Virtually all telecommunication companies have 2 different models to sell their services(MPLS, SIP, Metro Ethernet, SD WAN, etc) – through a direct sales force and through a channel program for organizations like C3. Here are some key facts about direct salespeople at telecom companies –
– The average sales rep stays in place between 18 and 24 months
– The average sales rep needs 10 to 12 months to reach full productivity
– The average sales manager stays in place for approximately 19 months
The processes needed to continuously power the loop of hiring/firing/promoting at telecom companies –
– Attract talent
– Initial interview with HR or a low level manager
– Background check
– Follow up interviews with higher levels of management
– On-boarding of new employees
– Training of systems, processes, HR procedures, etc.
– Intensive, multi-stepped product and sales training for long periods of time
The expense needed in just this piece of direct sales is extraordinary. With that said, we still haven’t touched on the ongoing expenses for direct sales –
– Internal IT to support users
– Managerial structures(and their entire cost structure)
– Use of facilities – real estate, office space, computer, phone equipment, etc.
Lastly, these reps are incented with large bounties for making sales (commissions). Most of these bounties are made with the eye on the short term. Why short term? Two reasons –
1. There’s a natural understanding that this sales rep won’t be in place very long, so why structure a long term compensation plan?
2. Telecom companies understand the difficulty and hardship placed upon customers to switch telecom providers. It can be painstaking and time consuming to switch from one carrier to another (let alone switching from MPLS to SD WAN, or PRI and POTS to SIP, or T1s to Metro E). Only a minimal level of service is needed to retain customers, but an extraordinary effort is needed to initially sell customers. This fact empowers the VP/C suite sales leaders in a telecom organization to improperly incent and create structures for direct salespeople that are much more heavily focused on new sales instead of customer retention. This truly makes for a situation where existing customers are quite literally taken for granted.
So what happens after this bounty is paid? Existing business accounts actually become a liability for salespeople. Why? Because if there’s nothing more to be sold, than there are no more commissions to be paid and the existing revenue is a liability if it is reduced(as market rates decrease) or eliminated(due to a client moving their business elsewhere). For a client that has maxed out their spending with Carrier X, accounts can resemble a hot potato as reps, managers, and directors try to minimize liabilities based on a lack of growth opportunity.
When you evaluate the above, it’s logical to conclude that it is difficult and costly to maintain a talented sales force needed to effectively service the needs of customers. To many customers, that rep is the face of the telecom organization. If that face is under-trained? Constantly changing? Unresponsive? Then you most likely have an unhappy customer. I would theorize that a significant portion of unhappy telecom customers can be linked back to a mismanaged sales structure which produces bad account representation.
Let’s take a look at the opposite end of the spectrum. Channel partners (VARs, brokers, etc) are another distribution method for selling telecom services for companies like Comcast, Earthlink, US Signal, 123.Net, etc. (referred to generically as Carrier X moving forward). This distribution method has virtually none of the overhead of the direct sales force model above and is incredibly simple to administer. Simply, channel partners are paid a percentage of what their customer’s bill as long as they are a customer of Carrier X. This is typically a cheaper way to sell services . Most customers don’t care to inquire about specifics beyond this, but in doing so miss an important point – for channel partners, there is no huge initial money bounty for a sale made. The direct sales model, because it faces the realities of an ever-shifting sales force, has to be short term focused, and stresses these bounties. For channel partners to realize the entire value of a customer, an initial sale must obviously be made, but long term retention is an even more important component. That bounty can only be collected only as a sum that is acquired penny by penny, month after month, year after year. It’s a compensation structure that not only encourages long term customer relationship building, it necessitates it. Beyond this, your typical channel partner is a small organization whose quickest path to growth depends on referrals from existing customers. They cannot rely on typical corporate marketing activities (commercials, billboards, sponsorships, etc.). Channel partners HAVE to focus on long term customer retention and satisfaction to stand a chance of surviving, let alone thrive in the telecom industry.
A customer that isn’t properly cared for represents a double whammy – long term commissions are eliminated and our source for referrals is gone. Referrals aren’t stressed needed nearly as much through the direct model because the entire direct sales force model understands the temporary nature of salespeople. How do you build or stress an effective referral model when salespeople, who generate the referrals, aren’t in place long enough (whether they take another job at Carrier X or leave the company entirely) to realize the long term benefits? To the contrary, this is vital to the growth of the channel partner community whose presence is much more stable and whose earnings don’t wildly fluctuate and depend on customer retention for earnings growth.
In closing, I leave this question for buyers of telecom networks and I’ll ignore all other criteria (that will be addressed in a later blog post) as to why channel partners are an effective telecom sourcing option (our unbiased nature, ability to create multi-vendor solutions, etc.) and focus on this – Based solely on compensation, who would you rather buy telecom services through? A short term focused, perpetually replaced telecom sales person or a channel partner whose long term prosperity is entirely dependent upon long term customer satisfaction?
If you find yourself wondering why you’re realizing only a percentage of the value of the telecom solution you were promised by your telecom vendor, then maybe you should ask that original salesperson…if they still work at that company.