Repeat vs. new business: Should farmers and hunters be compensated the same?

I often hear owners, presidents and CEOs complain that they cannot remember the last time their company signed up a new customer or client. They claim the sales team seems to call on the same accounts over and over again, but can’t or won’t find new clients.
In other conversations, I hear the opposite. The sales team keeps bringing in new accounts, but the attrition rate for new customers is sky high. After the first order or two, the new client goes into the “witness protection program” and the salesperson can’t or won’t find the time to search out the missing account.
There are many possible problems with these scenarios, but let’s focus on two key factors: the sales team’s compensation and their selling objectives. Consider the following questions:

  • Do you have one compensation program for the entire sales team, regardless of their roles?
  • Are the folks responsible for bringing in new business compensated the same as the folks responsible for repeat orders?
  • Do you believe that the selling skills for finding new business are the same as skills for maintaining repeat business?

If you answered “yes” to any of the above questions, there lies the problem.
Let’s call the finder of new business the hunter. Every day, the hunter goes out into the field to find new opportunities. Cold calling, networking, face-to-face meetings, qualifying/disqualifying prospects and closing orders are the activities they master. The hunter loves the kill – signing up new accounts. The hunter hates reconciling payments to invoices, booking repeat orders, chasing down lost orders or explaining late deliveries.
In the same vein, let’s call the maintainer of existing business the farmer. The farmer ensures the client is happy with product quality, handles delivery, keeps the supply chain full and moving, ensures accurate invoicing and takes repeat orders (to name a few). The farmer relies on being accessible to the client and being knowledgeable on the details of the client’s orders. Farmers cannot stand talking to someone new every week at an account, or dealing with internal problems that make the company look bad in front of the customer.
So, how do you incentivize these two creatures to accomplish your revenue goals? Lots of compensation plan models are out there, just ask any HR consultant. But, what are the keys?

  • For hunters, incentivize them to keep hunting. For new kills, give them a generous commission for, say, the first year. Then, diminish the commission for that repeat business over time (two to five years) until the commission is zero. If the hunter doesn’t constantly bring in new business, he starves.
  • For Farmers, incentivize them to maintain and nurture the client. Provide a salary base that rewards them for prompt order entry and accurate invoicing, and then a commission for increased volume and cross/up-sale items.

Those are the basics. Any compensation plan needs to customize these elements for your specific situation. If you have hunters and farmers doing the same tasks for the same pay, and you’re getting inconsistent sales, it may be time to revamp your sales roles and compensation.
Dave Harman is an associate with Sandler Training. He has over 30 years’ experience in sales and sales management with Fortune 500 companies as well as small, family-owned organizations. He has held positions from sales to senior management with companies such as Conoco/Vista, Amresco and Ohio Awning, and owns his own business. He earned his MBA with a concentration in Marketing from Miami University, Oxford, Ohio. You can reach him at [email protected] or (888) 448-2030.