This article raises the level of sales (T.L.S.) of the program to the next level by introducing sales force incentives to maximize program results. T.L.S. the program is detailed in Part I. It focuses on segmenting and targeting customers based on growth opportunities. This puts the right focus on your “plus” accounts by directing you to the top five accounts with the most growth potential without neglecting the top five medium accounts and the five revolving target accounts for new business.
Incorporating a sales-level program without questioning the way sales representatives pay can lead to improved results, but those results are likely to be below expectations. As we all know, sales representatives follow money very well (most have adopted Jerry Maguire’s motto, “Show me the money”), and if successful in T.L.S. The program shows them more money, their hearts and minds will follow. Three different options for applying incentive fees for T.L.S. The program is described below.
Easy way — SPIF
The easiest way to include T.L.S. into the existing sales compensation program is by using a special incentive work formula or “SPIF”. One option is to pay lump sums for a certain level of revenue growth realized from each of the three levels of the account. Another more interesting idea is to create a “bonus” pool and pay 50% of the pool to the sales representative who generates the largest amount of gross profit from his T.L.S. accounts. Pay second place 30%, third place 15% and fourth place 5%. The goal in structuring payouts for pools is that 50% of reps would earn some reward and that the difference between first, second and third place is significant. It really plays on the competitive spirit that most sales representatives have. Bonus payouts are generally paid along with the usual commission earned on this income, but only for growth. There are many options in designing SPIF and creativity is encouraged.
Another option for those of you who pay your sales results primarily through sales commissions is to use a layered commission program. With this program, T.L.S. bills are paid at a higher rate than that which is not T.L.S. accounts. As a warning, this option requires some homework. Either a strategic decision is made that your company is willing to increase sales costs as a percentage of GPs for sales on those accounts, or the existing commission must be lowered to compensate for the higher T.L.S. rate. If you choose the latter option, go back to high school textbooks and refresh your memory and binomial equations. You can also play Robin Hood the other way around, taking from the weak and giving to the strong. T.L.S. recognizes your strong accounts based on unrealized potential.
Weighted bonus factor
If your existing sales compensation program is basically a salary plus bonus program, adding an existing bonus structure to cover three-level revenue is a simple solution. Over the years, I have come to like the sales compensation program we call the “Weighted Factor Bonus Program”. This program is structured to pay sales representatives (or any employee in that regard) a percentage of their salary to achieve predefined goals. These goals can be based on revenue, customers, products, or anything that can be measured. The real neat part of this program is, however, that all goals are measured together, which means that a representative cannot be paid well if he achieves two goals well and fails on the third. Satisfactory or above-average performance must be achieved in all categories for any type of significant bonus to be earned.
In general, these programs are structured with the expectation that between fifty and seventy-five percent of a salesperson’s total income will come from a salary, and the rest will be earned through incentives (bonus).