Paid for Performance

Sales agents are the foot soldiers on the front lines as wireless carriers wage their battles for market supremacy. As such, attracting and keeping top salespeople by offering attractive sales/commission packages has become a key strategy among both large and small wireless carriers.

"You have to offer better deals (to attract good salespeople)," said one wireless official who asked to remain anonymous. "You have to offer them better commissions."

"You've got to have the right mixture of salary and commission, no question about it," agreed Randy Carr, Cellular One major account manager in Harrisonburg, VA. "That's the most important thing."

Some companies keep their commission-structure analysis a closely guarded secret. Others, however, are willing to outline how their commission plans are structured, how much flexibility they offer and what they have learned throughout the process.

PERFORMANCE EARNINGS What emerges is a multifaceted picture, depending on whether the carrier is one such as Rural Cellular, which relies almost exclusively on about 150 outside independent retail agents; one such as Cellular One in Harrisonburg, a small company with fewer than 10 sales representatives; or a major carrier such as BellSouth Cellular with about 1,800 sales associates. Despite the diversity, the one common thread is that no matter how many salary/commission plans may be in place, they all are based on "pay for performance." Sell a higher-cost rate plan, and the commission it carries generally will be higher than for selling a budget plan.

Wireless carriers also have built-in flexibility to their salary/commission plans. This flexibility not only allows them to adjust the structure at different times of the year, but also it allows them to provide incentives to encourage their sales agents to concentrate on selling particular products and services.

"Our program is designed to be flexible enough to help our marketing and sales department take products in and out of the plan very quickly without changing the plan itself," said Ami Patel, Ameritech Cellular director of compensation.

At BellSouth Cellular, officials employ a "point system," with different products and services assigned varying point values. For example, selling a customer a plan that includes short message service would be worth more points than upgrading another customer's phone.

"The point structure also allows us to more accurately compensate according to the profitability of the sale," said Jill Mosteller, BellSouth sales compensation and incentive director.

With new activations, for example, one goal is to help the company grow its existing customer base, she said.

"What 'points' allow us to do is reward the sales rep not only for growing the customer base, but growing the customer base according to the potential profitability of that new customer to the corporation," Mosteller said.

Commission structures also may vary depending on the time of the year.

"Throughout the year, there are different expectations of what we're going to sell," Patel said. "We have a base program, but do find ourselves perhaps making adjustments."

At Cellular One in Harrison-burg, the only change in commission structure usually occurs during the Christmas shopping season, when sales quotas are raised as prices are dropped on phones, and the company launches an aggressive advertising campaign to get shoppers in a buying mood, Carr said. Carr added that the combination of lower prices and the ad campaign make it "a better opportunity for the salespeople as well. It's a win-win situation. "

At Rural Cellular, spokesperson Ann Skinner said the carrier's commission structure doesn't change during the year or for specials or other promotions. Independent agents who sell Rural Cellular products and services work strictly on commission, which includes not only a percentage for merchandise but also for service (residual) revenue and a "retention perk."

"We don't believe that once you've sold our service to the customer, the job is over," Skinner said. "The agent needs to be able to contact the customer in the future, tell them of new plans that are out there, things that would augment their service and make it better for them."

ROOM FOR IMPROVEMENT Herschel Shosteck of Herschel Shosteck Associates said he gives poor marks to the commission structure used by wireless carriers for their independent agents, both for products sold and for paying for residuals.

"They're generally doing a pretty lousy job," said Shosteck, who has studied commission structures and whose company specializes in measuring, analyzing and forecasting the wireless market.

He noted that in 1989, about 63% of agency dealers were paid residual commissions. By 1997, that figure had dropped to 48%.

"They are getting out of the business of paying residual commissions, which makes a lot of sense," he said. "You're fundamentally distributing something. The profit should be in the hardware and the initial sale, not stay on forever and ever."

Commissions have changed little for mass-market retailers, he added. The result, he said, is that the carriers are driving away many of the small dealers while giving the mass marketers more leverage to negotiate commissions. Skinner said that agents selling for Rural Cellular are entitled to residual commissions because their jobs don't end with the sale.

"We operate our business of a balanced growth strategy," she said. "We don't just want to get as many customers as we can and don't just want to have the highest revenues that we can. We want to retain customers. We want to acquire them at an acceptable cost."

KEEPING TRACK As for tracking the commission structure, large carriers typically rely on computer systems that download data from billing and sales into a commission program. Small carriers such as Cellular One in Harrisonburg track that information manually.

"We will compensate only for those things for which we can measure and accurately track the results," said BellSouth Cellular's Mosteller. "That's a key fundamental issue."

Those surveyed agreed that communication between the company and the sales force is essential to success.

"The more timely you can provide feedback to sales reps as far as how well they're doing is a critical part in ensuring their productivity," Mosteller said.

Ameritech Cellular's Patel agreed, noting that it is important that the salespeople understand how the system works so they know how they are being paid and that the commission data is accurate. Despite the best of intentions, however, it is human nature never to be satisfied.

"Commissions are "a moving target month to month and quarter to quarter," Patel said. "We have to go with the underlying philosophy, and I think any compensation person would agree with me, that no one is ever happy with their pay."