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SALES FORCE

EFFECTIVENESS MANAGEMENT
Accelerate Sales Force Productivity and Improve Your Sales Results by
Aligning Sales Activities with Company Objectives
Origin Source by David Cichelli

Senior Vice President The Alexander Group, Inc.


Author of Compensating the Sales Force

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Comprehensive Framework for Sales Growth

Sales Management System


Strategy

Structure

Management

12345678
Sales
Segments
&
Objectives

Coverage
Model

Sales
Process

Job Design
&
Organization
Structure

Resource
Deployment

Sales Talent
&
Supervision

Performance
Metrics

Quotas
&
Sales
Compensation

SALES OPERTIONS AND TECHNOLOGIES

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Predictable Pattern of Business Growth


Phase I
Start-Up
High

Grow
Really Fast

Launch New
Products
Control
Pricing

Grow

Grow
Select
Markets
Reduce
Cost
Reposition
Re-Think
Product & Market
Strategy

Low
Objectives Top Line Growth

Sales
Issues Territory Sizing
Quotas

Phase IV
Optimization

Grow; Keep
Customers

Growth
Base

Phase III
ReEvaluation

Phase II
Volume
Growth

Revenue Mgt
Get New
Customers
Keep Customers
New Products

Price Mgt
Protect Base
Price Mgt
Reduce Costs

Segment Gowth
New Value
Proposition
New Markets
Specialization

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Success Can Lead to Obsolescence


Phase I
Start-Up
Start-Up

Phase IV
Optimization

Phase III
ReEvaluation
Re-Evaluation

Phase II
Volume
Growth
Volume Growth

Optimization
SBUs

Sales
Strategy

Survive

Big Market

Lower Costs

Insufficient
Insufficient
Customer
Customer
Coverage
Coverage

Many Products/
Markets

Hold Share

Failure
Failuretoto
Support
SupportMultiMultiProduct
Product
Strategy
Strategy

Segment
Management
Optimize for
Returns

Obsolescence

One Product

Certain
Business

Obsolescence

Marketing
Strategy

What
Business?

More Business

Obsolescence

Any Business

Obsolescence

Business
Strategy

Too Many
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Dissimilar
Dissimilar
Price Erosion
Too Many

Price Erosion

Products
and
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to you!
Products
and
Customers
Customers
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Dimensions of Excellence by Phase


Phase IV
Optimization

Business
Strategy

Any Business

More Business

What
Business?

Certain
Business

Marketing
Strategy

One Product

Sales
Strategy

Survive

Recruiting
Recruiting
On-boarding
On-boarding
Messaging
Messaging
Executing
Executing
Testing
Testing

Big Market

Lower Costs

Acct
AcctStratification
Stratification
Multiple
MultipleMessages
Messages
Acct
AcctMgt
MgtSkills
Skills
Hunters
Hunters
New
NewProducts
Products
Market
MarketShare
Share

Many Products/
Markets

Hold Share

Transformation

Phase III
Re-Evaluation

Transformation

Phase II
Volume Growth

Transformation

Phase I
Start-Up

Segment
Management
Optimize for
Returns

Customer Segments
Customer Segments
Fewer
FewerSegments
Segments
Multiple Channels
Multiple Channels
Simpler
Channels
Simpler Channels
Sales Specialization
Sales Specialization
Intense
Customer
Intense
CustomerFocus
Focus
Rules
RulesofofEngagement
Engagement
High
Productivity
High Productivity
Margin Maintenance
Margin Maintenance
Low
LowChurn
Churn
Customer De-selection
Customer De-selection
Good
Margin/
Cash
Flow

FUN
tastic
Enthusiasms
to
you!
Good
Margin/
Cash
Flow
Productivity
Productivity

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Destination: Sales Excellence - Themes


Phase I
Start-Up

Phase II
Volume Growth

Phase III
Re-Evaluation

Phase IV
Optimization

New
NewMarket
Market
Access
AccessSelling
Selling
Successful
SuccessfulGrowth
Growth
Scaling
Scaling
Core
-Market Selling
Core-Market
Selling
Proficiency
Proficiency
Multi
MultiSegment/
Segment/
Solution
SolutionSelling
Selling

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Sales Segment & Objectives


Sales Management System
Strategy

Structure

Management

12345678
Sales
Segments
&
Objectives

Coverage
Model

Sales
Process

Job Design
&
Organization
Structure

Resource
Deployment

Sales Talent
&
Supervision

Performance
Metrics

SALES OPERTIONS AND TECHNOLOGIES

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Quotas
&
Sales
Compensation

Sales Segments
Sales must do marketing
Sales Segments
Product

Customer

Channel

to organize selling resources.

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Principles of Effective Segmentation and


Targeting
Actionable: determines sales strategy, coverage and
account targeting
Simple: easy to communicate and understand
Customer focused: based on buying process and
buyer needs
Sales potential focused: customers and prospects
grouped on potential and current revenue
Ranked by attractiveness: segments are evaluated
and ranked in term of buying processes revenue
potential, profitability and past success
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Segmentation and Targeting Components


How should the market be divided into meaningful, actionable groups and which should be targeted?

Buyer
BuyerProfile
Profile

Identification of significant differences in how buyers make their


purchase decisions

Buyer
BuyerGroup
Group
Attractiveness
Attractiveness

Determination of attractiveness of buyer groups based on current and


potential revenue, profitability, strategic fit, operational fit, loyalty, etc.

Targeted
Targetedand
and
Actionable
ActionableSegments
Segments

Matching segment buying criteria (based on how buyers want to buy)


with the attractiveness of segment to the company
Segments must be identifiable and actionable

Value
Valueproposition
proposition

Alignment of value proposition with buying preferences


Delivery of a unique value proposition

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Coverage Model
Sales Management System
Strategy

Structure

Management

12345678
Sales
Segments
&
Objectives

Coverage
Model

Sales
Process

Job Design
&
Organization
Structure

Resource
Deployment

Sales Talent
&
Supervision

Performance
Metrics

SALES OPERTIONS AND TECHNOLOGIES

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Quotas
&
Sales
Compensation

Channel Strategy Evolves


Business
Growth
Phase

I
Start-Up

II
Volume Growth

III
Re-Evaluation

Customer Size/
Value
Specialization

Vertical Market
and Product
Specialization

IV
Optimization

V
SBUs

Deployment
Model

Geographicbased coverage

Action Plan

12

Channel
Specialization
Channel Bus
Unit
Field Bus Unit
Market Bus Unit

Strategic
Business Unit

Account
Stratification

Account
Segmentation

Buyer
Segmentation

Market
Segmentation

Size
Value

Product
Industry
Channel

New Access
New Market
New Buyer
Access
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Illustrative Sales Coverage Model


Coverage Resource
Worldwide Accounts
Top 500 Accounts: Over S10M in Potential
Annual Revenue

Coverage Comments
Team Selling Model

Corporate Accounts

Local Sales Through Central AM

Major Accounts

Channel Management

Inside Sales Accounts


Outbound/ Inbound

Geographic Sales Coverage


Channel Support
Assigned Accounts
Field Teaming

Inbound only

Customer Service

E Commerce

E-Channel

Field Sales Accounts

13

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Sales Process
Sales Management System
Strategy

Structure

Management

12345678
Sales
Segments
&
Objectives

Coverage
Model

Sales
Process

Job Design
&
Organization
Structure

Resource
Deployment

Sales Talent
&
Supervision

Performance
Metrics

SALES OPERTIONS AND TECHNOLOGIES

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Quotas
&
Sales
Compensation

Types of Selling
Product Focus
Selling
Also Known As

Need satisfaction
selling

Applications
Selling
Design-in selling

Thought
Leadership
Selling

Solution
Selling
Consultative selling

Visionary Selling

Primary Objectives

Obtains approved
supplier status
Maximizes volume

Maximizes volume
and price
Achieves desired
product mix

Maximizes gross
margins
Obtains/ retains
target accounts

Establishes and
grows long-term
relationships
Meets growth goals
in volume and
profitability

Leads customer
toward solutions that
result in attainment
of volume and profit
goals

Salespersons
Activities

Responds to RFPs
Submits bids
Differentiates
products based on
delivery, price

Differentiates on
basis of product
characteristics
Mathes products to
customers needs
Overcomes
objections
Adds value through
product knowledge

Focuses on use of
product in
customers
environment
Engineers product to
fit customers
requirements
Typically repetitive
solutions to
standard, recurring
issues

Focuses on
economics of
customers
operation
Proactively identifies
ways to improve
business results
Sell solutions that
improve market
share, profitability,
customer retention,
etc.

Articulates vision
regarding where
industry and
customer are going
and can go in the
future
Guides customer
toward solutions
with long term
implications

Selling Technique

Price/ performance
comparison

Justifies higher
prices through
superior product
and/or ability to
meet needs

Value added
through application
expertise

Establishes
exclusive
partnership with
customer

Engages in joint
planning with
customer; lead their
thinking

Geographic

Large account list

Deployment

15

Vending

Feature/ Benefit
Selling

Geographic

Narrowly defined

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Identify Sales Process


Steps of the Sales Process
Generate
Lead

Qualify
Lead

Conduct
Needs
Analysis

Design
Solution

Propose/
Negotiate

Close/
Fulfill

Attrition (hit rates)

10

Effort (hours)

1.5

Total Effort (hours)

15

32

18

24

18

8 = 115

Duration
Avg. Sales Value

3,5 months
$ 90K
Return on sales effort = $90,000/115 = $780/hour
How can we minimize attrition late in the sales process?
How can we increase speed to close?
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How can we increase transaction size?

16

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Cross Industry Benchmark

Selling
Time
50-60%
Total
Time

On-Site
Contact
33%
World Class
Other
Selling
22%
Service
10-20%

NonSelling
Time
40-50%

Administration
10-20%
Travel
15-20%

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Sales Time

Non-Sales Time

Sales Personnel Survey - Benchmark

Travel and Other downtime


People Development
Admin. / Reporting

3%
7%
9%
10%

Customer Service
Implementation Problems

9%

Order Entry and Delivery

9%
15%

Opportunity Pursuit/ Close


Account Development

18%
12%

Account/ Opprtunity Planning


Market Development/ Prospecting

8%

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Job Design & Organization Structure


Sales Management System
Strategy

Structure

Management

12345678
Sales
Segments
&
Objectives

Coverage
Model

Sales
Process

Job Design
&
Organization
Structure

Resource
Deployment

Sales Talent
&
Supervision

Performance
Metrics

SALES OPERTIONS AND TECHNOLOGIES

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Quotas
&
Sales
Compensation

Existing ADC North America Sales Force Structure

VP
VP

Verizon
AT & T
Qwest
SBC
Bellsouth

Wireline
Wireline

Dedicated Resource
Dedicated Resource

Sr.
Sr.AM
AM
AM
AM
AM
AM

National
Accounts

HQ
HQ

OEM
OEM

Wireless

Sr. AM
Sr. AM
AM
AM
AM
AM

Other
Accounts

20

Director
Director

VP
VP

IP Cable

Connectivity

Sprint
Level 3
Cisco
Nortel
Others

Field
FieldSales
Sales

Services
Services

Dedicated Resource
Dedicated Resource

For Each Large Account

Large
Accounts

Connectivity
Connectivity

Dedicated Resource
Dedicated Resource

Entertainment
Entertainment
Sr. AM
Sr. AM
AM
AM
AM
AM

VP Connectivity
VP Connectivity
Sr. AM
Sr. AM
AM
AM
AM
AM

GOV
GOV

Sr. AM
Sr. AM
AM
AM
AM
AM

VP IP Cable
VP IP Cable
Sr. AM
Sr. AM
AM
AM
AM
AM

Sr. AM
Sr. AM
AM
AM
AM
AM

VP Wireless
VP Wireless
Sr. AM
Sr. AM
AM
AM
AM
AM

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Resource Deployment
Sales Management System
Strategy

Structure

Management

12345678
Sales
Segments
&
Objectives

Coverage
Model

Sales
Process

Job Design
&
Organization
Structure

Resource
Deployment

Sales Talent
&
Supervision

Performance
Metrics

SALES OPERTIONS AND TECHNOLOGIES

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Quotas
&
Sales
Compensation

Resource Development 7 Steps

22

Step I

Determine the optimal territory/ segment size:


Define the average anticipated capacity for each sales role

Step II

Determine territory/ segment definition criteria:


Consistent relationships, geographical deployment, match skills with opprtunity,
coverage of accounts in multiple location, segment issues.

Step III

Develop sales capacity model:


Build model based on productivity benchmarks

Step IV

Develop resource deployment recommendations:


Review for reality check with test market.

Step V

Refine sales capacity model:


Based on market test

Step VI

Build territories/ segment of equitable size:


Run the sales capacity model for all territories/ segments

Step VII

Assign accounts to account managers:


Industry/ account knowledge, skills experience

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Sales Talent & Supervision


Sales Management System
Strategy

Structure

Management

12345678
Sales
Segments
&
Objectives

Coverage
Model

Sales
Process

Job Design
&
Organization
Structure

Resource
Deployment

Sales Talent
&
Supervision

Performance
Metrics

SALES OPERTIONS AND TECHNOLOGIES

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Quotas
&
Sales
Compensation

Sales Talent & Supervision


Competency Model

Assessment Tools

Skill Assessments
(Implementation)
Training Curriculum

Ongoing Development
Plan
24

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Performance Metric
Sales Management System
Strategy

Structure

Management

12345678
Sales
Segments
&
Objectives

Coverage
Model

Sales
Process

Job Design
&
Organization
Structure

Resource
Deployment

Sales Talent
&
Supervision

Performance
Metrics

SALES OPERTIONS AND TECHNOLOGIES

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Quotas
&
Sales
Compensation

Return on Sales Effort


Steps of the Sales Process
Generate
Lead

Qualify
Lead

Conduct
Needs
Analysis

Design
Solution

Propose/
Negotiate

Close/
Fulfill

Attrition (hit rates)

10

Effort (hours)

1.5

Total Effort (hours)

15

32

18

24

18

8 = 115

Duration
Avg. Sales Value

3,5 months
$ 90K
Return on sales effort = $90,000/115 = $780/hour

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Sales Compensation
Sales Management System
Strategy

Structure

Management

12345678
Sales
Segments
&
Objectives

Coverage
Model

Sales
Process

Job Design
&
Organization
Structure

Resource
Deployment

Sales Talent
&
Supervision

Performance
Metrics

SALES OPERTIONS AND TECHNOLOGIES

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Quotas
&
Sales
Compensation

Why Sales Compensation is Different


Powerful and effective but noisy and difficult to manage
Derivative design process matches unique job content
Multi-parties must be involved sales, marketing, finance, HR
and IT
Best solution is a consensus
It produces positive results and sometimes unexpected negative
outcomes
Most litigated compensation program
Requires constant attention communication, administration,
interpretation
Not an HR compensation program

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Management: What Drives Sales?

29

Factor

Description

Methods

I. Leadership

Corporate Vision
Communication

II. Accountability

Measurement
Engagement Management

Appraisal Process
Program Execution
Reporting

III. Self-Accomplishment

Individual Goals and


Needs
Personal Achievement
Programs
Affiliation/ Team

Career Progression
Recognition Programs
Training

IV. Remuneration

Cash
Security Programs
Incentives

Base Pay
Benefits Stock
Incentive Compensation

Speeches
Learning
Orientation
Leadership Conferences

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Types of Variable Compensation Plans

Gainsharing

AddAdd-On

2x Capped

Straight
Commission

3x Uncapped

Target
Total
Compensation

Types of Variable Compensation Plans

30

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Two Categories of Sales Jobs

Value Created by

Account Owner

Basis of Pay

Examples

31

Income
Producers

Sales
Representatives

Seller
(Relationship)

Company
(Product/Services)

Sales
Person

Company

Percent of Revenue
(Unlimited)

Manage to Target Pay

Real Estate
Traders
Independent Agents
Multi Tier Marketing

Territory Rep
Account Manager
Chanel Manager
Product Specialist

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Market Pay Volume Versus Earnings


High
Sales Representatives

W-2 Earnings

Income Producers
Low

Low

High

Sales Territory Volume

32

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Managing Pay Sales Representatives


High

Sales Representatives

Global Account Manager

W-2 Earnings

Senior Account Manager


Account Executives
Senior Sales Representative
Territory Representative

Low

Low

High

Sales Territory Volume


33

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Job Categories and Pay Plans

Income Producers

Sales Representatives

Sales Support

Own the accounts Portable


Relationship Selling

Straight Commission
Target Rate - Unlimited

Company Accounts
Promote Solution/ Value

Bonus Plus Incentive


Target Pay Managed
Significant Risk

Support Companys Sellers


Extend Solution/ Value

Base Plus Incentive


Target Pay Managed
Moderate Risk

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Target Pay Target Cash Compensation

Target
TargetTotal
TotalCash
CashCompensation
Compensationisisthe
thepreferred
preferredannual
annualpay
payfor
forachieving
achieving
goal:
lower
pay
for
less
than
goal;
higher
pay
for
exceeding
goal.
goal: lower pay for less than goal; higher pay for exceeding goal.

Consistent with your companys:

Labor Market Rates


Job Scope
Budget Dollars
Internal Equity

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Manage All Compensation


Recognition

Intrinsic Rewards
Special Compensation

Contests

Focused Efforts

Overtarget
Incentive
Pay

Outstanding Pay

Target
Incentive
Pay

At Risk Pay

Salary

Retention/
Non-Sales Pay

Performance- Based
Compensation
Sales Compensation

Fixed Compensation
Benefits

Security Needs

Sales
Expenses

Reimbursement

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Upside Earnings

Target Compensation

Target

200
160
120
100%

10

90

30

70

50

50

0%
Low
Influence of
Salesperson

High
Extent of Upside Potential

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Performance Measures

Required

Avoid

Accountable
Accountable
Assigned
AssignedtotoaaSalesperson
Salesperson
Observable
Observable
Measurable
Measurable
Accurate
Accurate
Reportable
Reportable

Bad
BadMeasures
Measures
Corporate
CorporateGalactic
GalacticMeasures
Measures
Compliance
ComplianceMeasures
Measures
Input
Measures
Input Measures
Cant
CantMeasure
MeasureMeasures
Measures

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Types of Performance Measures


Volume Production

Sales
SalesRevenue:
Revenue:purchase,
purchase,continuing,
continuing,estimated
estimated
Profit:
gross
margin,
contribution
margin
Profit: gross margin, contribution margin
Items:
Items:units,
units,contracts,
contracts,design
designwins
wins

Sales Effectiveness

Products:
Products:balance,
balance,mix,
mix,launch,
launch,cross-sell,
cross-sell,packages
packages
Accounts:
new,
retention,
penetration,
growth
Accounts: new, retention, penetration, growth
Orders:
Orders:close
closerate,
rate,size,
size,length,
length,receivable
receivable
Price
PriceManagement:
Management:discount,
discount,rebates,
rebates,realization,
realization,percent
percent

Customer Impact

Sales
SalesSatisfaction:
Satisfaction:surveys,
surveys,complaints
complaints
Loyalty:
persistency,
share
Loyalty: persistency, share

Resource Use

Productivity:
Productivity:cost
costper
perorder
orderdollar,
dollar,sales
salesloading
loading
Channels:
partner
success,
outlet
performance
Channels: partner success, outlet performance
Personnel:
Personnel
Personnel:balance
balanceperformance,
performance,turnover,
turnover,ramp
ramprate
rate

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Quota Difficulty

60% to 70%
of Sellers

# of Salesperson

30% to 40%
of Sellers

Bottom 10%
of Sellers

Top 10%
of Sellers

Minimum

Target
100%

Quota Performance

40

Excellence

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Formula Types for Sales Reps


Target Incentive
Commission Formula

TITI- -CF
CF

Target Incentive
Bonus Formula

TITI- -BF
BF

Target
TargetEarning
Earningare
arePre-Established
Pre-Established
Expected
ExpectedVolume
VolumeisisKnown
KnownSame
Samefor
forAll
AllTerritories
Territories
Commission
Formula
Rate

Pay
Percent
of
Production
Commission Formula Rate Pay Percent of Production
totoAchieve
Achieveand
andExceed
ExceedTarget
TargetEarnings
Earnings

Target
TargetEarning
Earningare
arePre-Established
Pre-Established
Expected
Volume
is
Expected Volume isKnown
KnownDiffers
Differsby
byTerritories
Territories
Bonus
Formula
Rate

Pay
Percent
of
Target
Bonus Formula Rate Pay Percent of TargetPay
Payfor
for
Percent
of
Goal
Achievement
to
Achieve
and
Percent of Goal Achievement to Achieve and
Exceed
ExceedTarget
TargetEarnings
Earnings

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Flat Commission
Features

Pay Mix: 0/100


Payment for each sale: sales dollars, gross margin, units

Commission Graph

Illustration

Flat Commission
Rate on Revenue
3%

Commission
Dollars

3%

Sales Volume

Comments

42

Simple, easy to understand


Seller owns customers
Earnings will vary substantially

Visi Pramudia

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Ramped Commission
Features

Pay Mix: 0/100


Payment for each sale: sales dollars, gross margin, units

Commission Graph

4%

Illustration

Commission
Volume
Rate
To $3M
2%
$3M & Over 4%

Commission
Dollars
2%

Sales Volume

Comments

43

Simple, easy to understand


Seller owns customers
Premium paid for high sellers

Visi Pramudia

FUNtastic Enthusiasms to you!


http://visipramudia.wordpress.com

Bonus - Steps
Features

Pay Mix: 80/20


Territories: dissimilar size
Earnings: equalized

I. Base Salary

Illustration

Comments

44

II. Bonus Schedule

Bonus Schedule
(% of Base Salary)
% to
% of
Quota
Base
<85%
0%
85%
5%
90%
15%
100%
25%
105%
40%
110%
55%
>115%
75%

Basis Choices: base salary, midpoint, target incentive


Weakness: steps

Visi Pramudia

FUNtastic Enthusiasms to you!


http://visipramudia.wordpress.com

Bonus Dollar Schedule


Features

Pay Mix: 75/25


Territories: dissimilar size
Earnings: equalized
Dollar Payouts

I. Base Salary

Illustration

Comments

45

II. Dollar Schedule

% to
Quota
<96%
98%
100%
102%
104%
106%
>108%

Dollar
Amt
$1,500
$3,000
$5,000
$7,500
$10,000
$12,500
$15,000

Basis Choices: base salary, midpoint, target incentive


Weakness: steps

Visi Pramudia

FUNtastic Enthusiasms to you!


http://visipramudia.wordpress.com

Bonus Supervisor Matrix


Features

Pay Mix: 75/25; base plus bonus matrix


Measures: volume and number of reps achieving goal
Linked: both measures must be excellent payout

Bonus Matrix (% of Target Incentive)

I. Base Salary

Illustration

Comments

II. Bonus Matrix

Excellence

Volume

75 100 125 150 200 250 300


58
83 108 133 172 211 250
42
67
92 117 144 172 200
Target
25
50
75 100 117 133 150
17
36
56
75
92 108 125
8
22
36
50
67
83 100
Treshold
0
8
17
25
42
58
75
Treshold
Target
Excellence
# of Reps Reaching Goal

Effective: strong visual impact of results and pay-out


Application: channel manager, product overlay specialist
Weakness: double threshold and cap

Visi Pramudia

46

FUNtastic Enthusiasms to you!


http://visipramudia.wordpress.com

Thank You

Visi Pramudia

FUNtastic Enthusiasms to you!


http://visipramudia.wordpress.com

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