It’s been roughly a year since Sharon Rowlands took over at ReachLocal.  During that time she’s sought to bring more transparency to the organization and a greater focus on customer service and satisfaction.  During her session, she shared three main priorities for moving ReachLocal to the next level:

• Developing a great product with a strong value proposition that is competitively differentiated from the rest of the market;
• Building a great client experience.  Ie. Everything around the product – the sales experience and the service experience
• Fixing ReachLocal’s sales and retention business model.

Before Sharon took over, ReachLocal relied on a hunter/farmer sales model.  The hunter being the sales person and the farmer focused on service and retention. It was clear this model was not operating successfully.  ReachLocal was experiencing lots of churn.  Sales reps would oversell, over promise and the service reps were put in a difficult position, usually unable to save the client.

The reasoning behind moving to the hunter/farmer model was with good intention.  The problem with one person managing the whole process was that once the portfolio reaches a certain size, too much time was needed to service the clients leaving no time to sell.  Hence the separation of those functions.

But this fostered a problem in that the hunter doesn’t have any skin in the game for keeping the client or thinking beyond getting the client in the door.

ReachLocal’s model now utilizes the digital marketing consultant (DMC).  This individual is responsible for selling, following up and upselling. While the DMC is not responsible for fulfillment services, he or she does have an interest in maintaining a good relationship with the client.  Compensation is also based on a mix of sales and retention factors.

DMC (sales) compensation model:

• Based on a mix of incentives for bringing on new business and retention.
• One half of compensation is commission based on the sale paid out 50% upfront and 50% over lifetime of the deal.
• The other half of compensation is based on retention rates on the book of business.
• To be successful, the DMC must both bring in business and retain that business.

Marketing expert (service rep) compensation model:

• Based only on retention.  Based on client performance.
• MPS scores utilized.
• Transactional based score utilized. e.g. after each call 3 questions are  asked. And compensation based on client answers.

This compensation model emphasizes that retention is as important as new business.  It also encourages bringing in the right business i.e. sell to clients who are a good fit and that ReachLocal can do a good job for.

What is a good fit?

• Client goals can be met. Reach Local knows what, where and how campaigns work.  They knows what the client needs to spend to run a successful campaign.  If the client only wants to spend ½ of that, then that’s not a good fit because the expected result is failure.
• A profitable client.  If ReachLocal doesn’t keep a client for 5 months, they lose money on that client.

This change in sales model was obviously a huge operational change that had the potential to be devastatingly disruptive to the company.  To combat this, Sharon engaged with sales leadership and employees so that everyone was supportive of the change.  Early results have been great so far.  ReachLocal launched the model partially on Feb. 1 and across North America on April 1.  There has been an enthusiastic response from sales folks – they want to sell this way and are comfortable with it.

Lastly, Sharon was asked about her perspective on on-demand services such as Uber and AirBnB and how that business model impacts the marketplace.  While the model is very consumer focused, Sharon is not convinced it is good for the merchant.  If the economics do not work for the merchant, ultimately it is not good for the consumer.  So it will be interesting to see how the model evolves and plays out for the ecosystem as a whole.