The Death of a Salesman ' Online

The situation is no better in today's competitive international and online economy than in 1949 when Arthur Miller penned his masterpiece 'Death of a Salesman' ' bleak and unforgiving. Whatever he or she might feel about a customer, the sales representative must follow the basic rule of sales: The customer is always right (even when the customer is wrong). With better and more readily accessible knowledge of competing sellers' pricing, customers can comparison shop for the lowest price almost without cost or delay. The lure of a slightly lower price online can make a customer forget the service and support that a good rep can provide. And all the goodwill established by the rep's prior work pales next to a slight price break, from the customer's perspective.

Many bottom-line driven businesses simply will not value the intangible and likely non-quantifiable benefits of a rep who spends time with his or her customer, unless it can find those benefits in a balance-sheet line item. Unfortunately, that attitude ignores the fact that the rep may have devoted many unpaid hours to educate the customer about product offerings, learn the customer's needs and then make recommendations based on that knowledge ' all ignored in favor of a simple price ranking.

Cost-cutting manufacturers, in turn, squeeze the rep constantly by increasing sales quotas and requirements. To remain an authorized rep, he or she must master new technology, reporting systems and marketing plans, all while struggling to visit existing and potential customers who are also constantly squeezed for time in the 'yesterday is too late' world of business. Today, the ubiquitous and equalizing Blackberry gives the diligent rep and the lackadaisical one the same ability to reply immediately to a customer's needs, whether the rep is planted in front of a laptop, or on the golf course. Willy Loman's mantra, 'The man who makes an appearance in the business world, the man who creates personal interest, is the man who gets ahead; be liked and you will never want,' has been turned on its head by technology. 'Making an appearance' has become easy through the tools technology offers reps for staying connected with clients and potential customers ' without even taking into account more sophisticated but readily available marketing software such as www.salesforce.com, or the tools described in an article at www.knowthis.com/articles/marketing/findingsalesleads.htm. Constant availability of the rep has become the client's minimum expectation, rather than a goal.

After all that stress, the rep may find that his or her competition might come not only from other firms, but from the very firm that employs him or her. A rep might prospect a sale and acquire the customer, only to see the order placed through the manufacturer's Web site ' especially if the manufacturer pays the rep no commission on a Web site sale to his or her own customer. There may not have been any problem with the rep's work; the customer might have preferred a quicker turnaround, lower prices available directly from the vendor online, or simply the convenience of online or automatic ordering ' or a combination of these possibilities. The rep's risk of loss of business is especially great after the rep has used his or her skills to identify the customer's need, for repeat or re-order business that doesn't require complex order specification, and might even be automated. Why wait to speak to the rep if the order can be processed online in seconds? If the rep's compensation (as is typical) is weighted heavily to commissions on directly generated sales, then how does he or she personally benefit from a structure that gives the customer incentives to order online (regardless of the lifetime value his or her firm might receive from that customer's initial and, particularly, repeat, orders)?

Sales Floor and Online Commissioning

Typically, sales reps work on a commission that is tracked by identifying the source of a sale. If a manufacturer grants the rep commissions on all sales to his or her accounts, whether placed online or through the rep, then he or she wouldn't lose the benefit of the sales efforts. Commonly, a rep may have specified accounts, either by name or territory, so that he or she can focus his or her efforts. Ideally, those accounts would be exclusive, so that he or she needn't fear competition from others promoting the same products or brand. Indeed, anecdotal evidence from online job postings that refer to commissions on Internet sales suggest that some manufacturers have already adjusted to this reality by offering commissions to those in traditional sales channels for online sales to the rep's customers (particularly in businesses that have promoted a limited number of sales outlets staffed by well trained personnel) ' but not all firms pay those commissions.

Other firms, in contrast, affirmatively choose not to sell online (e.g., www.stihlusa.com/internet_policy.html, www.andersonfloors.com/internet_sales.aspx or www.cannondale.com/policies/int_sales_policy.html), avoiding the issue of commissions for online sales entirely. (Entering 'internet sales policy' on common search-engine sites will reveal many companies with similar rules.) This policy clearly protects the incentives for traditional dealers to invest in training for their sales organization, and for sales reps to educate themselves about their product. Moreover, from the manufacturer's perspective, it also tries to ensure that customers will speak with qualified personnel for product recommendations, training and troubleshooting, which is a critical concern in our litigious society for all businesses, especially those working with hazardous equipment.

International Herald Tribune technology reporter Victoria Shannon, in a lengthy article, 'Some Products You Just Can't Find Online' (The New York Times, Dec. 3, 2006, no longer available online), explained these firms' decision in words that would be music to the sales rep's ears. Commenting on a European antitrust investigation of the anticompetitive effect of barring online sales, an analyst noted in that article: 'The companies said that if you buy (their products) in a physical point of sale, you get professional advice with these products, you talk with someone who takes care of you. They are sold in conjunction with delivery of customized advice.'

In the European case, 10 high-end cosmetics manufacturers agreed to allow more 'flexibility for internet sales.' (U.S. antitrust law provides a clear green light to such 'unilateral refusals to deal': A manufacturer's refusal to sell to those who resell online, or who refuses to sell online itself ' in one of the oldest doctrines in U.S. law, the U.S. Supreme Court's 1919 Colgate case. Along the lines of that case, as long as the manufacturer shuts down its relationship with commissioned sales agents or resellers who try to sell online solely of its own choice, without interference from other, competing, reps, then such action is legal, unless it otherwise violates a contract between the ' soon-to-be former ' rep and the manufacturer.)

While brands with high value and exclusivity might be able to implement such policies, most cannot, especially when customers prefer to shop online. As Shannon's article noted: 'Yet how could a 21^st century company think that it could prevent sales when the Internet makes the world a single, extremely competitive and price conscious market? Consumers could just use shopping comparison services to search for goods available anywhere around the globe' ' and bypass the sales rep who helped them select the best one for their needs. Moreover, as a practical matter, what firm wants to discourage online sales by its customers, when enforcement of such a policy involves becoming adversarial to its customers and its own sales force?

Looking to the Past To Improve the Present

Instead, traditional business models might offer solutions to the dilemma of the modern-day sales rep ' and of his or her employer who needs the rep's leads and in-the-field expertise, and the cost-cutting benefits of online sales. While these practices may provide only a partial solution that might be a better result from the rep's perspective, no rep wants to be denied compensation entirely for work that leads to sales just because tracing his or her role in making the sale might be difficult, or because the customer preferred a cheaper and easier online purchase method.

For example, even before the Internet, a customer may have preferred to speak with a sales rep different from the one assigned to the customer's account, or to an adjoining territory. While firms generally try to discourage encroachment into others reps' territory, it might happen through third-party referrals or simple social acquaintance, or as the result of general advertising. Rather than lose a sale to preserve the integrity of a policy, the override commission allows one person to earn a commission on a sale made by another, when one would not typically be paid under the standard policy. (The term override commission might have a specialized meaning in some industries.)

Another example of a commission policy that could be adapted for online sales comes from firms in which group efforts are necessary to make a sale, or in which tracking individual effort might be difficult or expensive. Some employers might perceive incentives for individual sales as creating an undesired motivation not to cooperate with one's coworkers to maximize one's own benefit. In these cases, employers sometimes pay commissions on group sales; in other words, although individual effort might not be directly rewarded, it will raise the overall compensation level, and therefore lead to greater pay ' not only for oneself, but for all one's coworkers.

Both of these solutions have been commonly employed in business for many years, separately, or in combination with each other and with more traditional arrangements ' all done to create the greatest incentives for representatives to obtain new sales. But these solutions may not work for all businesses. Both of these methods also cost the employer more than a single, traditional commission ' the employer might have to pay two commissions on the same sale (albeit perhaps at a reduced rate) ' an 'override' of its policy to the agent who actually procured the sale, and another to the agent who should have handled the order under the policy. Typically, an override commission is paid in addition to the commission required to be paid under the standard commission policy, rather than as a substitution.

As a result, in a marketplace where instant access to information often has driven margins to the bone, the need to consider these types of commission structures might also have another consequence for the sales rep ' a consequence that is much less benign than haggling over commissions on the unusual out-of-territory sale. Instead, if an employer sees that online customers choose to buy for reasons other than the influence of a particular commissioned sales agent, it might reasonably wonder whether any commission need be paid at all. If a firm is fortunate enough to obtain online customers from its Web marketing and referral arrangements, then even if those customers might have worked through a representative at one time, it could legitimately ask why it needs commissioned sales representatives at all.

But this attitude ignores the constant changes online that dictate that what works today might not work tomorrow, much less next week or next month. And those who specialize in selling a company's wares might be able to make best use of that knowledge of what works to sell a particular company's product or services by taking advantage of online opportunities, rather than relying on the chance observations of a Web site designer or the part-time computer aficionados a firm happens to employ.

Consider: Although Google first became known as a search-engine firm, it achieved its multi-billion dollar IPO through its sophisticated online ad sales (see, www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2004/08/09/BUGAD835EP1.DTL). In a world of such complexity, a skilled seller can combine his or her techniques with those of the online marketer. Also, regardless of the growth and benefits of online sales, some products ' like chainsaws ' really do need specially trained installers, or others with specific knowledge of the product, to provide 'hands-on' service (or handholding) for high-level customers. While outsourcing might be possible for many such functions, the need to get it right ' the first time, and every time ' makes the cost of extra commissions seem more bearable beside the formidable cost of lost sales and the boon of repeat business, particularly as the price and cachet of the product rise.

Another 'traditional' but possible solution for the manufacturer (but not for the sales rep) lies in brand differentiation ' which is creating different brands for different markets, whether divided by price, territory or sales method. Just as products as diverse as cars and beer offer various incarnations of products similar in composition under different labels but with different prices and marketing, a company could create an Internet-only product with reduced or no commissions. This solution, however, also imposes additional costs on the manufacturer, and while consumers have in the past been willing to pay different prices for a Chevrolet and a Cadillac, or for a Miller Lite and a Molson, the question remains: Will savvy Internet shoppers behave the same way, especially when they can easily research the products and pricing?

Looking Out for One's Best Interests

And what could poor Willy Loman do if he had to contend with the additional pressures of selling against his own company's Web site? Perhaps a series of cases from the early days of online selling provides guidance for the rep negotiating his or her commission package. In those cases, franchisees with exclusive territories challenged the right of their franchisors to sell online to customers in their region (thereby depriving the franchisees of sales 'promised' to them in their franchise agreements). The arbitrators and the courts reached different results, depending on the language in each franchise agreement; for example, some defined protected sales more broadly than others. In other words, even in an electronic age, the words of the contract still matter ' a lot.

A sales rep negotiating an employment contract in 2007 and beyond, then, cannot ignore the omnipresence of e-commerce. The same is the case for attorneys advising e-commerce ventures. Even if a product is not offered online at the moment, it could be in the future as technological innovation expands the menus of products and services available online. The rep ignores this trend at his or her peril, and the rep must negotiate an agreement and commission arrangements with Internet sales in mind.

This approach must take two forms. First, the definition of commissionable sales should explicitly state the commission due. That statement should be for online sales by the manufacturer or other reps, in which the rep had a role, were in the rep's territory, or were to customers already identified as that rep's customers. The calculation of that commission will naturally vary by the type of business (I've suggested in this article several possibilities, but what works will vary for each business). Without such a clear statement, the rep has little argument when he or she finds the manufacturer cannibalizing his or her efforts through sales on its Web site.

In a world where change is constant, the agreement should also expansively define which sales are subject to commission. At a minimum, it should make clear that online sales 'count.' If the manufacturer wants to reserve Internet sales to itself, then the rep should bargain for other compensation ' higher rates or greater exclusivity, for instance ' to make up for potential sales that cannot be obtained because of the manufacturer's reserved rights.

More important, because selling methods might change as technology improves, the agreement should not limit commissionable sales to any particular medium or form of a medium. And the agreement should be flexible enough to give the representative an argument for compensation, regardless how the technology of selling develops. Just as would be the case in negotiating many points of a rep agreement, the rep should be cautious about broad language preserving the principal's rights to expand its online activities at the rep's expense.

Of course, not every manufacturer will be willing to negotiate these rights, or to vary its standard forms. The rep might have to live with a contract that doesn't clearly address Internet sales issues, but at least the rep will then know the risks and can decide whether to pursue another opportunity that will allow benefit directly from e-commerce efforts. In other words, similar to what Arthur Miller wrote, attention must be paid to e-commerce ' when a rep negotiates commission agreements, rather than after the death of his or her business.

The situation is no better in today's competitive international and online economy than in 1949 when Arthur Miller penned his masterpiece 'Death of a Salesman' ' bleak and unforgiving. Whatever he or she might feel about a customer, the sales representative must follow the basic rule of sales: The customer is always right (even when the customer is wrong). With better and more readily accessible knowledge of competing sellers' pricing, customers can comparison shop for the lowest price almost without cost or delay. The lure of a slightly lower price online can make a customer forget the service and support that a good rep can provide. And all the goodwill established by the rep's prior work pales next to a slight price break, from the customer's perspective.

Many bottom-line driven businesses simply will not value the intangible and likely non-quantifiable benefits of a rep who spends time with his or her customer, unless it can find those benefits in a balance-sheet line item. Unfortunately, that attitude ignores the fact that the rep may have devoted many unpaid hours to educate the customer about product offerings, learn the customer's needs and then make recommendations based on that knowledge ' all ignored in favor of a simple price ranking.

Cost-cutting manufacturers, in turn, squeeze the rep constantly by increasing sales quotas and requirements. To remain an authorized rep, he or she must master new technology, reporting systems and marketing plans, all while struggling to visit existing and potential customers who are also constantly squeezed for time in the 'yesterday is too late' world of business. Today, the ubiquitous and equalizing Blackberry gives the diligent rep and the lackadaisical one the same ability to reply immediately to a customer's needs, whether the rep is planted in front of a laptop, or on the golf course. Willy Loman's mantra, 'The man who makes an appearance in the business world, the man who creates personal interest, is the man who gets ahead; be liked and you will never want,' has been turned on its head by technology. 'Making an appearance' has become easy through the tools technology offers reps for staying connected with clients and potential customers ' without even taking into account more sophisticated but readily available marketing software such as www.salesforce.com, or the tools described in an article at www.knowthis.com/articles/marketing/findingsalesleads.htm. Constant availability of the rep has become the client's minimum expectation, rather than a goal.

After all that stress, the rep may find that his or her competition might come not only from other firms, but from the very firm that employs him or her. A rep might prospect a sale and acquire the customer, only to see the order placed through the manufacturer's Web site ' especially if the manufacturer pays the rep no commission on a Web site sale to his or her own customer. There may not have been any problem with the rep's work; the customer might have preferred a quicker turnaround, lower prices available directly from the vendor online, or simply the convenience of online or automatic ordering ' or a combination of these possibilities. The rep's risk of loss of business is especially great after the rep has used his or her skills to identify the customer's need, for repeat or re-order business that doesn't require complex order specification, and might even be automated. Why wait to speak to the rep if the order can be processed online in seconds? If the rep's compensation (as is typical) is weighted heavily to commissions on directly generated sales, then how does he or she personally benefit from a structure that gives the customer incentives to order online (regardless of the lifetime value his or her firm might receive from that customer's initial and, particularly, repeat, orders)?

Sales Floor and Online Commissioning

Typically, sales reps work on a commission that is tracked by identifying the source of a sale. If a manufacturer grants the rep commissions on all sales to his or her accounts, whether placed online or through the rep, then he or she wouldn't lose the benefit of the sales efforts. Commonly, a rep may have specified accounts, either by name or territory, so that he or she can focus his or her efforts. Ideally, those accounts would be exclusive, so that he or she needn't fear competition from others promoting the same products or brand. Indeed, anecdotal evidence from online job postings that refer to commissions on Internet sales suggest that some manufacturers have already adjusted to this reality by offering commissions to those in traditional sales channels for online sales to the rep's customers (particularly in businesses that have promoted a limited number of sales outlets staffed by well trained personnel) ' but not all firms pay those commissions.

Other firms, in contrast, affirmatively choose not to sell online (e.g., www.stihlusa.com/internet_policy.html, www.andersonfloors.com/internet_sales.aspx or www.cannondale.com/policies/int_sales_policy.html), avoiding the issue of commissions for online sales entirely. (Entering 'internet sales policy' on common search-engine sites will reveal many companies with similar rules.) This policy clearly protects the incentives for traditional dealers to invest in training for their sales organization, and for sales reps to educate themselves about their product. Moreover, from the manufacturer's perspective, it also tries to ensure that customers will speak with qualified personnel for product recommendations, training and troubleshooting, which is a critical concern in our litigious society for all businesses, especially those working with hazardous equipment.

International Herald Tribune technology reporter Victoria Shannon, in a lengthy article, 'Some Products You Just Can't Find Online' (The New York Times, Dec. 3, 2006, no longer available online), explained these firms' decision in words that would be music to the sales rep's ears. Commenting on a European antitrust investigation of the anticompetitive effect of barring online sales, an analyst noted in that article: 'The companies said that if you buy (their products) in a physical point of sale, you get professional advice with these products, you talk with someone who takes care of you. They are sold in conjunction with delivery of customized advice.'

In the European case, 10 high-end cosmetics manufacturers agreed to allow more 'flexibility for internet sales.' (U.S. antitrust law provides a clear green light to such 'unilateral refusals to deal': A manufacturer's refusal to sell to those who resell online, or who refuses to sell online itself ' in one of the oldest doctrines in U.S. law, the U.S. Supreme Court's 1919 Colgate case. Along the lines of that case, as long as the manufacturer shuts down its relationship with commissioned sales agents or resellers who try to sell online solely of its own choice, without interference from other, competing, reps, then such action is legal, unless it otherwise violates a contract between the ' soon-to-be former ' rep and the manufacturer.)

While brands with high value and exclusivity might be able to implement such policies, most cannot, especially when customers prefer to shop online. As Shannon's article noted: 'Yet how could a 21^st century company think that it could prevent sales when the Internet makes the world a single, extremely competitive and price conscious market? Consumers could just use shopping comparison services to search for goods available anywhere around the globe' ' and bypass the sales rep who helped them select the best one for their needs. Moreover, as a practical matter, what firm wants to discourage online sales by its customers, when enforcement of such a policy involves becoming adversarial to its customers and its own sales force?

Looking to the Past To Improve the Present

Instead, traditional business models might offer solutions to the dilemma of the modern-day sales rep ' and of his or her employer who needs the rep's leads and in-the-field expertise, and the cost-cutting benefits of online sales. While these practices may provide only a partial solution that might be a better result from the rep's perspective, no rep wants to be denied compensation entirely for work that leads to sales just because tracing his or her role in making the sale might be difficult, or because the customer preferred a cheaper and easier online purchase method.

For example, even before the Internet, a customer may have preferred to speak with a sales rep different from the one assigned to the customer's account, or to an adjoining territory. While firms generally try to discourage encroachment into others reps' territory, it might happen through third-party referrals or simple social acquaintance, or as the result of general advertising. Rather than lose a sale to preserve the integrity of a policy, the override commission allows one person to earn a commission on a sale made by another, when one would not typically be paid under the standard policy. (The term override commission might have a specialized meaning in some industries.)

Another example of a commission policy that could be adapted for online sales comes from firms in which group efforts are necessary to make a sale, or in which tracking individual effort might be difficult or expensive. Some employers might perceive incentives for individual sales as creating an undesired motivation not to cooperate with one's coworkers to maximize one's own benefit. In these cases, employers sometimes pay commissions on group sales; in other words, although individual effort might not be directly rewarded, it will raise the overall compensation level, and therefore lead to greater pay ' not only for oneself, but for all one's coworkers.

Both of these solutions have been commonly employed in business for many years, separately, or in combination with each other and with more traditional arrangements ' all done to create the greatest incentives for representatives to obtain new sales. But these solutions may not work for all businesses. Both of these methods also cost the employer more than a single, traditional commission ' the employer might have to pay two commissions on the same sale (albeit perhaps at a reduced rate) ' an 'override' of its policy to the agent who actually procured the sale, and another to the agent who should have handled the order under the policy. Typically, an override commission is paid in addition to the commission required to be paid under the standard commission policy, rather than as a substitution.

As a result, in a marketplace where instant access to information often has driven margins to the bone, the need to consider these types of commission structures might also have another consequence for the sales rep ' a consequence that is much less benign than haggling over commissions on the unusual out-of-territory sale. Instead, if an employer sees that online customers choose to buy for reasons other than the influence of a particular commissioned sales agent, it might reasonably wonder whether any commission need be paid at all. If a firm is fortunate enough to obtain online customers from its Web marketing and referral arrangements, then even if those customers might have worked through a representative at one time, it could legitimately ask why it needs commissioned sales representatives at all.

But this attitude ignores the constant changes online that dictate that what works today might not work tomorrow, much less next week or next month. And those who specialize in selling a company's wares might be able to make best use of that knowledge of what works to sell a particular company's product or services by taking advantage of online opportunities, rather than relying on the chance observations of a Web site designer or the part-time computer aficionados a firm happens to employ.

Consider: Although Google first became known as a search-engine firm, it achieved its multi-billion dollar IPO through its sophisticated online ad sales (see, www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2004/08/09/BUGAD835EP1.DTL). In a world of such complexity, a skilled seller can combine his or her techniques with those of the online marketer. Also, regardless of the growth and benefits of online sales, some products ' like chainsaws ' really do need specially trained installers, or others with specific knowledge of the product, to provide 'hands-on' service (or handholding) for high-level customers. While outsourcing might be possible for many such functions, the need to get it right ' the first time, and every time ' makes the cost of extra commissions seem more bearable beside the formidable cost of lost sales and the boon of repeat business, particularly as the price and cachet of the product rise.

Another 'traditional' but possible solution for the manufacturer (but not for the sales rep) lies in brand differentiation ' which is creating different brands for different markets, whether divided by price, territory or sales method. Just as products as diverse as cars and beer offer various incarnations of products similar in composition under different labels but with different prices and marketing, a company could create an Internet-only product with reduced or no commissions. This solution, however, also imposes additional costs on the manufacturer, and while consumers have in the past been willing to pay different prices for a Chevrolet and a Cadillac, or for a Miller Lite and a Molson, the question remains: Will savvy Internet shoppers behave the same way, especially when they can easily research the products and pricing?

Looking Out for One's Best Interests

And what could poor Willy Loman do if he had to contend with the additional pressures of selling against his own company's Web site? Perhaps a series of cases from the early days of online selling provides guidance for the rep negotiating his or her commission package. In those cases, franchisees with exclusive territories challenged the right of their franchisors to sell online to customers in their region (thereby depriving the franchisees of sales 'promised' to them in their franchise agreements). The arbitrators and the courts reached different results, depending on the language in each franchise agreement; for example, some defined protected sales more broadly than others. In other words, even in an electronic age, the words of the contract still matter ' a lot.

A sales rep negotiating an employment contract in 2007 and beyond, then, cannot ignore the omnipresence of e-commerce. The same is the case for attorneys advising e-commerce ventures. Even if a product is not offered online at the moment, it could be in the future as technological innovation expands the menus of products and services available online. The rep ignores this trend at his or her peril, and the rep must negotiate an agreement and commission arrangements with Internet sales in mind.

This approach must take two forms. First, the definition of commissionable sales should explicitly state the commission due. That statement should be for online sales by the manufacturer or other reps, in which the rep had a role, were in the rep's territory, or were to customers already identified as that rep's customers. The calculation of that commission will naturally vary by the type of business (I've suggested in this article several possibilities, but what works will vary for each business). Without such a clear statement, the rep has little argument when he or she finds the manufacturer cannibalizing his or her efforts through sales on its Web site.

In a world where change is constant, the agreement should also expansively define which sales are subject to commission. At a minimum, it should make clear that online sales 'count.' If the manufacturer wants to reserve Internet sales to itself, then the rep should bargain for other compensation ' higher rates or greater exclusivity, for instance ' to make up for potential sales that cannot be obtained because of the manufacturer's reserved rights.

More important, because selling methods might change as technology improves, the agreement should not limit commissionable sales to any particular medium or form of a medium. And the agreement should be flexible enough to give the representative an argument for compensation, regardless how the technology of selling develops. Just as would be the case in negotiating many points of a rep agreement, the rep should be cautious about broad language preserving the principal's rights to expand its online activities at the rep's expense.

Of course, not every manufacturer will be willing to negotiate these rights, or to vary its standard forms. The rep might have to live with a contract that doesn't clearly address Internet sales issues, but at least the rep will then know the risks and can decide whether to pursue another opportunity that will allow benefit directly from e-commerce efforts. In other words, similar to what Arthur Miller wrote, attention must be paid to e-commerce ' when a rep negotiates commission agreements, rather than after the death of his or her business.