Magazine article CRM Magazine

Tie Sales Compensation Plans to Your Company's Mission: Point "Coin-Operated" Reps toward Ensuring the Right Business Results

Magazine article CRM Magazine

Tie Sales Compensation Plans to Your Company's Mission: Point "Coin-Operated" Reps toward Ensuring the Right Business Results

Article excerpt

I FIRST HEARD the phrase "Sales reps are coin-operated" from a sales vice president I worked for early in my career. I remember laughing at the image of pumping quarters into this inanimate sales guy only to have him come alive and race out to make a sale. Most salespeople go into sales because of their ability to overachieve financially, and corporations could significantly improve their results by leading sales resources with targeted compensation plans.

Top-earning sales reps dissect their compensation plan to understand exactly how they can maximize earnings. Are there specific bonuses for selling certain products, services, lengths of contract, references, new accounts, profit levels? Once they intimately understand their pay, they develop their sales plan around what they are going to sell to whom to maximize earnings. Top sales reps, by definition, have good relationships with their customers. This relationship affords them influence to shape the combination of products and services that their customer purchases.

As such, it is vitally important for an organization to be very prescriptive in how it creates and administers the sales compensation plan. A well-designed plan can ensure the sales organization focuses on results that directly support corporate initiatives. Here are four guidelines to follow:

Stack rank the three initiatives that will drive the compensation plan. Some examples include: grow market share; increase deal profitability; expand deal size with cross-selling; replace products that are costly to support; acquire new accounts; renew existing accounts; and gain longer-term commitments. Ranking these initiatives will allow you to design a plan which rewards outcomes that align only to these goals. In addition, it sends a clear message to the organization at large of your sales focus, which will allow supporting resources to align to help jointly reach those goals.

Make sure that goals don't conflict with each other. For instance, if you're trying to grow market share, you may be willing to take deals at a reduced price or profitability to get in the door. This would conflict with the goal of increasing deal profitability. It would be in concert, however, with the goal of acquiring new accounts or expanding deal size with cross-selling. …

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