It is said that the sales person's mind works faster and more accurate than a super-computer when it comes to calculating their incentive payments.  They know how to reach their targets and optimise their pay by taking the most efficient of all actions.

     Yet, despite all the incentives that companies give their sales people, there are still some chronic problems faced by most sales forces, such as:

• Selling low margin items and foregoing higher margin ones, since it's easier and a lot faster to sell;

• Pushing products rather than providing solutions that will deliver long-term benefits to customers;

• Selling to the same customers and not doing enough to develop new ones;

• Communicating with the same, singular contact in the customer's organisation most of the time, and not taking the initiative to develop more relationships with more people;

• Making lots of customer visits that eventually produce little results etc

     While a lot of training has been conducted to enable sales people overcome the above issues, their behaviour still remains very much the same.  Now that we are all in economic winter, budgets and time for sales training are likely to be slashed further. 

     In any case, having the right training for your sales force is just part of your solution towards better sales performance.  Giving your sales people the right incentives so that they are focused on doing the right things may be more important than the training itself.

What Gets Paid Gets Done

    Here are some common ways how sales people are paid for their efforts:

1. Commission based on a percentage of the sales revenue;

2. Bonus based on the achievement of a pre-determined annual sales target (based on sales revenue);

3. Profit -sharing based on gross profits or sales margins; etc.

     Of the 3 common ways, 1 and 2 are the most common, while some companies are beginning to focus on achieving good margins in addition to sales revenue.  Still, sales people are rewarded by the dollars-and-cents that they bring in, rather than on how they can develop sustainable "pipelines" that will provide revenue in the future, and are also less prone to vicious price competition.

     Here's a simple example.  Imagine that you work for a company that sells computers to other companies.  You sell both desktop computers as well as servers.  While the margins for desktop computers are getting thinner by the day, if your customers identify with your brand, they will tend to buy from you.  Even if they may haggle some discounts from you, but the sale is relatively easy.

     However, selling servers are a little more complicated.  You will need to find out more technical details about your customers' requirements, and customers are also quite particular about how your product performs, as well as the after-sale maintenance agreements.  While servers are comparatively less prone to severe price competition (than desktop computers), it may take twice as long for you to make the same amount of incentive pay selling servers than selling desktop computers.

      Hence, it's going to be a no-brainer for you to keep focused selling desktop computers than selling servers, even if your company needs to establish itself as a major seller of high-quality and high-performance servers.

     To incentivise sales people to sell more of the difficult products (or to difficult target customers), come companies provide "spiff" for the hard sale, i.e. additional bonus or commission to sell the hard-to-sell stuff.  but this may or may not work for you, especially in hard times.

     In the real world, things can be a lot more complex, e.g.:

• Some solutions are so complex that you will require the efforts of your engineers or technical colleagues to help evaluate customer needs and draft proposals.  As such group incentives may be needed;

• Some existing customers are simply not going to give you significant re-orders in the near future, and customer service staff may be called to do the servicing of customers via phone and online means, and close the small deals as well.  You will only be paid if you or your customer service colleague identifies some new buying needs from your customer, and you helped close the new deal.  And you will get the bigger share of the group (you and your customer service colleague)  incentive for the new deal;

• Sometimes it may take months if not years to develop new customers, or to get other departments in your existing customers to buy new solutions from you.  If you are not compensated for the months of hardwork (which may or may not lead to anything), you won't invest in the time and energies in it, etc.

     Given the tough economic times where companies will want to reduce (sales) costs and still motivate your sales people to sell the hard-to-sell stuff, here are some broad suggestions:

• If your sales people are still pretty much selling the same stuff (low margin products or dealing with the same customers or pushing products instead of providing solutions), instead of paying them the full commission or bonus, pay them half the amount instead.

• If your sales people (and non-sales staff too) went through thick and thin to get the hard sales, pay them the full commission or bonus (but pay them as a group is it's a group offer).

• If you keep track of the progress of your sales people working their "pipelines" to develop new customers, AND you don't have the budget to reward "effort" only, give sincere praise and recognition in your weekly, monthly or annual sales meetings.  Who says incentives must always be monetary-based?

Compensating Sales Managers

     Traditionally, sales managers are paid:

1. Either by a direct over-ride on the sales achieved by her team;

2. Or with a bonus upon achieving or exceeding the team's annual sales targets

     Given the changes in the sales team's incentives mentioned above, sales managers' compensation would have to be modified a little as well, for best results.