Early on in my tenure at American Express, I worked on two very different partnerships, both with the same goal: get our partners’ sales force to get people to sign up for our credit cards.
One partner was a merchant acquirer — a company that sold credit card processing services to businesses. The partner employed a huge salesforce that would pop into every restaurant, hardware store, and hair salon on Main Street and convince the owners to switch their credit card terminals to their own offerings.
The merchant acquirer’s salespeople were all stone-cold hustlers, entrepreneurial-types who looked for every possible competitive edge in what was a surprisingly cut-throat industry. At the partner’s annual sales conference, I was surprised to find a common theme in my cocktail hour conversations: many of the top salespeople had their pilot’s licenses. For their own planes*.
The second partner was Costco. While anyone could just walk into any Costco and sign up for an Amex card at any time, a few times per year Costco made an extra big push on their sales effort — for a few days, Costco employees would stand at a table and tell members about Amex cards. Costco employees were decidedly not stone-cold hustlers. Their company culture is known for being obsessive about customer service, generous to employees with their salaries and benefits, and an frequently awarded Best Place to Work. But cutthroat sales junkies, they were not.
For the merchant acquirer, the salespeople would pitch the benefits of an Amex card at the tail end of their sales process and would get a nice little cash bonus with each one.
Costco didn’t allow partners from offering any form of bonus to their employees, so the Costco employees had no incentive at all to offer Amex cards.
Which do you think performed better? the merchant acquirer, whose salespeople did enough business enough to buy themselves planes? Or Costco, whose cashiers hawked credit cards alongside bulk paper towels and 10-gallon mayonnaise jars for $18/hour?
Surprisingly, it was Costco. By a landslide.
How could Costco possibly be so much more successful than the merchant acquirer at selling
The merchant acquirer had everything in its favor: a clear alignment between our product and their core offerings (it made sense to talk about applying for a credit card during a sale of credit card processing terminals); an aggressive sales team; and an incentives that made it easy to see the immediate value of offering our product.
And yet, we were missing something critical: an understanding of what truly motivated the sales team. Naturally, we figured that the merchant acquirer’s sales reps would be motivated by cash. And in a sense, we were correct. But the sales reps actually made the vast majority of their money from the credit card transaction fees — for every swipe of a credit card at one of their clients’ stores, they took a fraction of a penny per dollar. Over the years, and with a large base of businesses running their credit cards through them, that could add up to a recurring revenue stream worth millions of dollars per year.
Comparatively, our little cash bonus was pitifully insignificant. When the merchant acquirer’s sales reps were getting close to closing a sale that could have resulted in another register ringing for them over the lifetime of the customer, they had little interest in risking their deal by offering yet another product. The risk was too great, and the incentive was far too small.
By contrast, Costco employees were not motivated by cash bonuses or long-term revenue streams. Pushing credit card applications alongside bulk frozen foods didn’t actually make a ton of sense. And yet, for years the Costco partnership was one of the most important ones we had.
Costco employees were motivated by one simple thing: they were doing their jobs. Costco’s culture looked for people who enjoyed doing the job of helping its customers, and provided sufficient incentive for being a productive member of the team. Cash bonuses weren’t a distraction from a greater incentive – being good employees. And at the end of the day, all we needed for a successful partnership were Costco employees who were just happy to do their job.
*One pair, a husband and wife team, had a helicopter, too.