CREATION OF SALES INCENTIVES THAT WOULD WAVE A GREEN FLAG

Even in today's scenario, a well-built sales incentive package, along with a well-defined sales strategy, will help you achieve difficult goals!

Management learns, to its dismay, that where the sales incentive is concerned, all is not well. Motivation, which was deemed automatic, failed to reveal itself. It's also the root of employee frustration. With the downturn and recessionary situations abounding, many businesses have to override existing 'Sales-incentive' programs. People in sales are cautious of the fine print that engulfs all such plans.

“A sales incentive is a mere instrument of motivation, “A poor work culture and indifference to other aspects of motivation can kill whatever little, a reasonable Sales Incentive Scheme can do for motivation”.

Sales incentives over time

There was a little discontent in the Seventies if money was overtly waved in front of the sales force. And this came from the sales team itself. Managers thought that their willingness to be successful team leaders was in doubt if they turned to sales incentives. The Eighties gave way to team sales competitions as India became highly competitive, where inspiration came from being a part of it.

The Eighties saw the focus on the team and the individual. Sales force competitions aimed to give the devil his due when singing the platoon's praises. The Nineties saw the burden grow relentlessly on sales teams and it became impossible to sustain the Star Performer. It was The One's Age. A time to allow the jungle itself to be rewarded with individual excellence.

Not all sales compensation is the same. Structuring incentives using a few building blocks, can improve the bottom line.

Many businesses have made major changes, such as the emergence of new digital platforms, the addition of specialized positions, and the introduction of team-based selling, to achieve growth in this evolving and challenging selling environment. However, there is another critical change that appears to be ignored. The creation of new, thoughtful compensation structures that offer strong inspiration for how a sales force can continue to sell efficiently needs fully addressing today's complexities. Salespeople should not be told what to do; they should feel reassured of habits that help the go-to-market strategy of a company. Adjustment for the combination of commissions, quotas, incomes, and bonuses for the salesforce can be a driver of growth.

The following building blocks can be suggested to revamp sales compensation structures and help sales organizations effectively and efficiently address today's most pressing trends.

Building blocks of new sales-incentive schemes.

1. Role specific incentive

In the digital age, the notion of a “product” has dramatically shifted. It is less likely to be a physical entity and far more likely to be a service that requires a continuous consumer relationship after the end of a contract. And whether this service is cloud-based software, mobile app features, or a rental equipment suite for the agricultural industry, additional expert experts additional expertise is often needed to assist frontline sales reps in the sales process. For example, many businesses will want specialist sellers who can assist with complex sales as well as solution architects who can provide digital or otherwise intricate products with technical know-how. Other positions to recognize are customer-care specialists who provide customers with attentive after-sales service, and advisory salespeople who have extensive industry experience and can provide customers with pre-sale advice about what types of solutions to buy. For positions less specifically related to revenue, such as solution developers, customer service, and advisory sales, compensation should be targeted at avoiding frontline sales competition and enabling these salesforce participants to offer as much support as possible to sales representatives and/or the customer. Such incentives may be a wage plus a bonus package based on overall team results and/or frontline sales input on how helpful everyone was in the sales process.

2. Split Incentives

With more salespeople participating in any given contract, the most effective and conflict-free way for everyone to work together is crucial. This begins with the configuration of specific rules of engagement by sales managers that detail what positions will be paired up on which deals, how teamwork will be structured, and how each person will be rewarded for his or her job. A governance mechanism for reviewing team-member contributions and arbitrating future credit conflicts should also be in place.

For example, two sales representatives from different geographies can be motivated to work together on the same account by giving each rep "double rewards". This implies measuring the revenue from a sale evenly against each rep's quotas without separating the contribution of each one to the sales process. Such an agreement facilitates cooperation in the short term, cross-regional and cross-functional. However, since such double payments are not economically optimal in the long run, you compensate sales workers as though they had received twice the revenues they actually do, a more permanent solution is to divide the revenue produced (and hence the sales incentives) evenly or in some predefined proportion among sales representatives involved in the transaction.

A multinational chemical corporation, for example, which has sales workers working on the same deal in two separate countries, divides revenue distribution according to the workload of each sales team member so that their contributions are commensurate with their incentives. The organization has developed a powerful governance system supervised by the HR department to determine workloads and arbitrate periodic conflicts over incentive allocations.

3. Presales Incentives

Faced with the relative novelty and sophistication of today's goods, consumers spend more time before locking in their best choice to test alternatives, resulting in prolonged sales cycles, often more than one year. A staged compensation strategy that supports both short-term and long-term emphasis is needed to help the salesforce remain motivated over such long periods of time. One way to do this is by allowing reps to earn commissions before the end of the sale and depending on their success in the sales funnel to reward interim progress on long offers. At the same time, by providing a disproportionately large payout at the final closing of the contract, persistence and sustained effort can be encouraged.

Another approach is to offer a balanced portfolio of offers with both long and short sales periods to vendors, such that near-term incentives are provided by those accounts. There could also be a benefit of making different hunter teams devoted only to going after long-sales-cycle pursuits. These salespeople may have a sufficiently high base salary to not rely on commissions, but when a transaction eventually closes, they could still be awarded a healthy payout. In the incentive package, a med-tech firm utilizes two curves. By inspiring reps to move beyond their quota, one focuses on long-term revenues. The second, a stair-step curve, offers rewards in the funnel to reach very clear and observable goals, such as obtaining a verbal agreement or a signed contract from a client.

4. Omnichannel Incentives

In how they interact with manufacturers, consumers demand versatility and therefore use both human and digital platforms. This implies that often, especially during the actual transaction, sales reps and/or channel partners/dealers are left out of the loop. By seeking ways to make online or mobile transactions an opportunity for salespeople or channel partners and not a threat, leading businesses are working to resolve this. One solution is to compensate members or channel partners for their engagement in online transactions and to give them credit for doing what digital technologies can not: in the early stages of the purchasing process, being consultative and convincing. Companies could also link transactions (whether online or traditional) to the previous digital experiences of consumers, such as their involvement in a sales-run webinar, and then give credit to the employees who led the case.

5. Advanced analytics based target setting

It is increasingly difficult for businesses to predict consumer demand and use it to set targets and quotas for the sales force, with sales managers missing from parts of the sales process and purchasing times extended (and thus drive business performance). It needs analytics and Big Data to overcome this problem. These instruments can add consumer demand, revenue forecasts, and salesforce quotas to an unparalleled level of precision and granularity, which can then encourage fairer targets and a more empowered salesforce to be created.

Companies can use predictive models that use a range of internal and external data sets to come up with the best consumer demand forecasts instead of predicting that a sales company can achieve the target of last year plus 10 percent. The framework can learn to become more accurate over time by making these algorithms receptive to how accurate such predictions turn out to be.

6. Customer Satisfaction

These are two words so violently attacked by callous sales forces during boom times, which had not the slightest concern for the spirit of such a calling. We need to rebound from our loyalty to the market. Build alarm flares for "dumping" or excessive sale. This also arises as sales are made to distributors and individual distributors' money power causes business disruptions. Like shipping with sales tax differentials in poorer territories or states. Clarify from risky sale what is nice selling. Incentive programmes must use sufficient punishments to curb such temptation.

7. Seek a balance

Between the need to spur the individual while keeping the goals of the team and motivation intact. There is also greater motivational pull of peer group pressure from a well-designed team opportunity. The 'how-to' route must also clearly set out any daunting goal. A generous sales incentive package is a blue print for a catastrophe without a strategy for producing results

8. Make it memorable

Jayashree Mohanka, who has led sales teams in Eastern India for Titan, Nerollac and Eveready said "In my experience, largely in a ‘base + incentive’ model, I’ve found that it doesn’t add much to motivation levels to keep increasing the money value of incentives". The best incentive plans are those that are unique, that generate excitement and give the salesperson something they would never experience on their own, even if the cash component of the incentive made it affordable. One successful plan was the Asian Paints’ first use of the ‘Palace on Wheels’.

The hype associated with the proposal is a necessary feature. When they realized what 'Palace on wheels' was all about, what started to be called 'the train scheme' turned magical. Market it, give it a catchy name, and ensure that daily updates and standings keep the adrenaline levels of the team pumped up. It can become, without costing too much, a sort of sports league in its strength.

The need to focus on a sensible sales reward package is very important with times becoming tougher. The more an interesting promotion we can carry out, the more the impression that the management cares enough is stronger. The kernel of true inspiration lies inside that. Sales rewards must be part of the broader framework of ensuring that all motivation is simply to make a winner appear to the sales person.

Just as the Asian Paintings Palace on Wheels offered unique experiences and had an amazing effect on sales, so did the getaway from Pune. The idea of 'Simplify' travel by plane was analogous to a journey to outer space years earlier, long before Capt. Gopinath implemented it. At least for the beat salesman who with his new bride won this amazing Pune getaway but getting there was supposed to be by plane. No one had ever travelled by air in their extended family. There was an entire contingent left for the airport. It was a 40-minute flight and a weekend trip to Pune.

Though now, the past is untarnished. Functioning sales incentive programmes should be unforgettable!

PLANNING FOR SUCCESS

There is no definitive response to how many or what building blocks a business can follow when redesigning the sales-incentive scheme. The trick is to strike the right balance between a complicated concept that incorporates all of the above-mentioned building blocks and a strategy that focuses on a few elements that the sales force can easily understand as follows:

Whatever approach a business takes, for any sales company, one shift is non-negotiable: the cultural acceptance of data to make key decisions regarding sales compensation and beyond and to control the sales force. Companies can collect data on every part of the sales process in today's environment: the backlog of fresh transactions, the sales personnel involved in individual deals, the quality of last quarter's estimates, and more, then funnel it into a single centralized source of consumer and sales transaction information that is trusted by both sales and non-sales teams. Innovative methods of sales compensation would not have the fact-based clarity they need to thrive without this. It is also important to have technology that allows accountability and real-time sales performance monitoring. For example, Rep planning software may assist in developing and administering complex, role-specific compensation models. It provides an accurate view of the economics and flows of the transaction, provides granular insights into rep behavior, and empowers advanced analytics to perform complex deal scoring.

The pace of market disruptions and the emergence of new products with radically different business models is only going to accelerate in the coming years. Companies will have to change how they sell and find ways to keep their salesforce engaged and motivated in the midst of these challenges in order to continue driving growth. A creative, differentiated, and data-based approach to compensation is the most productive way to do this.

Thank you, happy reading!

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