By Allan Ferguson
I recently wrote about why you must reward performance and allocating budget purely for reward allocation, even if money is tight.
Budgeting for every dollar your business receives is a significant step towards better management and when you know your numbers, you’ll be surprised at how much you can achieve from doing this.
Given your incentive scheme should be formalised and structured, it only makes sense for how you’re planning on using every dollar received to be monitored likewise.
It is no good to look for a quick fix in randomly allocating rewards, as this will not change anything long-term and can create confusion within your workers about what is expected and how they’re acknowledged.
Let’s take a look at how allocating for rewards can increase sales, performance and loyalty.
I’ll use an example of 5% allocation for rewards, but the number can change depending on your company or budget.
It can be 3% or it can be 8% but whatever it is, the customer needs to be paying for that because that additional incentive is going to be the motivation for your technicians to make more sales.
So for every dollar that is billed by my company, I will take 5% and allocate it to direct labour incentives.
My definition of “direct labour” is all labour out in the field and anyone else that is involved in making sales.
By knowing your numbers you’ll be able to work out the price you need to charge customers which can include this direct labour incentive.
You also will know about the average number of jobs technicians are expected to field, expected conversion rates and the average price each type of job is typically charged.
Let’s say your average sale is $1000 and a tech runs fives calls a day and has a 40% conversion rate, so in other words he goes out to five jobs, is told to leave three but the other two jobs will on average total $2000.
But you’d like to see his conversion rate lifted to 60%, which is only another customer a day.
With your formalised reward system, you can talk with your techs about what’s expected but also what their rewards will be for exceeding their current rates.
If you work on 5% and you have to raise your average pricing by 5% that’s not gonna make a huge difference to customers, provided you justify the price lift with increased service, but I tell you it will make a big difference to your technicians to go above and beyond.
The 5% price increase will mean you’re not just paying for rewards out of your pockets, you instead have them allocated for and the technicians will know the rewards will always be there if they’re able to improve performance.
Keep it simple, give the techs a target and make sure it’s a realistic one, because it will be counter-productive to create impossible expectations.
If you throw too much at people, it is only natural for motivation to drop or for standards to fall away.
Have clearly defined expectations, ensure the technicians know if they get that extra customer per day, they’ll get a 5% bonus on their monthly pay.
The numbers will of course differ from companies and it’s absolutely ok to have different levels of bonuses if you feel that’s what you need to do.
Take a look around sales technician trainers and the reward systems they use (I personally recommend Joe Cunningham –this might have a link here maybe-) and talk to your technicians about what your plans are for it.
If you get the technicians on board then you’ve know got a system in place which is budgeted for and gives you a tremendous chance of improving your sales.
Allan Ferguson is the CEO of Service Professionals Australia.
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