I Didn't Mean To Lie...
By: Kim Klaver
In today's New School session we were discussing how much you earn on your customers - what the company pays you for customer orders.
"I've been telling prospects and my own people for years that I make up to 50% on customer orders. But today I realized that that is not true. I only make 25% at most.
I will never say 50% again and will correct this wrong impression with everyone in my group, so they don't say that anymore either." -twenty-year vet in the business, eight years in current company.
Others chimed in that they had been doing the same thing, only they didn't realize they were actually telling a lie.
When a company charges $100 for a product set, and tells you they pay you 50% when you sell it, how much do you expect to get?
And if you pass that info on to a prospective distributor, i.e. that the customer orders average $100, and the company pays you 50%, how much will THEY expect to get if they sell such a product package?
But instead of $50, what if they they only get $25?
Happens all the time in companies that disguise what they really pay out: they publish their product prices and the promote big percents they pay you on sales, but they actually pay you your percent on another, much lower price.
It's the PV (or BV), folks. (Purchase Volume or Business Volume).
In the case above, the gal had just been repeating what she'd heard for years without much thought, because everyone in the leadership and at corporate were saying the same things.
Here's what happened to her:
She has typical orders of $50/mo from many customers. She gets paid 50% yes, but not of that $50 the customer paid - but of the PV the company assigns that product - which is half the customer's price - $25
So instead of $25 (half of $50) she gets $12.50 for a sale. (50% of the product's assigned PV of $25.)
That is 25% of the $50 customer order. Not 50%. But of course, 50% sounds better, doesn't it?
Naturally there's much explaining of the "complex pay plan" to those who discover this.
Is there any purpose to assigning PV and BV numbers to products other than to disguise the real percent being paid to the reps? And the reps pass the big percents on as an incentive to prospects to get them to join them because the "pay is the best"?
If a house sells for $100k, and the broker's commission is 6%, $6,000 is what is paid out (and divvied up however). It is NOT 6% of the "oops just revealed PV" of the house, only $70,000, so the commish is $3,200. Hahahaha.
Am I missing something here, or shall we stop encouraging reps to misrepresent to others (and themselves) what they're actually getting paid on customers?
P.S. This is not about the reality that most companies pay a commission scale, depending on one's level. It's about the basis of the pay, which is less than advertised for any company that has a double standard: public product price and its PV/BV, that being the lesser amount they actually pay the Rep on.
This article was posted on October 12, 2006
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