SALES REP TURNOVER AND COMPENSATION 

Sales representatives are the lifeline of office equipment dealers.  They’re the main point of contact with potential clients and are in charge of managing accounts to which they’re assigned.  Continually changing a customer’s account executive can eventually adversely affect the dealer’s ability to retain that customer when it comes time to renew leases.            

Each year we conduct an enormous study of office equipment dealers in which we ask them about virtually every aspect of their business.  Hundreds of in-depth interviews are conducted via telephone interviews that can last up to two hours.  The following information referenced in this article came from our annual dealer study.

Turnover           

Turnover rates are a critical issue for dealers who expect to actively compete in the high-volume, digital, copier/printer and color markets, all of which require higher levels of selling skills and expertise.  We would expect to see those dealers with more experienced sales representatives be more successful in these markets. High turnover rates erode dealer profits through increased recruitment, training and management costs in addition to losing opportunities due to open territories.  Decreased productivity rates, normally associated with new sales representatives, erode profits even further.   

Over the last three years, we have consistently seen the industry average turnover rate drop for copier/MFP dealers from 32.3% in 2005 to 25.9% in 2007.             

When looking at the last three years, Toshiba dealers have had the most success when it comes to retaining sales representatives.  Conversely, Ricoh has had a much more difficult time, losing more than 5% more sales reps than the industry average over the last three years.  Konica Minolta made great strides, reducing their turnover rate from nearly 30% in 2005 and 2006 to fewer than 20% in 2007.  As the bizhub line has become stronger and Konica Minolta’s merger pains have eased, it seems they’re finally hitting their stride.  

Compensation           

In 2007, we saw average sales rep compensation drop when compared to 2006 for every vendor except Panasonic and Toshiba.  This is not surprising because sales reps are almost always paid commission based on a percentage of hardware gross margins, which have declined.  

Over the last three years, no brand has been more profitable to sell than Ricoh.  Canon follows closely behind with Sharp a distant third. There are many outside factors that influence the preceding data.  Over the last two years, dealers from all three of these brands compensated sales reps with higher commission rates and lower salaries when compared to the universe.   Combing this “sink or swim” mentality with decent products and solid brand recognition seems to be an effective formula for compensation.             

However, it is interesting to note that Ricoh dealers had the highest turnover rate compared to the rest of the industry over the last three years.  While sales reps may enjoy the higher compensation when marketing these brands, the pressure to produce may eventually push them out the door more quickly than other brands.  

Industry Analysts, Inc., is a marketing and management consulting firm for the office automation industry. Much of the company’s research and testing results can be viewed on their web site – www.industryanalysts.com .