Evaluating Direct Sales Incentives: What's Your Incentive IQ?

National Mail Order Association

Evaluating Direct Sales Incentives:
What's Your Incentive IQ?

by Patricia K. Zingheim and Jay R. Schuster

"Direct-contact" companies selling by direct mail, Internet, call centers, and other sales channels seem obsessed with marketing strategies. Studying, testing, changing, updating, re-testing, re-engineering, or whatever-the "re-thinking" process seems endless. But they often leave the sales incentives that are supposed to be the "accelerator pedal" to help the selling and marketing strategy go alone.

Companies as diverse in their business strategy as those in direct mail and Internet share the sales incentive challenge. Research for Pay People Right! Breakthrough Reward Strategies to Create Great Companies, provided some powerful questions and important "tips" on how to improve the design of sales compensation so it satisfies sales professionals and closely aligns with business priorities.

Simple, Aligned, and "Channel Aware"

Here are the three "rules" to successful direct sales incentives. How does your sales incentive approach stack up?

·Rule #1 - Simplify incentives to emphasize a limited number of essential success measures. Direct sales incentives are far too complex to keep a strong focus on key success measures-and sales professionals are confused too! Emphasize only the most essential success indicators.

·Rule #2 - Align sales incentives with both business goals and the efforts of others involved in making selling a success. Sales incentives are commonly unaligned with primary company goals-and even less often create collaboration with others in the company important to improving sales results-and it may be wasting pay dollars as well! More people than just those in the sales force are important to making sales.

Rule #3 - Design incentives to make them selling channel aware. For example, sales incentives were often designed before electronic selling channels came on-line-in many cases what's rewarded in one selling channel creates internal competition and losses selling power-and it may be taking the advantage away from multiple-channel marketing!

So, how did you do? If your answers are consistent with our "rules"-we should now turn more specific tips.

Tips to Winning Incentives

Here are some "tips" leading to straightforward, simple, and direct workable sales incentives:

1. Add Measures in Addition to Revenue. Best experience suggests just three to five goals are necessary. If revenue, units or margin comprise the volume measure, top companies choose the few key drivers that will help the salesforce focus their energies on the type of sale the company needs. If companies can get their selling team focused on all the key drivers, what more can they ask?

2. Pick The Most Important Goals. If three of the goals are worth most of the money a company has to spend on incentives, maybe other goals should be omitted from incentive design this time around. Getting most of what a company wants may be preferred to spending dollars on goals people don't spend time achieving.

3. Stay Agile and Flexible. Best experience suggests measures and goals should change as the business changes-quickly during dynamic business times. It isn't logical to have a salesforce marching in one direction and a company needing to move in another.

Sales Incentives "Internet-Ready"?

Few direct sales incentives are e-commerce ready. Fewer are sales-channel agile for all the new selling channels. Traditional incentives miss "delivering the sales bacon" for a number of reasons. Here are some questions to ask yourself:
Here are some questions and tips to consider:

1. Who should receive rewards or incentives for sales made through the Web? The sales professional? The webmaster?

2. Whose customers are those who come through the Web? The sales professional? The webmaster?

3. What's the role of the Web in making sales? Is it somewhere to place orders sold by the sales professionals? Is the Web a sales tool that competes with sales professionals as it convinces customers to buy?

4. Does the existence of Web marketing influence how sales incentives should be designed? Or can a company ignore e-commerce from an incentives and rewards standpoint?

Multiple Channel Selling

Companies with multiple selling channels often need more than one person to complete a sale. These days the sales professional plays a more sustained customer role with more responsibility for ensuring the sale is actually completed. But this may mean incentives are needed for others helping make the sale a reality-e-commerce professionals, distribution personnel, catalog representatives, and others required to complete the sales transaction. Let's turn to some more questions:

1. What's the job of sales professionals? How do they influence customer buying? Do they sell face-to-face only? Sell through all channels? Sell only through some channels? Do they influence e-commerce buying? If so, how?

2. What's each selling channel expected to produce? What are the needed outcomes of each selling channel to sell products and services? Do they differ from channel to channel?

3. Are you getting what you want? Companies get what you pay for! What sort of behaviors and outcomes does sales incentives reward?

4. Are people in one channel paid to help sales through other channels? Is a sale a sale no matter where it comes from? How do people collaborate to maximize sales?

Some Final Tips

In the final analysis, here are some solid guidelines to follow that make sense to all direct selling organizations:

1. Pay where the decision to buy is made. Who actually makes the sale? Who persuades the customer to buy? Where is the buying decision made? If this is not where sales incentives are paid, they need a hard look because sales incentives pay for persuasion.

2. Pay based on how selling channels work to get sales. Are channels independent or interdependent? How sales incentives are paid and to whom should follow the selling process. If they don't, this may be a symptom of the need for a critical evaluation.

3. Spend incentive dollars where sales dollars are generated. Do incentive payments follow how total sales are shared among selling channels? For many companies e-commerce selling channels have become equally or more important than other channels in convincing customers to buy.

Direct selling incentives often need a second look-many businesses are hesitant to change how sales people are paid. But sometimes a sales incentive "tune up" is worth consideration. Is it time in your company?

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