3 Types of Sales —3 Types of Incentives

Setting incentives for salespeople is always challenging, says consultant David Cichelli, but it’s a whole lot simpler when you evaluate your selling conditions and then stratify incentives across the three basic sales job types.

Cichelli, senior vice president at the Alexander Group, offered his tips at WorldatWork’s Total Rewards 2013 Conference and Exhibition.

Here’s how he describes the three types of sales jobs:

Job Level→ Factor↓	Territory Rep	Account Manager	Key Account Manager
Customers	Many/Existing and potential	Several (20–30)/ Existing	Few (3–4) /Existing
Orders	Many/Small	Average/Average	Few/Large
Sales Cycle	Short (<2 months)	Moderate (2–4 months)	Long (>4 months)
Mix Leverage	50/50/3x	70/30/3x	80/20/3x
Pay Levels	Market matched	10% Premium to market	15% Premium to market
Periods	Annual goal paid monthly year-to-date	Annual goal paid monthly and quarterly year-to-date	Annual goal paid quarterly year-to-date
Territories	Alike	Dissimilar	Dissimilar

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Solution Selling

Cichelli offers the following conditions needed for solution selling success (solution selling, he says, is “providing services” as opposed to “selling”):

• There is an enhanced product service offering.
• Existing product selling dominates.
• There are better margins with solutions.
• Buyers still buy products.
• Product selling has a short sales cycle.
• Solution selling has a long sales cycle.

	Territory Rep	Account Manager	Key Account Manager
Bold Formula Choices	Higher rate on solution sales OR Revenue modifier for solution sales (based on % of solution sales)	Certification modifier (e.g., 5% rider after completing class) Solution sell revenue modifier Sell and reward standard/bundled solution purchases	Solution selling account planning Only credit solution sales Reduce credit on product sales

Pricing and Margin Improvement—Conditions

Under the conditions below, use the pricing and margin improvement suggestions in the table, Cichelli says.

• Sellers can influence price.
• Product mix can influence margin.
• Customer type can influence profitability.
• Contract length can influence profitability.

His recommendations for pricing and margin improvement at different levels:

	Territory Rep	Account Manager	Key Account Manager
Bold Formula Choices	Price realization modifier (Manufacturers) Gross margin modifier (Distributors)	Revenue/Price realization matrix No credit for sales below price objective	Reward with contract length modifier No credit for sales below margin objective

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Long Sales Cycle

Quota-based systems don’t work well with long sales cycles, says Cichelli. Under the circumstances listed, he recommends the approaches outlined in the table.

• Four months and longer sales cycle
• Difficult to predict sales events
• Lumpy orders (small, big)
• Customer-driven purchases (not seller-driven)

	Territory Rep	Account Manager	Key Account Manager
Bold Formula Choices	Sales progression incentives Contract signing award	Contract signing award/with declining commission (paid out over length of contract) Account outcome KSOs (key sales objectives)	Contract signing awards Reward with contract length modifier Account planning KSOs

Dissimilar Revenue Types

With dissimilar revenue types (see typical list below), consider the options in the table, Cichelli suggests.
Revenue types:

• Purchase
• Rental
• Services
• Usage
• Blend of different types

	Territory Rep	Account Manager	Key Account Manager
Bold Formula Choices	Stand-alone rates for each revenue type Modifier for preferred revenue outcomes	Modifier to reward preferred strategic revenue	Account value rewards Market share incentives Account plan KSO sales outcomes

In tomorrow’s Advisor, more of Cichelli’s tips, plus an introduction to a free webinar (sponsored by SilkRoad) in top HR trends of 2013 that are here to stay.