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3 Questions to Ask Before Changing Your Sales Compensation Plan

Written by Mike Marks on Monday, 17 April 2017. Posted in Distribution

At IRCG’s recent executive workshop, Sales GPS, we spoke with wholesale distribution executives about the need to rethink their distribution sales models to adapt to new market realities. We spoke about changes in how customers are shopping and buying; the growing need for a team-selling approach to meet customers’ needs more efficiently; where e-commerce fits in today’s world; and how to evaluate your sales process to identify gaps in how you’re serving your customers.

Sales compensation is a critical part of all of this. If you want to drive change in your organization, your sales comp plan must align with the change you want to see. After all, if you want your distribution sales team to sell shovels, but their comp plan incentivizes rakes, they’re going to sell rakes.

That said, the mistake many distributors make is rushing into a redesign of their sales compensation plan, thinking that will solve everything. Before starting down this difficult path, answer these three questions:

Strategy: Where should you compete?

Set your strategy first. Segment your customers based on potential to grow, cost to grow and switching costs. Ask your customers how they prefer to buy. Find out what really matters to them, something that’s often driven by your customers’ own customers. (Read more: Competitive Differentiation – A Matter of Perspective.) Determine where you fit in the market relative to your competition, and identify your growth objectives. Use real data to drive these decisions.

Structure: What roles are required to achieve your strategy?

After you have a greater understanding of your customers’ true needs, as well as your direction as a company, allocate resources accordingly. What level of service will you provide which customers? What will your territories look like?

Shift from a self-directed sales force to a management-directed sales force, which will let you align selling resources so that customer needs are met at the lowest cost while driving the company’s overall strategy forward. Narrow the role of field sales to driving new business. This may result in shifting some accounts and transactional activities inside. Consider creating specialized selling roles, such as product and market specialists. (Read more: The Distribution Sales Rep of the Future.)

Metrics: How will you measure success?

Your job doesn’t end when your strategy is set. Track your progress toward your goals. Use real data to determine whether you are moving in the right direction, and if not, adapt. What Key Performance Indicators will you use to measure success?

After you have these three elements set, you’re ready to revamp your sales compensation plan to drive your new direction.

Learn more about sales compensation:

The Distribution Sales Rep of the Future

About the Author

Mike Marks

Mike Marks

Mike Marks co-founded IRCG in April 1987. He began his consulting practice after working in distribution management for more than 20 years. Over the years, his narrow focus in B2B channel-driven markets has created an extensive number of deep executive relationships within virtually every business vertical in construction, industrial, OEM, agricultural, and healthcare.

Mike has led project teams that improve market access by aligning resources to growth opportunities serving manufacturers, dealers, and distributors. Clients have ranged from small privately owned firms to many of the industry’s market share leaders. Ownership structures have included owner-operators, private equity, ESOPs, and publically traded firms. Mike is proud of the teams work and the confidence clients have shown with additional project work.

He has written extensively, and is frequently quoted on many industry issues. He has substantial board experience on both public and private distribution firms. His contributions to the field include serving multiple terms as a Research Fellow with the National Association of Wholesaler-Distributors, permanent faculty at Purdue University’s University of Industrial Distribution, eight years as Graduate Adjunct Faculty in the Industrial Distribution Program at Texas A & M University, and rendering several precedent-setting expert opinions in contract disputes between manufacturers and distributors.

Prior to forming IRCG, Mike held the position of Executive Vice President at Lex Electronics, an $800 million vertically integrated electronics distributor in Stamford, CT. Mike’s path to management in his early career was through increasing responsibilities in sales and sales management. He also completed a tour of duty as a manufacturer’s representative.

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