The 4 Lenses of Sales Compensation Planning

March 2, 2012 at 7:00 AM

Omitting your customers from your sales compensation models is a mistake that will ultimately cost your company revenues. Sales leaders want reps to “sell more stuff.” In many cases, the messaging used to communicate this is inward-out focused and ignores the voice of the customer. In an age of fierce competition and zero-sum outcomes, companies can’t afford to ignore their customers anymore.

In a Sales 2.0 world, it has become common practice to incorporate the buyer’s journey into selling methodologies. Companies have realized that mapping buyer behavior is critical in developing demand generation strategies and sales processes. The focus has turned to the customer, which creates synergies that allow sales reps to win more deals at a higher price in less time. The interesting thing is that this same discipline rarely finds its way into sales compensation planning.

As a sales consulting firm, it is our job to bring insight that incorporates multiple data points. The Venn diagram below is an example of how we look through four lenses to bring together the unique viewpoints of each stakeholder.  

  • Executives – This is the most commonly used lens from a compensation planning standpoint. The executive leadership team gets their number from the board and begins to distribute it to sales in the form of quotas and incentives. This is often called a “top down” approach.
  • Sales – In some instances, companies will ask key members of the sales force what they can produce. The “bottoms up” approach provides context and a second data point to help validate the top down numbers from executives. Caution: If done with an immature sales force, the output of this exercise typically creates wildly fluctuating results.
  • Competitors – With the amount of public information available, it is very easy to collect data on how your competitors compensate their sales forces. If you’ve hired reps away from competitors, they often willingly share information regarding their compensation plans. This is a “lateral” approach that brings context from your peer group to help ensure you are competitive in the marketplace and can attract ‘A’ player sales talent.
  • Customers – In our business, finding companies that use customer input to develop sales compensation plans is as rare as a triple play in baseball. The approach of looking “outward in” to develop a sales incentive plan through the eyes of your customers is a tremendous opportunity to create differentiation. If sales focuses on delivering what the customer wants, their ability to create win-win partnerships will increase exponentially.Lenses of Sales Compensation Planning

Interested in exploring how this might work for your organization? Here’s the Call to Action:

  • Conduct a Voice of the Customer study
  • Use the findings to understand what your customers want from sales
  • Develop quantifiable metrics that hold sales accountable to delivering customer results
  • Create an inventive plan that rewards reps who hit the number and keep your customers happy

If you are looking to “sell more stuff,” continue down the current path and use inward-out thinking to compensate your sales force. However, if you’re looking to create a competitive advantage that will produce long-term customer satisfaction and sustained revenue growth, include the customer lens in your sales compensation planning this year.

Ryan Tognazzini

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Topics: Compensation Planning, Quota Setting, Sales Compensation Planning, Sales Compensation

Posted by Ryan Tognazzini

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