How to Set Compensation and Sales Goals
by Jim Hart
How to Set Compensation and Sales Goals
by Jim Hart
Editor's note: This is the second in a series of three articles covering the most important success factors when selling targeted delivery capabilities. In this article, Jim discusses compensation and goal-setting.
In the previous installment, we talked about structuring the sales organization to effectively position targeted delivery. Compensation and goal setting is typically an offshoot of the structure. The higher the degree of separation in the selling process, the less likely that reps will be incented based on the sale of anything other than the product they are directly charged with selling. In other words, the more product-centric the selling process, the more product-centric the compensation plans.
This is often dictated by the desire to separate the financials, focusing on a "clean" P&L of the new distribution capabilities. If newspapers are to strengthen, leverage and expand the franchise, it makes sense to begin with this same approach to their relationships with individual accounts.
We have seen and/or tried several approaches to making the incentive process more customer-centric. Here are some some insights into the relative strengths and weaknesses of these approaches.
Straight double counting. This practice is the norm for newspapers that have targeted sales reps whose primary role is to sell targeted delivery capability. The "regular" sales reps sometimes resist working with the targeted sales reps because they don't want to lose any commissions. To solve this problem, revenue that is attributable to the targeted delivery capability is credited to both the targeted sales rep and the regular sales rep responsible for the account. In theory, this ensures buy-in from the regular rep when it comes to helping the targeted reps gain access to their accounts.
This approach allows the regular rep to take on a customer-centric mentality toward the selling process, and it helps the accountants maintain a separate P&L for the targeted delivery capabilities. It also has some shortcomings that dilute its effectiveness:
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It only works at the levels implemented. For example, this approach is often applied to sales reps, but not managers. It seldom makes it to the director level and it rarely is represented on the reports seen by senior level executives. In essence, the reps may be holding hands and singing Kumbaya, but sales managers might be under fire for numbers that do not take into account their reps aggressive adoption of new capabilities. |
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It might not mix well with existing plans. Reps that are already consistently making their goals may actually be turned-off regardless of double counting. If the cash incentive to sell drops off considerably once the goal is met (as is the case at many newspapers), the reps have little interest in selling anything once their goal is met. They are doubly concerned that this will do nothing but raise the base that determines their goals for next year. |
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The double counting is one-way. Typically, the newspaper rep gets credit for revenue sold into the targeted delivery products, but the rep representing the targeted delivery only gets credit for revenue attributable to the targeted delivery. This creates two negatives. First, the targeted sales rep is forced to be product-centric and is not recognized for participating in an integrated proposal — a proposal that reinforces an account's current advertising mix. Sometimes the analysis that helps to determine which, if any, targeting capabilities might best serve the account comes back showing the account is already doing the right thing. This is a valuable and important outcome that strengthens the franchise. Some recognition should be given to the new capabilities ability to support this. |
Blended goals vs. Product goals. A blended goal is one where revenue from all available products is lumped together into one goal. Product-specific goals tell the reps you expect them to proactively see that the targeted delivery capabilities are sold. Their role in this varies depending on the structure you've put in place. Hopefully, if the reps have a goal that demands a product get sold, the rep will be in a position to make it happen. One drawback of setting product-specific goals is that it forces reps to be product-centric at times. This is probably a necessary right-of-passage.
Linked product goals. Linkage is an important element of compensation plans that need to drive multiple products. When a rep is faced with a smorgasbord of products they can sell in order to make their goal, there is nothing to keep them from selling only one product if they can make their goal that way. Except linkage. Linkage is a multiplier that kicks in (sometimes literally) positively or negatively based on whether the rep is selling multiple products.
Let's say you have sales goals for in-paper, shared mail and online products, and the commission for achieving the goal for any one product is $500. A multiplier is put in place that rewards or penalizes reps based on whether they met or exceeded their goal for one, two or all three products. For example, if they achieve their goal for one product, they get 80% of the commission or $400. If they achieve their goal for two products, they get 100% of the commission on both products or $1,000. And if they make the goal for all three products, they get 120% of the commissions for all three products or $3,600.
The main goal is to create an atmosphere that encourages all reps to focus on creating the best possible solutions for their advertisers … to eventually become product neutral. It is management's challenge to make sure the products that make up those solutions are priced and produced to be both competitive and profitable. The eventual revenue mix from product to product shouldn't matter.
The above compensation tactics are designed to get the ball rolling in the right direction from the outset. For your newspaper, it might make sense in the early going to select a group or category of accounts and have customer-centric goals only for those accounts. The rest of the accounts are business as usual. Grow this approach from the most logical area of your business. Then refine it and expand it!
This article was written exclusively for ASTECH InterMedia's web site. Jim Hart is vice president of ASTECH InterMedia. For help in setting compensation and sales goals, he can be reached at 623.875.3000.
© 2005 ASTECH InterMedia, Inc.
