Commissions on Outsourced Sales Only Help Printers Grow
By: Dave Clossey / T.J. Tedesco
For: High Volume Printing
Published: October, 2003

Here’s a surprising trend that’s recently come to light: Printing companies are causing their salespeople to turn away lucrative business. Now, before you dismiss such a preposterous notion, consider the reason: Most salespeople are not being paid commission on the outsourced portion of the jobs they sell.

I recently had a chat with industry consultant Dick Gorelick to get his thoughts on this subject. As usual, he had plenty of valuable insights to share.

“Commission is a prime motivational factor for salespeople because it rewards them for their work,” says Gorelick. “If a client discusses a project that will heavily rely on outsourcing and the sales representative knows that he will not receive commission on the outsourced portion of it, there is little incentive for him to go with the outsourced solution, even if it’s clearly the better option.”

Even if your company currently outsources only a few times a year, paying salespeople commission on that work encourages them to find the best solutions for your customers, regardless of where they come from. Failure to do that can limit the creative freedom your salespeople crave. When that becomes a standard operating procedure, customers will perceive your company as having a limited range of services.

Once this perception takes root, your company loses top of mind positioning with customers. That can cause you to lose not only jobs currently in the hopper, but projects that will come along in the future.

I know of several printing companies that refuse to pay commission for externally produced projects, and their businesses reflect it. On only the rarest of occasions will their salespeople use outsourced providers to produce a job, as they know the extra time and effort will go unrewarded. The result? Lucrative projects slip through their fingers at an alarming rate as they continue to pigeon-hole themselves by failing to provide customers with a full range of options.

Companies that openly discourage outsourcing risk losing more than just customers. At a certain point, you also risk losing employees when you do not provide commission for external projects. Once they realize that there are companies out there that reward them for work sold – even if some of the production is handled by outside vendors – they’ll be more likely to jump ship.

I Have Postpress Equipment. Why Outsource?

Let’s backtrack a bit. We know that salespeople are happier when they’re compensated on outsourced work that they sell. But what advantages does outsourcing offer your company if you already have an array of postpress equipment in-house? The answer is simple: Outsourcing allows you to offer customers the total package without actually having the total package under your roof.

Gorelick sums it up best when he says, “The definition of knowledge has changed. Knowledge used to mean knowing how to do something. Today, it means knowing where to go to get something done.”

Presenting customers with an alternative solution and maintaining responsibility over the project’s entire production cycle demonstrates your company’s expertise and confidence. When a frequent customer comes to you with an oddball job that you can’t produce entirely in-house, they don’t want you to shrug your shoulders and thumb through a PIA directory. They want you to give them peace of mind by saying, “We’ll handle it,” and then contracting with the best supplier available to get the project produced properly.

Presentation is the key to outsourcing success. You need to make customers feel comfortable with your company taking control of a project even when it isn’t in your hands. The way to do that is to present your outsourcing solution as the best solution for everyone.

For example, your presentation to a pharmaceutical client may go something like this: “This particular job requires some pretty specialized folding. We’ll do a great job on the printing, but we don’t have the proper folding capabilities. Fortunately, we have a relationship with a great pharmaceutical folding company. Our core competency is ink on paper, and their core competency is conversion of the pharmaceutical work. That’s exactly the combination you want, and we’ll manage the whole thing to be sure it’s produced properly.

“When would you like to get started?”

How much are we talking?

So how much will it cost to pay a salesperson commission for outsourced work? There are many ways that outsourcing activity commissions can be formulated. The ultimate goal is to provide sales representatives with the incentive to meet the needs of the customer, even if the solutions come from outside your building.

Let’s say, for example, that you have a job with an outsourced component of $10,000 with a 20% markup. If 5% of that $10,000 is the salesperson’s commission, there is still $1,000 in profit due to the markup. Now you’ve made money on the outsourced work, rewarded your salesperson for their efforts, and pleased the customer by finding the best solution and taking control of the project. By the way, that doesn’t include whatever you’ve made from the printing – your core competency!

One word about markups: although some companies are uncomfortable marking up, it is absolutely necessary. It’s essential to helping you cover your salesperson’s commission, as well as any spoilage or waste. According to Gorelick, there’s an even more compelling reason to markup outsourced work:

“Your customers are paying for your expert knowledge,” says Gorelick. “You have every right to add on a fee for that. It’s not that different from the role of a print broker. They make their money by determining the best way to get a job done, and the customer is willing to pay for that knowledge.”

T.J. Tedesco is a “hands-on” marketing, sales, coaching and training consultant to the post press industry. He is the author of Binding, Finishing & Mailing: The Final Word, and Win Top-of-Mind Positioning, both published by GATFPress and available at Amazon.com. T.J. can be reached at (301) 294-9900 or tj@growsales.com.