Soliciting feedback on a sales concept

[futhey]

I'm selling a brick and mortar product to a market segment not inclined to make purchases over the internet, or over the phone without seeing the product. I have found that this market segment responds best to seeing a short demo of the product and/or using it hands-on.

I am bootstrapping an already strapped-for-cash business and going the route of turning some of my best (and most passionate) customers into independent salespeople by offering lucrative price breaks on my product, a buy-back option for unsold merchandise, and flexible terms.

It also helps that my customers spend most of their year traveling independently and interacting primarily with other members of my market segment.

Do you see any potential pitfalls to this, or have any advice to improve this concept? Has anyone tried a similar concept with any success?

For those of you familiar with the 80/20 rule, what kind of commissions (or price breaks, in my case) best motivate salespeople, and at what point does a higher commission see little increased benefit?

Does anyone have any knowledge of (for tax and employment purposes) how likely the government (in the US) is to view this relationship as genuinely an independent contractor relationship?

Thanks in advance for your feedback.

Update: The item's MSRP is ~$100 (<$25 cost), but most customers think that it is underpriced and I wouldn't take offense at anyone marking it up a little higher.

 

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[EastWind]

Try it, see how it works. If it doesn't work the way you want, fine tune it.

 

[healthstatus]

1) without some price range, hard to tell, is it a $10.00 item, then commission needs to be north of 30%, if it is a $20,000 item, 5% would probably work.

2) offer spiffs at certain levels, if these people travel a lot, see if you can get flight upgrade or hotel upgrade certificates as awards for selling x amount in 1-2 months, this can be really good if you can get them to hit the first target in their first one or two months. Sometimes they are pretty cheap to obtain and have a higher perceived value than real value. Quick success and getting them used to these kinds of perks will make them push your product.

3) watch your own margins, you will pay commission based on retail price, but you have to make sure you have enough profit to support you. If you aren't careful your salesmen get rich while you just squeak out a living.

 

[futhey]

Thanks, healthstatus. Just to clarify my MSRP is ~$100 and total costs right now are south of $25. My initial offer is a 20%-25% price break (eating the shipping costs myself, so it's costing me ~30%).

I really like your second point. I don't think these specific incentives will be the most effective in my demographic, but I really like where you are going with this. I'm a little concerned about giving people targets and too many incentives though, because it starts to become an employee-employer relationship at that point. I should be safe using carefully chosen incentives on a limited scale though.

I guess I'm trying to create an incentive for customers already passionate about my product to talk to their peers about it. That already brings in some sales but I think being able to immediately buy it and have it will increase the number of these types of sales. At the same time if I turn a customer into a full time sales rep they will stop traveling and interacting with their peers...

 

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