Drive Full Portfolio Performance Using Sales Compensation at Life Science Companies

Life sciences companies are shifting to a portfolio-focused approach, tailoring go-to-market (GTM) models to end-market and segment differentiation. Sellers now oversee a broader range of products and services than ever before and there is an increasing need for overlay specialists support to provide deep market and technical expertise.

These changes enhance customer relationships, drive cross-sell opportunities and maximize customer lifetime value. However, life sciences companies must adapt their sales compensation programs to drive successful transformation. As GTM strategies evolve to focus on understanding and addressing specific customer needs and how the overall portfolio can address them, it is imperative for compensation plans to align by rewarding overall portfolio success.

The Challenge: Driving Product-Line Focus When Selling Full Portfolio

Organizations adapting compensation programs to reward overall portfolio success face a key challenge: maintaining product line focus. In a portfolio-focused GTM model, product-line focus remains important for several reasons:

• New Product Launch: New products may be more challenging to sell as they require new sales knowledge and additional customer awareness/education.
• Mergers and Acquisitions: M&A activity presents another avenue for portfolio expansion.
• Varied Effort: Not all products in a portfolio are created equal, and some products may require significantly more effort than others to sell.
• Varied Value or Margin: Some portfolios may have a large variance in value or margin of products, and value may not always directly align to margin.
• Underperforming Products: There may be underperforming products within the portfolio or organizational concerns that certain products may underperform in the future without in-plan focus or dedicated sellers.
• Strategic Importance: There may be specific products in the portfolio which are of higher strategic importance to the organization, such as products with high growth potential, strong potential for cross-sell, or high stickiness.

Using Sales Compensation as a Tool to Solve for Product Focus

Sales compensation can provide a powerful tool for drives business outcomes. When compensation is the right solution to drive product focus in a portfolio model, organizations can deploy various strategies. They should consider strategic priority, ability to set quotas and emphasis relative to other plan initiatives. It is also crucial to maintain alignment to overall program guiding principles, including keeping the plan design simple. Primary compensation strategies for driving product focus include:

1. Short-term Special Performance Incentive Funds (SPIFs): SPIFs motivate sales behaviors and generate awareness and excitement to accomplish short-term business results such as the launch of a new product or to grow an existing product.
2. Add-on Bonuses: Add-on bonuses motivate longer-term strategic priorities which may otherwise be difficult to include as a weighted measure in the plan (e.g., inability to set quotas). Add-on bonuses may be costly as they are incremental to a seller’s core plan.
3. Plan Modifiers: In-plan components such as value/credit adjustments or hurdles drive a higher level of focus than on-top components and may be less costly; however, modifiers add some complexity to tracking and administration. Depending on the type of modifier deployed, it may also be required to set quotas.
4. Separate Measures: Separate product measures drive the highest level of focus and are self-funded; however, they create additional complexities to design, especially if buying behavior varies significantly across territories. The use of separate measures requires setting product specific quotas which need to be aligned to sales potential in each territory. Additionally, leveraging product specific measures may inadvertently reduce focus on overall portfolio performance, potentially requiring modifiers such as linkages to drive desired behaviors.

The sales compensation program goes beyond just the design of sales account manager’s plan. When adapting a sales compensation program, the program should be evaluated in aggregate to create an ecosystem of compensation plans that drive alignment across jobs. Key jobs to incorporate may include:

• Field Application Scientists are likely to focus on a specific product or solution, and their plans should align to product or solution specific measures and in many cases may not include a full portfolio element. Additionally, these jobs are likely on a team measure depending on how they are deployed.
• Market Specialists are likely to be focused on a specific market or end-customer type. These jobs may not be product or solution specific. As these jobs tend to be focused on driving longer term market growth and may not be territory or account specific, it is not uncommon to see them on a BU-level measure.
• First-Line Managers plan design should align to the same measures as their direct reports to ensure alignment to the same outcomes across the team. Additional management specific measures, such as balanced performance, may be layered in as needed.

Driving Rep Behavior Beyond Compensation

Compensation is a powerful tool to solve business challenges and drive behaviors, but it’s not the only tool. If product focus differentiation is needed, organizations should assess the need to determine the right motivational lever(s). Additional solutions include marketing efforts, introducing product specialists, providing sales force training, and performance management such as forecasting and tracking goals. The right solution(s) will align with strategic importance, sales time/effort required and return on investment.

Final Thoughts on Evolving Sales Compensation Strategies

As the life sciences industry shifts toward more customer-centricity and specialization, the role of the sales account manager is evolving to a more portfolio-focused model. When shifting GTM strategy, adapting the sales compensation program is imperative to ensure successful transformation and drive business outcomes. Sales compensation is a key driver of sales behavior that organizations should leverage effectively.