In late 2010 Phoneworks conducted a survey of senior sales leaders on sales compensation at the sales leader and the sales rep level. The survey had a heavy focus on California based companies that were primarily involved in high technology/ software products and services. The companies surveyed have sales organizations ranging in size from fewer than ten to well over one hundred sales reps. To ensure that the results were not skewed they removed unusually high or low responses from the calculation to establish a "core" set of metrics.
Some key findings of the study were:
Even though this report was published 9 months ago it's likely that the same scenario will begin will be playing out as companies move into their 2012 planning cycles. Below are three activities you can do now to ensure a better chance of sales success in 2012.
Getting Ready for 2012 B2B Sales Planning
Sales model transition
Most of the companies we help have had the same selling model in place for many years. Sales territories have traditionally been established by geography or vertical markets and in many cases the same sales person has "owned" the territory for several years. Hunters network and cold call hoping to find a few qualified prospects. When one or more opportunities catch hold the sales hunters cease their prospecting activities until their personal pipeline is again dry.
If that is your model, now is a good time to look at the way your sales teams are organized – those traditional territories may need to be redone. It's also time to consider approaches to divide and specialize activities such as prospecting, opportunity development and account management.
Improving lead generation process
One sales best practice is to have your marketing efforts and sales team focused only on those prospects that fit your sweet spot profile and have met some level of pre-qualification. Defining high probability targets keeps sales reps from wasting valuable time on poor fit, non-core prospects.
Another sales best practices is to implement marketing automation technology coupled with an inside sales team to find, qualify and develop leads as deep into the sales cycle as possible. Well-executed Marketing Automation is excellent at engaging a large quantity of prospects at a very low cost per touch. As prospects begin to self qualify based on their activities and engagement with your website and content they get promoted to your inside sales team for further qualification. This approach creates a steady stream of sales-ready leads for the outside sales team to take through the final sales stages.
Review and revise sales compensation
Sales compensation is one of the most fiercely debated topics during sales planning. Some camps will claim that sales people are over paid based on their work effort or value they bring to the organization. Others may claim they are not paid enough and the best reps are likely to leave at the first chance for more money. The fact is that new sales are critical to any firm's survival and the key is to strike a balance between keeping a rep motivated and not breaking the sales budget.
The traditional compensation components are base salary, commission, bonuses, and commission accelerators. Each is appropriate when used to drive the correct behaviors of the sales team. However, a common compensation mistake is setting the bar too high or two low. If compensation bars are set too high and sales people fail to make what they consider to be adequate income you will have high sales turnover. If the plan is set too low you may create a runaway commission situation.
Stock options, which have traditionally been reserved for the executive team, are now showing up in many sales compensation plans. When applied correctly they serve a dual purpose. They reward your Sales Rain Makers for exceeding sales plans and show them how much they are valued. Because most of theses options vest over series of years they also serve as a way to keep your best performers from being lured away by your competition!
Remember, there is no perfect answer when it comes to building a compensation plan. Take time to develop likely scenarios so you can model best and worst cases to ensure that the proper incentives and expense budgets are established.
Don't wait until the fourth quarter to begin 2012 sales planning, a small investment today can provide returns over the next 12 months.
Need advice or help? 3FORWARD provides several services to help CEO's and Sales Leaders create winning sales plans. Let us know how we can help you!