The impact of sales targets on customer satisfaction

A recent article in Harvard Business Review pointed out to the fact that companies often overburden their sales departments with unrealistic sales targets for achieving financial success. Companies often perceive that by setting sales targets as high as possible, they would be able to stretch sales team’s efforts to the maximum (Zoltners et al., 2011).   The sales team is usually convinced to believe that sales targets are high but achievable. They are even offered handsome incentive structure to accomplish these targets. Though such an initiative usually increases the sales revenues in short-term, the long-term impact may be devastating for the company (Zoltners et al., 2011). Customers simply become sales targets for the sales team and they concentrate only on increasing sales numbers; neglecting completely the need for achieving customer satisfaction. Let’s check out how such a number-based sales philosophy emerges in the organization and what should be done by the firms in this regard.

The root causes underlying number-based sales philosophy are as follows:

  • Sales staff is considered as revenue-generator for the firm rather than as the firm’s representative to the customers.
  • Sales staff is hired on the basis of their success in selling in previous firms rather than their popularity and reliability among customers.
  • Sales staff are trained specifically to increase the numbers of units sold rather than identifying customers’ needs and enhancing customer satisfaction.
  • A good proportion of sales department’s pay package is variable and depends upon the numbers sold by them.

While, the root causes may be any or all of the above, the result is that such a number-based sales environment discourages  the sales team to invest their time in identifying customers’ requirements and offering customized products/services thereby reducing customer satisfaction levels. A reduction in customer satisfaction may further affect repeat purchases and brand loyalty deteriorating the customers’ perception of the firm in the long-run. So the question that follows is how contemporary firms should tackle this situation of achieving a continuum between sales figures and customer satisfaction?

Following can be done in this regard:

  • Modify the company’s mission statement to focus upon creating customer value and the same should be conveyed throughout the hierarchy.
  • Sales staff should be hired with the viewpoint that these people are firm’s representative to the customers rather than as firm’s revenue-generators.
  • Before hiring sales staff, proper referral checks should be done from people apart from those provided by the applicants. This should be done in addition to checking out previous sales history.
  • The sales training should focus on identifying customers’ needs rather than selling whatever the company is offering with a view to increasing sales units.
  • The sales staff should be encouraged to gather information on customers’ requirements and this data can be utilized by the company’s research and development (R&D) department for further innovation.
  • The sales staff should be trained to portray themselves as customer-advocates rather than the company-advocates.
  • The performances of the sales employees should be appraised not only for the sales they achieve but also on the basis of their behavior towards customers. Customers’ feedback forms must be used to identify good and bad performers on the basis of numbers of customer complaints or the patrons they created for the company. The customers should also be interviewed randomly from time-to-time for the purpose.
  • The performance appraisal systems should not be entirely based upon monetary rewards rather recognition and additional time-off should also be offered to the performers.

Barclays, the British financial service provider has recently taken a lead in this direction by modifying its incentive systems to reward customer service (This is Money.co.uk, 2012). The company had been scandal-hit in the past and therefore in order to rebuild customers’ trust, the company has now adopted a new bonus structure where employees are rewarded not on the basis of numbers of units sold, but the number of satisfied customers they have created for the company. Barclays plans to track their employees’ behavior towards customers with the help of customers’ questionnaires, mystery shoppers and independent experts (This is Money.co.uk, 2012).

HSBC bank has also followed Barclays and has based its sales team incentive scheme on the parameters like customer satisfaction and sales quality. HSBC was reported to be involved in mis-selling scandals in recent past. To rebuild customers’ trust, the bank has not only taken out a portion of funds to reimburse the customers who were cheated by their sales team; but also adopted this quality and customer satisfaction based incentive structure (Osborne, 2013). Other firms need to take a lesson from Barclays and HSBC bank before it is too late.

References

  • “Examining the Impact of Sales Climate on Sales Performance and Customer Satisfaction.” Retrieved from: http://www.bauer.uh.edu/doctoral/marketing/documents/Dissertation-Proposal-Manoshi-Samaraweera.pdf
  • “‘If you want a bonus, give better service’ – Barclays ditches sales bonuses for branch staff.” (October 11, 2012). Retrieved from: http://www.thisismoney.co.uk/money/news/article-2216037/Barclays-branch-staff-receive-bonuses-based-customer-satisfaction.html
  • Osborne, H. February 20, 2013). “HSBC removes sales targets from staff incentives.” Retrieved from: http://www.guardian.co.uk/money/2013/feb/20/hsbc-removes-sales-targets-staff-incentives
  • Zoltners, A., Sinha, P., & Lorimer, S. (September 12, 2011). “Five Ways That Higher Sales Goals Lead to Lower Sales.” Harvard Business Review.
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Ankita Agarwal

Ankita is working with the editorial board of Project Guru as a Research Analyst and Writer. With Masters in Commerce and Business Studies, Ankita learned much of what she knows about management through experience. She has previously worked in various financial institutions like Birla Global, HDFC Ltd. and Citi Financial. She is self-motivated and writes for the Knowledge Tank section of Project Guru. She has authored more than 80 articles so far in Human Resources Management, Strategic Management, Finance and Marketing. She likes to pen her thoughts about the latest issues gripping these areas across the world.

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