A Tale of Two Salesforces

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.

The Partners

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.

The Incentives

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.

The Results

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 were’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.

4 Responses to A Tale of Two Salesforces
  1. steve eyring Reply

    I agree that it is sometimes counter intuitive as to why a partnership works or doesn’t work. But I think that regarding the Costco deal you might be missing the mark. Remember Costco only takes cash, Amex and debit and have a loyal membership, I think the real success of the Costco partnership was not due to the sales force, but the clever way the partnership was structured. First no competition from other card associations and second a co-branded preferred rewards card from Amex were the real keys to success.

    • slpollack Reply

      Totally agree that the overall structure of the partnership supports its overall success, but even in an apples to apples comparisons of just salesforce motivation/activity, Costco won hands down.

  2. Franco Abott Reply

    My guess was not Costco.

  3. HenryC Reply

    Costco has different credit card partner in my region and they were having a co-promotion credit point program in September. I visited Costco three time in September because the counter kept reminding me how many credit point I got :-)It’s amazing how effective these Costco guys/ladies are when promoting or selling on the counter.
    I also learned from your article that Costco gives no extra bonus to their employee, through they are doing a great promotion job. Truely amazing company!!
    One of my task when delevoping new project is to find out deliverable values that bennefit my client, my company and my partners. These values need to be right positioning and pursausive enough so poeple are willing to discuss next step and moving forward. The action steps and R&R need to be discussed and designed carefully, make sure to deliver the value that promised.
    In Costo case, I think it’s a good match between AMEX and Costo; And Costo do a great execution.

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