A company’s salary/bonus system will inevitably push sales in an easy to understand direction. Sales people in general run in the direction in which you place the carrot. Analyzing and really understanding your company’s bonus system is therefore critical. It will explain why your sales force focus on a certain type of customers, e. g. pursuing new customers while neglecting existing. In general, sales towards new customers receive way too much attention compared to sales towards existing customers – contacting and selling towards new customers is often considered a little bit more “sexy”.
GENERATE A RAPID SHIFT IN THE SALES FORCE FOCUS by tweaking on 4 VALUE INDICATORS:
- “New customer indicator” specifies how fast do you want to grow revenue. In the base case this indicator is 1. Here is an example. If a sales person have a budget of € 10.000 and brings in a contract with the value of € 3.000 then in the base case this contract is valued at 3.000 1 = € 3.000. If you need to boost focus on top line for a month then increase the value of every new customer by increasing this “New customer indicator”.
- “Existing contract indicator” specifies the focus you want your sales them to have on extension of existing customer contract. In the base case this indicator is 0.5. Here is an example. If a sales person have a budget of € 10.000 and brings in a contract with the value of € 3.000 then in the base case this contract is valued at 3.000 0.5 = € 1.500. The reason for valuing an extension to 0.5 is primarily because it is generally a lot less work.
- “Off-the-shelf indicator” specifies the value you put on only selling what is standard. In the base case this indicator is 1 but if you are struggling with a sales force that is to create increase this factor to 2 until you have learned the sales people to sell only what is on the shelves. . If a sales person have a budget of € 10.000 and brings in a contract with the value of € 3.000 then for a company struggling with to creative sales people you can value this contract to € 3.000 2 = € 6.000
- “Tailor made indicator” specifies the value you put on selling non-standard solutions. For many companies this is very bad for short-term profitability and long-term work load. In the base case the value of this factor is 0.5. If a sales person have a budget of € 10.000 and brings in a contract based on a non-standardized product / service the value of those € 3.000 is reduced to € 3.000 0.5 = € 6.000
Strongest benefits with this “Indicator-approach”
- Uncomplicated to communicate
- Easy to remember and use for your sales force
- Time efficient to follow-up on for your accounting staff.
- Strongest benefit however is that you can implement this model on almost any existing bonus-program that exist today and achieve the desired shift in focus in your sales force.
CONSIDERATIONS TO TAKE BEFORE CHANGING BONUS/SALARY
You must implement any change in your salary and bonus system with respect to your employees and fellow colleagues. In addition, you must understand the underlying parameters of growth and customer loyalty before you decide to change anything in your bonus or salary system. Monetary benefits are cruel in its reality and show little understanding in terms of moral, justice and respect. Therefore if you want to achieve a change in the way your organization acts by modifying salary and/or bonus schemes then you must keep one foot out in the “field" and one foot in the office. A manager with both feet in the office, implementing changes in salary and/or bonus schemes will trip as he or she begins to walk.
Henrik Müller-Hansen is the founder of Optimalprint, and former CEO of Tele2 Norway (Telco with appr. 500 million USD in yearly turnover for 2006). Optimalprint provide cheap, effective printing services with high quality. This online printing company is aiming at minimizing human interaction in the offset and digital printing process, resulting in significant savings for any company when ordering print products and printing services. This online printing company offers full color printing services for business customers and private consumers with print material such as business cards, postcards, brochures, letterheads, invitations, wedding stationeries, birthdays and other celebrations. All printing services are provided with free design templates that customers can edit directly on Internet. Many companies order print services related to direct mail marketing. Cheap printing services with high quality is an important part of a successful marketing campaign. Effective planning and implementation of marketing and advertisement is crucial for company growth.