Five reasons why you should analyze your sales compensation scheme

In earlier texts, we have established how vital a motivational scheme is. It is safe to say the aims and objectives of a company cannot be achieved if this scheme is not reliable. This is because the plan not only pushes the salesperson to meet the target but also perform them. It is therefore imperative that every detail should be scrutinized so a perfect scheme that aligns with the interest of the company and salespeople could be set up.

Analyzing Results

How is the company fairing in the stock market? Is there a significant increment in sales recorded? Are we running at a loss or profit and at what percentage? These are some critical question that should be getting answered regularly. It is essential to periodically analyze the vital factors necessary for the smooth running of the firm. The motivation scheme shall be changed in any case to suit the needed priority at the time. For example, it could be changed if the company is losing to a competitor or perhaps sales are dropping. In any case, it is essential that the scheme is flexible enough to be bent when required.

Part of the sales team’s responsibility is to:

•    Using relevant metrics to determine the profit and expense margins. Figures are expected after the making use of the necessary key performance indicator to analyze.

•    Customer relationship management system lies in the hands of this team. They should know the opinions of the customers on the company’s product and channel it towards the betterment of the commodity. This should in turn influence the revenue system and of course the profit margin

•    Setting up to the necessary team for payment analysis.

Why you need to analyze

In a modern market where competition is more than ever, there is even a greater need to analyze to stay ahead of the game. Proper analysis keeps you in the loop and helps the company move forward. Let’s quickly discuss a few reasons why it is needed.

To ensure you don’t spend in vain; proper analysis ensures that the money for the incentive isn’t wasted. Many firms have failed in the system because the money spent is not being accounted for, as a result of improper or no analysis.

Analysis of money paid to motivate salespeople is also paramount. Ensure that they are well paid according to their performance levels with proper bonuses put in place. This will further make them strive to achieve more sales.

When everything is going well with sales, there is a need to strategize to keep it that way. Likewise, when purchases are low, a strategy needs to be adopted to increase it. The first step of implementation is to analyze the causes of the present situation and what needs to be done in each scenario. You need to see every quarter or year progress in sales.

Crosschecking the spending value and determining the strength of the company. The development of the company hinges on know how to spend appropriately.

The technical aspect of analyzing your data

Often, the method of analysis to be used depends on the size of a company. A sophisticated system needs more than just Microsoft Excel to analyze because of the robust database. Whereas, small companies don’t need to spend a fortune before the needed simple analysis can be done. Mostly, the analysis for small enterprises are some calculations that can be done in the following fundamental areas;

  • Cost of running day to day business and daily returns to determine its sustainability.
  • The percentage of motivation given to salespeople and the effects on their performances.
  • Check for the incentives by the company and the corresponding profit it brings to the company.
  • Have a look at commission paid based on the region and its prospects
  • Do a thorough analysis of the location and its potentials
  • Research the average performance of salesperson over a period.
  • Look at the percentages of commissions paid versus the quota a salesperson has. Look at discrepancies between salespeople.

Because the objective of the analysis is to reveal the strength and weakness of a company, a proper analysis is bound to show some displeasing results. This gives a chance to work on the negative consequence and make appropriate measures for the smooth running of the company. Here are some negative results to look out for during analysis;

•    Low sales at the turn of the year

•    The cost of expenses cutting down profits

•    High incentives have a drastic effect on the profit

•    The motivational system might be favorable to some salespeople while it is dysfunctional for others

•    The salespeople are not focusing on selling and promoting the products and services the company wanted.

The causes of these problems need to be investigated and come up with solutions to them;

1.    One major cause is the T&C of the system and target allocation. One needs to check these two and ensure they align with the company’s aims and objectives

2.    Delayed payment of due to the long cycle of sales might demotivate salespeople. Incentive scheme should take note of this and eliminate it.

3.    Eligibility of incentive is just another problem that needs a solution. Who gets commission and how much they get paid needs to be mapped out in clear terms; just as the conditions that qualify each person for the payment needs to be documented.

4.    The problem that comes with underselling a product might not necessarily be traced to the incentive system; It could be because of the ability of the salespeople to market it. For instance, if the company wants to promote a product, it needs to be reflected in the system, for example, with paying a higher rate.

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