Sales Compensation Plans Pitfalls and How to Avoid Them

    How effective is your sales compensation plan? Does it help you attract the  people you    need     and are you able to keep your top performers? If you’re not  satisfied with your compensation plan, you may have one or more of the following sales compensation plans pitfalls. As you review each one, think about your own sales  compensation plan.

1. One size fits all.

Having a uniform compensation plan may sound fair, but is rarely effective.  Unless all your salespeople enter your company with the same experience and do  exactly the same job, compensation becomes an issue. Such factors as size of the  territory, potential of the territory, types of accounts and experience of the  salesperson usually necessitates some adjustments in the compensation plan.

Tip: Make sure your compensation plan fits the various needs  and demands of your people, the job, and the company’s goals.

2. Punishing high performers.

Some companies have a philosophy of “how do we prevent our salespeople from  making too much money?” This approach de-motivates high performers. Basically,  the plan tells high performers “once you make this much, your income potential  stops… no matter how much extra revenue you could bring in for the  organization.” This doesn’t mean companies should give their people a blank  check. It means that if high performers can find ways to increase the company’s  revenues and profits, compensate them accordingly.

Tip: To maximize the potential of your sales force, give  worth-while incentives for your high performers. Give them a reason to  stretch

3. Subsidizing mediocrity. Many compensation plans set the  performance standard too low. Salespeople receive better than average  compensation for doing average performance. Plans that encourage salespeople to  “just make quota” settle for too little… and usually get it. High performing  organizations view quota as the minimal standard or starting point for achieving  financial success.

Tip: Make sure your plan is both challenging and  realistic.

4. Discouraging rookies. Most sales jobs take time to learn.  During this learning period, new salespeople usually produce less revenue and  make less than experienced salespeople. If the new salesperson can’t make enough  to live while learning the job, they will become discouraged and look for  another opportunity.

Tip: Create a compensation plan that helps salespeople make  the financial transition from rookie to an experienced salesperson.

5. Playing games with people’s paychecks. The quickest way  to destroy trust and de-motivate salespeople is to play games with their  paychecks. When any change, mistake, or adjustment to a paycheck happens handle  it quickly, accurately and with a proper explanation. If you change the pay  plan, make sure people understand it before rolling it out. If you miscalculated  a bonus or commission, correct it immediately. How you respond in these  situations is as important as what you actually do.

Tip: Be honest, direct and responsive in all actions that  impact salespeople’s actual paycheck.

6. Looking at compensation as a cost not an investment. The  goal of sales is to acquire customers. The goal of a compensation plan is to  motivate salespeople to acquire as many of the right type of customers as  possible. Managing compensation as a cost requires organizations to restrict it,  which in turn restricts the organization’s ability to acquire customers.  Managing compensation as an investment focuses on the return generated by the  compensation plan and not just the amount spent.

Tip: Develop a compensation plan that products the best  ROI.

7. Providing incentives for the urgent and not the  important. Why do so many companies experience peaks and valleys in  their sales? Often it’s because they only focus on short-term goals at the cost  of long-term growth. One company placed a premium on acquiring new business and  succeeded. However, they neglected their existing customer base and lost as many  existing customers as they gained new ones. Churning customers is a dangerous  and unprofitable practice. Remember, when you introduce an incentive for one  thing, something else suffers.

Tip: Before introducing an incentive, make sure you  understand its full impact.

8. Letting the compensation system manage performance.  Compensation plans give structure and incentives for the sales force. They  should support management’s goals and strategies, not replace effective  leadership and coaching. The compensation plan is a tool for managers to use  with other performance management tools and activities (i.e., performance  appraisals, forecasting, training, etc.) to maximize sales performance

Tip: Integrate the compensation plan with your other  performance management tools to maximize performance.

9. Failing to teach people how to win. One definition of  motivation is “winning is fun and losing isn’t.” If this is the case, a  manager’s job is to help his/her salespeople win. Since the compensation plan  provides the rules of the game, managers must show their people how to play and  win the game. This is particularly true when you introduce a new compensation  plan or for new people. Showing them how to win motivates and invites  loyalty.

Tip: Know how to win with your compensation plan and teach  your people how to do it.

10. Overlooking the power of psychic compensation. Money is  a strong motivator, but it’s not the only motivator. By leveraging such psychic  compensation as recognition, praise, feedback, teamwork etc., you can elevate  your sales organization’s performance to new levels.

Tip: Besides money, find out what winning is for each  salesperson. Then help them make their personal wins.

Summary How many of the pitfalls have you experienced? How  many are exist with your compensation plan? Developing the right compensation  plan requires a careful analysis of such factors as:

• The market

• Your work unit (region, office, etc.)

• The Company

• Your Personnel

• Your Goals

• The Resources / Tools Available

This analysis helps you develop a sales compensation plan tailored to your  needs. Take the time and effort required and both you and your people will be  justly rewarded.

Article Source: http://EzineArticles.com/6435518

Before Cutting Your Price Try These Negotiation Tactics

negotiation tactics

Here are some key negotiation tactics that you should use before you cut your price. In today’s New Economy businesses and consumers are looking for the best deal. They are bombarded in the media with sales, specials, promotions and coupons. This usually means you will be facing a buyer who has done homework and will ask you to cut your price. Instead of going with the marketplace flow resist the urge and build value before discussing price.

Here are some key negotiation tactics that you should use before you cut your price. Using these tactics can help you negotiate more effectively and sell at a higher price.

DO’s

  • When you meet sales resistance, try selling benefits before you
    negotiate.
  • Plan your negotiation.
  • Know what you want and what you need.
  • Set your aim high.
  • Know the other party.
  • Establish a positive climate for negotiating.
  • Identify all the issues before you begin to bargain.
  • Maximize the value of each concession you give.
  • Break complex negotiations down into pieces, and solve each piece one
    at a time.
  • When you lack power, structure the negotiation around facts, figures
    and hard numbers.

DON’Ts

  • Be the first to concede on a major issue.
  • Make unilateral concessions.
  • Get caught in a price only negotiation.
  • Bow to pressure.
  • Be afraid to say “no”.
  • Offer to split the difference.
  • Rush the process – how you negotiate is as important as what you
    negotiate.
  • Be put off by the word “no”.
  • Negotiate with anyone who has less authority to make concessions than
    you do.
  • Negotiate at times when you desperately depend on a favorable outcome.

Use these negotiation tactics to increase sales, profits and customer loyalty. Doing so takes planning, discipline and courage.  It also take a mindset that projects confidence in your product, your offer and yourself.  Remember once you start on the price cut road it is nearly impossible to move to the higher ground.