Leveraging Sales Compensation to Solve Business Challenges

Most companies agree that their sales compensation plans are ineffective–only 21% are satisfied with their compensation plans and have been able to demonstrate that these plans are more effective, according to Alexander Group’s recent Sales Compensation Hot Topics Research. So, what do they do differently?  

Sales compensation is more than just a reward mechanism; it is a lever to help overcome business challenges, a spotlight that focuses on what’s important and a catalyst for change and growth. During Alexander Group’s recent Media Sales Compensation Symposium, 51 leaders gathered to discuss the most pressing business challenges facing their sales organizations. Let’s dive into how sales compensation is a powerful tool for addressing these challenges and driving business growth.  

Understanding the Link Between Business Challenges and Sales Compensation

When used correctly, sales compensation can give organizations a strategic advantage in growth plays and overcoming common business challenges. Growth plays are defined as any investment or priority that helps them achieve their growth goals and objectives. Conversely, a business challenge is any hurdle that hinders the organization’s success and growth potential. Often, growth plays are solutions to challenges within an organization and are strategically identified to align with business objectives.  

Organizations may be driven to create awareness, drive productivity and profitability or improve customer success, but how do they reach these goals? By implementing growth plays such as: 

• Drive expansion (cross-sell and upsell) with product SPIFs, product credit uplifts and product measures 
• Secure retention with renewal hurdles, renewal measures and renewal bonuses 
• Improve demand generation with pipeline value SPIFs, sourced deal bonuses and sourced deal credit uplifts 

Case Study: Acquiring Large New Logos

A global media company that provides a full suite of solutions has a strong presence in the mid-market segment but wanted to expand its footprint to include large, key accounts, where they faced fierce competition from other players. The company needed to acquire large new logos, and they needed to do it fast. Alexander Group started by diagnosing the company’s current situation and uncovered that their current sales compensation plan was not aligned with their new logo acquisition goal. Their plan had three main issues:

1. It was too focused on solely revenue. It had a single revenue measure that accounted for 80% of the incentive pay but failed to differentiate between new and existing customers. It did not incentivize the sales reps to pursue new logo opportunities, especially if they were large and complex. 
2. It was too complex and confusing. It had too many measures, crediting rules and payout exceptions, making it difficult for the sales reps to understand how their pay was calculated and how they could influence it.  
3. It was too conservative and risk-averse. It had a low pay mix, leverage and pay curve. It did not provide enough upside potential for the sales reps to overachieve their quota, and it did not penalize them enough for underachieving their quota. 

To help the company achieve its business goals, the Alexander Group simplified and streamlined its plan and introduced some key changes: 

• Added a new logo measure, with a higher weight and payout rate, to incentivize the sales reps to focus on new logo acquisition 
• Added a new logo credit uplift, to reward the sales reps for closing large and complex deals, and to encourage team selling and collaboration
• Increased the pay mix, leverage and pay curve, to provide more pay-at-risk and pay-for-performance and to differentiate the top and bottom performers

As a result of the new plan, within the first year the company increased: 

• New logo revenue by 25%, exceeding their target by 10% 
• New logo count by 15%, exceeding their target by 5% 
• Average deal size by 20%, exceeding their target by 15% 
• Sales force engagement by 30%, exceeding their target by 20% 
• Sales force retention by 10%, exceeding their target by 5% 

This example showcases that sales compensation is not just a way to pay salespeople; it is a powerful management tool that can influence behaviors, motivate actions and drive results. Since there are many different sales compensation tools to leverage, companies should constantly investigate how to use sales compensation to drive growth plays, solve business issues and change behaviors quickly.  

Media Sales Compensation Trends

Understanding the latest sales compensation trends is key for media companies seeking to ensure that sales compensation plans are truly effective. Alexander Group has identified the following as the most critical trends for media sales organizations to leverage as they transform their sales compensation programs.

ILAER:

Companies differentiate jobs and sales compensation metrics across ILAER (Identify, Land, Adopt, Expand and Renew). Sales compensation metrics should be aligned with each stage of the ILAER process to drive targeted performance, with balanced attention and resources at all stages.

• Automated Sales: Continued shift from traditional channels to digital platforms with an intensified focus on automated sales (e.g., self-serve and programmatic) which have deep goaling and crediting implications.
• Data Monetization: Companies continue to compete on the value of first-party data solutions and its implications on sales compensation design span across measurability, goaling and teaming for convergent sales. Data-driven solutions are thriving particularly in cross-channel and omnichannel sales.
• Account Manager (AM) & Customer Success Manager (CSM) Lifecycle: Most put their AM & CSM jobs onto a sales incentive plan; high use of renewal and expansion metrics as lagging indicators of success or to reflect job role; innovative companies use adoption metrics also.
• Sales and Marketing Integration: The lines between sales and marketing are increasingly blurring, with more integrated approaches to customer acquisition and engagement. This trend affects compensation as it encourages a team-based approach to achieving revenue goals.
• Agency Landscape Evolving: Agency holding companies moving toward globally led designs with some local flexibility. Comp plans in this space are hyper-focused on integrated selling and cross-agency collaboration, particularly when selling digital and data-driven services.

Still, media sales compensation is complex and dynamic. Leveraging the right strategies and approaches can ensure that sales compensation is not just seller pay, but a valuable tool to overcome pressing business challenges.