|
You’ve probably weighed in on the debate in the past: Is it better to pay sales reps primarily through commissions, “to keep them hungry,” or pay a large salary, “so they aren’t fixated on the short-term?” Do you increase market share by paying a commission where a sales rep receives “a piece” of all the sales he or she makes, or with a bonus where nothing is paid until “an acceptable” level of performance is achieved?
Guess what? It doesn’t matter!
In the past, this debate has raged without concrete data to help determine the answer. Now, we have detailed surprising research results in “What’s Your Plan?,” authored by Mike Marks and Mike Emerson of IRCG, and published by the Distribution Research and Education Foundation of the National Association of Wholesaler-Distributors. We surveyed 584 companies on compensation practices and performed in-depth interviews with a sample of the market share gainers and market share losers. Findings were consistent throughout the cross-industry study, independent of firm size, line of trade, years in business, or any other factor.
The #1 Finding: There is absolutely no relationship whatsoever between a company’s sales incentive plan structure and its gain or loss in market share.
What Does Matter…
Instead, the key element that separates share gainers from losers is how well the incentive structure is aligned with the company’s business objectives. Market share losers chose incentive structures based on the erroneous belief that one is better than another in its ability to motivate the salesforce. Market share gainers demonstrated that any structure may work as long as it is developed to support the firm’s specific objectives. Cause and effect must be clear. For instance, market share gainers did not pay for volume when their goals were profitability. They did not pay for short-term results when they were trying to make changes to position themselves long-term. This may seem like an obvious concept, but it was frequently overlooked by market share losers.
The study also found that share gainers have effective sales management process in place. Effective sales management is more than call reports and performance measurement. The crucial link is accountability with consequences, backed by strong executive leadership.
A final important study finding is that there are clear differences in how gainers versus losers developed their incentive structures. The book details a “how-to” of the seven best practices for developing and implementing effective sales incentive structures.
IRCG expertise, as found in this book and in our many years of consultation and real-world practice, offers you:
- No-nonsense facts without the hype
- A success model for what’s right and wrong in the use of sales incentives
- Proven methods for the proper development and implementation of incentive plans that avoid the inherent pitfalls
- Sales management that removes comfort zones, encourages the right actions and establishes real accountability
- Keys to executive leadership that can make or break any plan
|
