn’t too high — it must be attainable with a reasonable effort-and then motivate higher performance with incentives in your pay plan.

Salespeople need both positive and negative motivators. Used correctly, quotas and incentives achieve this, and define a salesperson’s parameters, leaving no room for ambiguity. Salespeople also, as it turns out, prefer this clarity. And unfortunately, a local rep who handles other accounts cannot be remunerated — or managed — this way. Make the investment for the staff position, just be sure to protect and develop the investment, starting with well-defined deliverables.

For his answer, Derek Gatehouse will receive a copy of Advantage Play: the Manager’s Guide to Creative Problem Solving, by David Ben.

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Originally appeared on PROFITguide.com