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• A compensation plan is part of, not substitute for, a coherent sales management system. It is called a
organizational hygiene factor.
• While a sales compensation plan affects the company’s revenue stream and its patterns of resource
allocation in many areas besides sales, problems with sales compensation are often really symptoms of
weakness in sales management or other areas of the firm.
• An audit of sales management practices should consider the following factors:
1. Introduction
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This tool help us understand the changing
requirements of markets and the choices we can
make about positioning (success factors):
4
2. Inputs
• Competitive advantage is achieved by providing customers with what they want or need, better or more
effectively than competitors.
• The strategy grid is a tool that helps to focus on it. It represents different positions in a market where
customers or prospects have different needs in terms of value for money. They represent a set of generic
strategies for achieving competitive advantage. positioning.
Motivation of the salesperson’s is a
key function for managers.
In sales, motivation involves many
factors: recruitment policies which
influence the personal characteristics
of salespeople; salesperson’s territory
or account characteristics;
salesperson’s perceptions of the
connections among effort, results and
rewards; perceived value of additional
rewards; etc.
Motivation leads to effort. This effort
can be measured in two dimensions:
quantity (orders booked, etc) and type
(account development vs account
maintenance activities, etc).
Effort leads to sales performance,
which should be consistent with the
organization’s marketing strategy and
positioning.
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3. Outputs
• Organizations have a list of requirements to meet when developing a product. But because there is no
longer orientation to customers, this approach leads to unsatisfactory experiences.
• Designing and developing to requirements and feature lists leads to unsatisfactory experiences, because
you're no longer oriented to the perspective of the user.
The importance of sales tasks will
vary depending on the product life
cycle stage.
For instance, during the introduction
stage, customer education is a key
sales tasks; when the maturity stage
arrives, salespeople focus on selling
the functions of the product and its
benefits against the competitors.
The underneath risk is that
compensation systems fail to keep
pace with those changes.
Sales
Profits
Product
development
Introduction Growth Maturity Decline
An experience strategy is needed and it can take
many forms.
Whether in the initial design process, or as the
product is being developed, such a strategy guides
the team and ensures that the customer's perspective
is maintained throughout.
Sales and profits over a product’s life cycle:
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A standard new product development process can be
summarized in the following 8 steps:
6
4. Processes
• New product development can be defined as the development of original products, product improvements
and new brands through the organization’s own research and development efforts.
• New products have a high failure rate due to several reasons: poor design, error in pricing, poor marketing
communication, cost overrun, etc.
Compensation is a tool for achieving
sales performance consistent with
marketing strategy.
It is important to understand the
different sales tasks: how much of
selling is attention to delivery? Price
negotiations? Customer education?
etc.
Also, management need to set the
salary / incentive mix for saleforces:
Salary based on the difficulty in
measuring the impact of a
salesperson’s performance;
complexity and length of selling
tasks, importance of non-selling
activities, etc.
Incentives based on the importance
of managerial objectives: sales
volume, product mix, pricing, bad
debt-returned goods; training; etc.
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5. Capabilities
• Strategic capabilities are the sources and competences of an organization needed for it to survive and grow.
7
Value chain
•To achieve competitive advantage by delivering value to customers, we need to understand which
activities are important in creating value. The value chain describes the categories of activities which
together create a product or service.
Value network
•The value network is the set of interoganizational links and relationships that are necessary to create a
product or service. We need to understand the whole process and how they can manage these linkages
and relationships to improve customer value.
Activity system maps
•The activity maps tool show the different activities of an organization that are linked together.
Benchmarking
•Benchmarking is useful to understand how an organization’s strategic capability, in terms of internal
process, compare with those of other organizations. There are different approached to
benchmarking(historical, industry or sector and best-in-class benchmarking).
SWOT
•The SWOT analysis summarizes the key issues from the business environment and the strategic
capability of an organization that are most likely to impact on strategy development. This tool is really only
useful if it is comparative, i.e. if it examines strengths, weaknesses, opportunities, and threats in relation to
competitors.
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6. External factors
• There are three common layers to take into account when analyzing the external factors:
1. The macro-environment: there are environmental factors that impact the organizations. The PESTEL
framework can be used to audit how future trends in the political, economic, social, technological,
environmental and legal environments might affect the sales management system. The PESTEL analysis
provides data which to identify key drivers of change from which we can build scenarios of possible futures.
2. The industry or sector: here we analyze the same products or services produced by different organizations.
The 5 Forces framework can be used to understand the attractiveness of particular industries or sectors
and potential threats form outside the present set of competitors.
3. Competitors and markets: within the industry or sector commonly there are different organizations with
different characteristics and competing on different bases. The strategic groups analysis helps to identify
close and remote competitors.
It is very important to know the amount of compensation offered by competitors because an organization
could lose its best sales personnel.
Analyzing the salesperson’s potential is also a requirement when defining the compensation plan: for
example, if technical skills are required, the organization will hire highly trained people; if detailed
knowledge of the decision making becomes core, when selling people have developed such level, the
costs of losing them may be too much.
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Brief Bio
International Risk Management & Insurance Consultant /
SME, with over 13 years of experience in the industry.
I have a broad experience in helping organizations step up
to their true potential. Uniquely positioned to talk about
operational risks and how to turn productivity into a healthier
organization.
I have lectured to professional groups and business
audiences.
Ignacio Reclusa
Risk Management and Insurance
M +34 677 023 800
www.ignacioreclusa.com
ignacioreclusa@gmail.com
