Customer-Centric Incentive Design

2 August 2019

FILED UNDER:

This blog is a continuation of a seven-part series by OpenSymmetry for the Sales Management Association. In the sixth blog, we’re sharing our insights on what it takes to have a customer-centric approach to plan design. To read the entire blog series, start with blog one.

Customer-centricity in plan design can mean the difference between a successful and unsuccessful sales strategy. There needs to be alignment among how the customer wants to be sold to, the roles within the coverage model, and the plan design that drives selling behavior.

Research tells us that how a customer is sold to is critical for sales success. A 2018 survey by Aberdeen of 342 B2B buyers revealed that 62% of survey participants said that vendors who identify a new way to solve an established problem are most valuable, and 66% said this would shorten the buying process. In other words, if you provide value through the buying process, you are more likely to be successful. CSO Insight’s 2018-2019 Sales Performance Report showed that the qualities most coveted in the buying process are being a ‘Trusted Partner’ with a ‘Dynamic Alignment’ process. This translates into a need to define selling roles and drive behavior that encourages sellers to work with the customer through complex selling cycles.

The Customer Perspective

Customer buying capacity has become increasingly sophisticated, and the sales process in most sectors has become more complex. It is vital that an organization’s sales compensation plan design keeps pace. We have seen a number of trends in plan design that reflect how a more customer-focused approach is emerging. These include:

  • A more rigorous understanding of customers’ needs, leading to solution rather than product selling.
  • Moves to more collective, team-based selling as vendors need to demonstrate a greater span of knowledge.
  • The careful management of the transition of customer relationship responsibility from new logo hunter to account manager to avoid a drop off in customer focus.
  • The incorporation of customer satisfaction measures in sales incentive plans.
  • The recognition of the role of service delivery functions in identifying upsell opportunities.

There are three key areas that sales organizations must consider in delivering an effective customer-centric strategy — 1) coverage model; 2) collective selling behaviors; and 3) customer-focused plan design. We have picked out some of the key considerations for each.

Coverage Model

There are a number of challenges in building and maintaining a customer-focused sales team:

  • Lead generation is often the customer’s first experience with the sales organization, and it’s critical in establishing a positive relationship with the client. Normally the lead generator is incentivized through a combination of the number of qualified leads and the revenue or net margin value of converted leads. It is important that the lead generator sets the right tone, so incentives need to be balanced and simple.
  • From lead generation, the opportunity passes to the new business Hunter role. However, typically the challenge is ensuring a smooth handover from the Hunter to the Account Manager. A poorly coordinated handover can kill the relationship. For the sellers involved there is a potential conflict that needs to be managed. Often the initial sale is relatively small with the true value of the sale being recognized in future years. How do you reward both the Hunter who secured the relationship and the Account Manager who develops it to maximize sales potential? A positive shared interest is normally driven by shared credit or split credit for sales in the first 12 months.
  • Client service roles are critical in maintaining customer-centricity and are focused on quality of service delivery. However, they are in a great position to identify upsell opportunities. To maximize their engagement in upselling, a finder’s fee or referral policy can be game changing.
  • The role and eligibility for sales incentives of Pre-sales and Support Services roles can be a complex issue. Through the selling process, Presales typically plays a significant role in understanding the buying organization’s technical challenge. Without this involvement, the chances of a successful sale are reduced. But what credit should the Pre-seller be given? This decision is driven by the degree to which they are involved in determining the outcome of the sales process. Typically, the Pre-sales role is eligible but with a conservative pay mix. Sometimes it is the Pre-sales team as a whole that is credited.

Collective Selling Behaviors

We have identified that the increased complexity of the selling process is a challenge in achieving customer-centricity and the consequential need for more team-based or collective selling. It is important to define exactly what type of selling behavior you need as there is no single “right” approach.

Collective effort can show itself either in a team-based effort, collaboration between two or more sellers, or cross-selling between two lines of business. So, you must define exactly what behavior you need. Plan design must align to support each scenario best suited to your situation:

  • Team-based effort is best measured and rewarded through a collective measure when all members must work together to ensure selling success. This can be a collective target within the plan or sharing from a commission pool, for example. The critical element to consider is that each individual needs to demonstrate their contribution before qualifying for the payout.
  • For many sales organizations, teamwork really translates into effective collaboration of two or more sellers. This requires individuals to come together to deliver a successful sale, because selling a complex solution requires a wider skillset than what a single seller typically possesses. To be effective, plan design needs to articulate either a split of credit that reflects the contribution of the sellers or provide 100% credit to each. In this case, seller quotas need to be consistent so that quota setting and crediting rules need to match.
  • Cross-selling is the third main option and is often a whole design effort in itself. Sellers need to be encouraged to pass the sale rather than try to keep it for themselves. Others will be able to sell it better. Cross-selling is typically encouraged through a referral scheme addition to the main plan. The most significant aspect of design is the value attached to the cross-sale and behavior required of the referrer. A warm lead is more likely to preserve the customer relationship rather than just throwing it over the fence.

Customer-Focused Plan Components

All elements of the plan design will influence behavior. In the context of the customer focus, there are a number of key considerations that sale organizations need to get right. Getting it wrong can create behaviors that can be off putting to the customer. Key components include:

  • Pay mix is clearly a major influence on selling behavior. The behavior most acceptable to the buyer will depend on, for example, the complexity of the sale and/or the maturity of the product/service. Sellers with a low incentive opportunity may lack the selling urgency required by a fast-growing, dynamic buying sector.
  • Plan metrics need to match the role. For example, a seller incentivized on margin, who is not allowed to discount without referral upwards, will frustrate the customer who wants to negotiate directly with the seller.
  • Payout cycle needs to match up with the sales cycle. For example, if there is a long sales cycle for a complex, high value, multi-year contract opportunity, sellers who are on a shorter quarterly payout cycle may end up trying to pressure the customer into buying. The negative consequences may be that the customer decides not to buy.

Conclusion

To be an effective selling organization requires a deep understanding of your customers’ requirements and how they want to be sold to. We have set out some key considerations in this blog — how your coverage model is defined and the importance of role definition, how collective selling is required to match the increased complexity in the buying process, and how aspects of plan design are critical in driving behaviors that will maximize the customer’s potential to buy. The research shows that developing ‘Trusted Partner’ status and providing value throughout the selling process will increase sales success. The ultimate takeaway is: sell how the customer wants to be sold to and design your coverage model and incentive design to match.

For a deeper dive into this topic and much more, join us for our webinar on September 4, 2019.

About the Author
mm
Jon Clark

Discuss this blog

Become a member

Become a member