There once was a time when running a sales incentive contest was a simple matter – reps who sold a certain amount received a specified reward. No muss, no fuss. Today, complicating factors such as team selling, extended sales cycles and solution-based (as opposed to product-based) selling make the job of rewarding the performance of individual sales reps significantly more challenging. David J. Cichelli, senior vice president of The Alexander Group, addresses two of the more vexing incentive and compensation issues.
Issue #1: Long sales cycles
Traditional sales compensation approaches are best suited for sales cycles of three months or less. Short cycles mean more payouts, consistent with the motivational intent of the comp plan. When sales cycles run longer than 12 months, however, yearlong quotas don’t work. High-mix, low-base salary plans confront reps with cash flow problems and payouts prove to be too infrequent to provide regular motivation.
To counteract issues with long sales cycles, Cichelli suggests raising the base salary, reducing the upside potential and refocusing incentives away from outcomes. Instead reward individual sales actions that tend to lead to sales. Go ahead and keep using high-risk plans, he says, while allowing the pay plan to function in a boom or bust pattern. Finally, Cichelli says, use rewards for the individual sales actions mentioned above to meet target pay, then provide substantial bonuses when an order is booked.
Issue #2: Solution selling
When the values of a company’s core products diminish to the point where they are viewed in the marketplace as little more than a commodity, companies often seek to offer more comprehensive, integrated solutions. Salespeople schooled in the traditional selling model may face a steep learning curve when trying to adjust to the new solution-selling model.
With this sales culture shift, compensation and incentive programs are not always the best tools for recognizing salespeople’s achievements, Cichelli says. Many successful companies instead segment the customer base into group accounts most likely to respond to this approach, and then develop a dedicated sales team focused exclusively on this group.
If the culture shift is only slight, however, sales organizations may achieve success using one of two incentive methods, suggests Cichelli. The less drastic method involves adjusting the pay plan or putting incentives in place so solution sales are rewarded at a greater rate than traditional product sales. The more drastic approach is to exclusively reward solution sales and provide no credit for product-only sales.