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Who Owns the Customer, i.e. the Company or the Sales Agent?

This question was less important when the job market was in decline.  But as the economy recovers, business owners and senior managers will be faced with this question, more and more.

Depending on who you ask, there are two popular, but contradicting opinions.  If you ask the owner/CEO of the entity - "The customer belongs to the company.  They come to us because of our quality products/services.  The Sales Agent has been properly compensated for procuring the customer on our behalf."

However, If you ask the Sales Agent - "The customer belongs to me.  They were sourced by my efforts and we have a relationship.  They transact business with the entity because of me."

In fact, it is not uncommon for a Sales Agent to maintain a separate and personal file of their interaction with the client/customer.  When they leave your entity and seek employment from your competitor, they may say, "I produced $XXX in revenues for my last company, and I can do the same for you.  I maintain a book of business that will more than likely follow me, if I move to your company."

There is a legal answer to this question, which I was reminded of, when I left an entity after fourteen years, even though not in a Sales capacity.  Not more than 30 days after my departure from one entity to a competitor, I received a letter from the President of my former employer.  Excerpts of the note are as follows -"In view of your departure from XYZ, this letter is to remind you of your obligations to XYZ, and under the law, both during and after your employment with XYZ...it is your obligation to handle XYZ trade secrets, confidential or proprietary information to which you had access during your employment at XYZ, whether in your memory or in writing, or in any other form, with the strictest confidence and in a manner consistent with XYZ's policy, both during and subsequent to your employment...you may not misappropriate or use for the benefit of anyone other than XYZ any confidential or proprietary information relating to XYZ's business."

So what can you do?

As a first step, make sure your compensation agreements and employee agreements include language that clearly states the client belongs to the company and the legal obligation of the employee.  This agreement should be reviewed and approved by a qualified Labor Attorney.

But even after this measure, you may find that the client leaves you and follows the Sales Agent.  This situation may occur not because of what the Sales Agent did, but more because of what you did not do.  The companies that lock in the client and foster brand loyalty have developed a communication link with the client.  If you do not reach out and establish this link to your brand, the only connection the client has to the company is the Sales Agent.  More than likely, if the Sales Agent leaves, so will the client.

Popular approaches companies use to reach out to the client and maintain contact include offering post purchase support or discounts on future purchases or advertising related products/services.

At every possible opportunity your entity should advertise the brand and state the value proposition.   Regardless of the product/service, every business runs the risk that what they offer becomes a commodity in clients’ minds, i.e. belief that every competitor offers identical product/service.  If all products/services are the same, why not just work with the individual Sales Agent, wherever they go?

But your value proposition is your differentiator.  Customers/clients will seek you out and be less sensitive to price if they understand the benefit of working with you vs. other vendors.  How do you differentiate yourself from the pack?

It is a valuable exercise to identify and document what makes you different.  The results of this activity should become the basis of all marketing materials, i.e. your value proposition.

An example of a value proposition that I have used includes the following commitments.  XYZ Entity -

  • Offers superior product or service;
  • Makes an effort to understand your specific needs and has many ways of doing things so you can find the one that meets your needs;
  • Takes responsibility to get things done;
  • Is knowledgeable about the product/service you seek;
  • Tells you what you need to know in the way you understand;
  • Offers a complete array of the product/service you seek, to make your life easier.

The only way to maintain a client is to develop a relationship between the client and the company, through consistent messaging that differentiates yourself from the pack of competitors.

Comments

Topic Expert
Wayne Spivak
Title: President & CFO
Company: SBAConsulting.com
LinkedIn Profile
(President & CFO, SBAConsulting.com) |

Regis,

You touched on the topic, but the real litmus test of "whose client is it?" has to do with your contract and/or employee handbook.

Today, more than ever, businesses have either an employee contract or a separate non-solicit agreement. Non-compete's are difficult to enforce, expensive for the company in both of compensation that is the consideration for the non-compete and the ultimate litigation that almost always follows.

Employee handbooks can also have a built in non-solicit, but depending on how they are written, an Attorney would need to be consulted as to its binding effect.

So before you sign that contract, read the contract; because that client you bring to the employer may now be owned by that employer.

Topic Expert
Regis Quirin
Title: Director of Finance
Company: Gibney Anthony & Flaherty LLP
LinkedIn Profile
(Director of Finance, Gibney Anthony & Flaherty LLP) |

All great points. Thanks Wayne.

Regis

Ern Miller
Title: Co-CEO
Company: Miller Small Business Solutions
(Co-CEO, Miller Small Business Solutions) |

Back in my naive days, I worked as a sales rep/team leader for a computer manufacturer. The company never bothered with non-compete clauses, etc, because they blindly thought it was the company and not the person who had customer loyalty, built on with quality products and reliable service.

Well, after a disagreement about compensation, they asked me to leave. I did. And, I took my list of customers and contacts. Back in the day, it wasn't easy to transport data...pre-real internet...so I had 50 pages of customer contact data. Put it in my leaving box, and when the boss stopped me at the door, she saw it and paid no mind that I was taking it.

The former branch manager had started her own computer supplier company, so I contacted her and she hired me on the spot for the same base salary and sales commission. I thought she had left for the same reason...denied sales compensation that was promised her. I did not find out until later, she was quietly relieved of her job when it was discovered she was embezzling funds...specifically, she charged the company 10X what was reasonable for compensation for pool parties at her house that she claimed were team building exercises.

But, anyways, I start and immediately begin putting in my customer information into an MS Access database I wrote just to keep the data. I did not want it on a off the shelf database because those databases did not do everything I wanted.

So, a few weeks go buy. I am making sales, but nothing great. My customers, it turns out, were not loyal to the company, but to me. They were loyal because when they had an issue with the old company, I was involved to make sure they were satisfied in the end, often at my own expense.

I did not see it as stealing. I saw it as, "If they are loyal to the company, so be it. If they are loyal to me, so be it. I do my job and the company does its job. May the best one win." There were a couple clients who stayed loyal tot he old company, but most followed me.

Well, about week three, my new boss started hounding me about getting my records into the system so I could be more productive...I'll mention here that I was doing gangbusters, sales-wise. I was more successful here than the other place because the stress level was way lower.

Around week 5, I finished entering my information into my database...a database that was on the network, and all of us had access to, and all of us used. It was that impressive of a database.

I sent my boss an email telling her that I had finished the data entry and that in the morning, she could expect me to double my sales. Instead, she replies with, "Could you see me in my office? Now!"

So, I go in, and she fires me. At the time, employers could do so, for no reason whatsoever.

I pack up my stuff. She is watching me like a hawk as I put all of my personal items in a box. She is making sure I do not get on the computer to copy or delete anything.

I leave.

Four days later, I get a call. She is livid.

I put programming into my database that it only would unlock if I had logged in in the past 72 hours. After 10 tries to start the program, it cleaned out the entire contact table of anything that belonged to me. It left other salesreps' data alone...just didn't allow access to the database without me.

I put that trigger in there because a former coworker told me that I had been hired only to get my customer list. Just in case that were true, I put the trigger in there.72 hours was enough time to cover weekends. And in the case of three day weekends, I would get a call that the database was not working and I would come in, unlock it, and look like a hero.

Because they could not get into the database, they had to rebuild their contact info based on sales already taken place.

After leaving there, I started my own software company.

Topic Expert
Regis Quirin
Title: Director of Finance
Company: Gibney Anthony & Flaherty LLP
LinkedIn Profile
(Director of Finance, Gibney Anthony & Flaherty LLP) |

Love the story. Thank you for sharing. One question - in your current company, as a co-owner, who owns the client? This post has been placed on my blog (www.cfotips.com), Linked-in and Proformative. I receive one of three answers. The client belongs to Sales to the Company to No One. From Sales to Owner your perspective should be very interesting.

Ern Miller
Title: Co-CEO
Company: Miller Small Business Solutions
(Co-CEO, Miller Small Business Solutions) |

Well, in our company, we are small, so I wear a lot of hats. I am the main sales rep, I evaluate team members, and often I am lead programmer. So, since I own the company and am the sales rep, it hasn't been a question.

Now, if we grow, and I need a sales force, I will stand by my attitude that if a customer is loyal to the sales rep, it's his client. If he is loyal to my company, it's my client.

Having said that, all transactions and information other than contact info, and total sales (for the sales rep to show his ability to sell when interviewing for his next job), belong to the company.

There is a caveat to all of this.

If a sales rep gets a base salary as well as commission, then any information belongs to the company, since they paid for it. If the company pays simply a commission, then, in my personal view, the sales rep is a transaction agent and is able to keep the information expressed in the previous paragraph.

I recognize this is legally binding, since if in the future I take a former employee to court for stealing information, they will use this post as evidence that I feel differently. If that happens, I'll let the judge determine, since if I take someone to court for what seemingly goes against my personal beliefs, there must be additional information not discussed here.

Sara Voight
Title: Controller
Company: Critical Signal Technologies, Inc
(Controller, Critical Signal Technologies, Inc) |

I think it is a valid point that the client at least is familiar with someone other than their primary sales person at the entity. This doesn't have to be another salesperson, it can be an account manager, the department manager, or another reasonable contact the client has had a chance to interact with occaisionally.

Whether or not the salesperson leaves voluntarily, when a familiar person reaches out to them to help with the transition, it is more likely the client will stay assuming no major issues with product or person. A company has to be prepared for the questions about where did 'their' salesperson go? Why did they go? Is there a problem with the company? I have seen clients happily transition to the new person. While they might have followed a salesperson to us, they now really don't want to leave the product/service and had started to feel uncomfortable in the relationship. I have also seen where people automatically announce they were leaving because we must have done something awful to result in the loss of 'their' salesperson. How you respond/react helps you short term and even more importantly, long term, as some of these hot heads return.

Value propositions are important, but how you respond to the emotional reaction to change sometimes trumps the logical steps taken to put you in a position of strength.

Topic Expert
Regis Quirin
Title: Director of Finance
Company: Gibney Anthony & Flaherty LLP
LinkedIn Profile
(Director of Finance, Gibney Anthony & Flaherty LLP) |

Different companies have their own view on the answer to this question. The goal is to document the policy, to avoid the future conflicts and costly litigation that may ensue. For those that look at this question and believe that the Sales Agent owns the client, be prepared to answer the following additional questions within your policy statement - If I own the client, shouldn't my commissions be in perpetuity and at the same level as my initial commission rate? If I own the client, but he/she stays dormant for three years, shouldn’t I receive full commission if a new order comes in to the entity, even if it comes through another Sales Agent?

EMERSON GALFO
Title: CFO
Company: C-Suite Services
LinkedIn Profile
(CFO, C-Suite Services) |

I just read a relevant Entrepreneur article... http://www.entrepreneur.com/article/242090

How LinkedIn Has Killed Your Book of Business

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