I apologize for not having posted to this blog for a while. In March, I agreed to lead the turn around of a business in the coin handling (high-speed sorting, counting, dispensing) industry. Much of my time has been devoted to that endeavor.
Last weekend though, Norm Eagle — Director of Sales for Meta Health Technology, sent me an email summarizing multiple comments he’d collected on developing sales compensation plans. As part of his evaluation of the sales compensation plan for his own team, Norm solicited input from a group of high-level sales executives via the Marketing Executives Networking Group (MENG). MENG members are senior sales and marketing executives with business-to-business (B2B) and business-to-consumer (B2C) companies, both large and small. MENG members lead sales and marketing organizations across the United States and around the world. As you might expect from such an experienced group, the responses Norm received were full of valuable insights.
I share with you a slightly edited version of Norm’s summary below. If after reading this post, you would like to contact Norm directly, please let me know and I will put you in touch with him.
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FROM: Norm Eagle
SUBJECT: Summary Sales Plans and Incentives
Thanks again, lots of good advice and suggestions. Here is a summary of all the information I received.
Everyone agreed that what is most important is that a Company knows where it stands in the marketplace as well as knowing what it wants to accomplish.
Where does a company stand as to Market Share, Recognition, and Revenue, etc.?
Being honest about these answers allows you to better accomplish what you want to get done.
Certainly combinations of the above are the norm. If a company is really looking to be sold, then their needs are going to differ greatly from the company that is staying in business. If you are looking to sell the company, then driving revenue is of paramount importance and profit is usually less important. Again there is lots of room for interpretation here.
Answers to the above questions will help you build sales plans and provide incentives for the salespeople.
The advice and suggestions I received include driving revenue from new sales as well as from the current base of customers. Most agreed selling to new customers was harder, took longer and was more costly. Given the greater difficulty, the feeling was to pay a higher commission rate for those sales. Sales managers justify lower commission rates for sales to existing customers because it is an easier sale. Since you know the players, the sales process and, given you are doing well with other products in the account, up-selling will hopefully take less time and be less costly.
There was some disagreement here and some felt you should pay the same commission on new sales and sales to existing customers. Here, the justification is that the sale to the old customer is easier and could generate revenue for the company more quickly. As a result, the sale is less costly so why not pay the higher commission rate. I’ll leave that to others to decide which way to go.
There were a number of suggestions on sales plans and incentives for salespeople and they included:
The other topic discussed was what you pay on Term-Use deals versus Perpetual-Use deals. I received a lot more suggestions on this one. Perpetual Use was pretty easy as commission was figured on the value of the contract because it was all paid up front. Here are the suggestions on commission of Term Use Deals:
Some additional points everyone seemed to agree on:
I believe that is all of it and if I missed anything my apologies. Thanks again to all that contributed.
Norman Eagle