Devising Incentive Schemes for Salesforce
Business to
Business companies rely heavily on salesperson performance for commercial
success and therefore motivation of salesperson is essential for success.
The KISS Theory: Salespeople by nature are like electricity.
They naturally take the path of least resistance. That's not to say they are
lazy or untoward. In fact, it's just the opposite.
A poor motivated Salesforce and highly motivated Salesforce can
make a huge difference to overall sales performance. The most common
perspective among Salesperson is that they want to earn what they deserve and
they respond favourably to incentive schemes.
Incentive
Schemes can also drive the overall strategy of company however devising a
incentive scheme is a complex process. It involves investment, product
segments, geographies, legal environments, market potential, no. of
salesperson, culture considerations.
A.
Common Flaws in Sales Incentive
Schemes
1. Incentive Schemes are not
communicated in a right manner to sales team especially Pay out pattern.
2. Determining Sales incentives only on
Market Potential & Historical Data and ignoring seasonal challenges,
operational and commercial capabilities of organisation.
3. Incentives are not in aligned with
overall strategy of company. For instance to drive a specific product or
service.
4. Setting threshold for incentive
scheme at a certain level( High or Low), which doesn’t drive Salesforce
motivation
5. Failure to include all the sales
metrics to calculate incentives. E.g.
Ø
Number
of sales calls
Ø
Number
of new Customer on-boarded
Ø
Number
of contractual wins
Ø
Customer
Lifetime Value
Ø
Retention
Rate of Customers
Ø
Health
of Sales Pipeline
Ø
Percentage
of Large Customers, Small Customers
Ø
Product
Portfolio Balance
Ø
Review
of average profit margins in sales deals. Review discounts in deals
Ø
Pay-out
Patterns shouldn’t be disclosed to Customers. Customers can employ delay
tactics to grab maximum discounts.
B.
Hygiene Factors of a Good Incentive
Scheme
1. Define Corporate Objectives- There
should be no disconnect between management intentions and sales outcomes
2. A successful Incentive Scheme should
include following:-
Ø
Sales
Volume
Ø
Sales
Volume Growth
Ø
Revenue
Growth
Ø
Market
Share Growth
Ø
Contribution
Margin
Ø
EBITDA
Ø
Discounting
Levels
Ø
Price
Performance
Ø
Specific
Customer Segmentation
3. Incentives should be attractive
enough to achieve sales force behaviour
4. Variable component, when implemented
should be on higher side say a minimum of 20%
5. Sales team should be involved in
setting incentive schemes. The decision should be intrinsic decision
6.
Marketing
departments too will have a view on what is realistic and should be invited to
participate.
7. Sales Incentives Scheme should be
communicated to Sales team effectively. Buy-in of Sales force is as important
as sales force incentive schemes to ensure right commitment
8. Visibility of sales incentives and
monitoring of the same is very important to keep momentum going
9. Evaluate and assessment the impact
of Sales incentives on corporate performance is very important. Here
Cost-benefit analysis is essential tool to make right adjustment to schemes.
|
| Sales Incentives Matrix |
No comments:
Post a Comment