A Sales Compensation Problem Looking for a Solution
Apr 14th, 2010 by David Svet
I need your input to help solve a thorny problem.
A friend of a friend has built a successful business. His organization has an excellent territory sales force that required a sizable investment to create. It is an extremely valuable asset.
The problem: A new salesperson is suddenly having tremendous success selling through social media channels. Social media knows no bounds or territories. What is a fair way of compensating everyone involved?
I suspect that this isn’t the only case where this is happening and we will probably see more of it in the future. Do you know of anyone who has solved this successfully? Do you know of anyone who made a mess of it?
I am open to your suggestions.
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Need more info to be helpful, BUT a few questions.
Why is a territory important?
What are they selling?
How are they compensated?
Did the sales people have to “buy” their territories?
How many sales people are there?
How big are the territories?
What is the average sale price?
How long is the sales cycle?
All of these questions would help provide a solution that would work for him.
Barring having that info, my advice is; remove any friction to selling. If that means re-evaluating the territory model, because the business seems to respond well to social media, then do it. The key to sales is to create a structure, compensation model and process that removes as much friction as possible.
The DON’T is: don’t do ANYTHING that could frustrate the new guy for being creative and making things happen. He’s onto something bottle it, DON’T impede it.
Thanks Keenan! Great insight. I’ll see if I can get answers to your questions. I think the owner realizes the new guy is on to something and wants to make it work. You’re right. Remove friction!
I agree with the previous respondent. My preference is for accounts to be assigned on a “named account” basis rather than a territory basis. In order for a salesperson to have an account assigned they have to be able to prove the activity they have under way in the account. I prefer this approach because it enables salespeople to follow referrals (the pursuit of which I recommend as a key pillar of any sales culture) wherever they lead them. This would pertain equally well to sales opportunities generated via social networking.
Thorny sales compensation problem
It seems like this will be relevant for many successful businesses as they add social media to their marketing mix.… especially those companies using independent reps. Challenges around mixing something “new” with something “old” have been around for a long time. Has anyone seen any general guidelines that we could apply to social media and commissions based on territories?
Hi David!
Why doesn’t your client offer to pay the “social butterfly” to develop and execute a program for training his/her colleagues to do the same? Once they’re all on more-or-less an even playing field, it should be easy for him/her to say “Where are you from?” to a prospect, then “Let me introduce you to my pal @ChetYoubetchya, who is our rep in your area”.
Make sense?
Alan, I appreciate your input. Named accounts sounds like it might work for them, particularly with social media referrals.
Jon, Good point! Got to keep the “butterfly” in the cabbage!
Got some clarification on the situation. They don’t have a new rep using social media, they set up a corporate account and it is attracting sales. I think they should direct prospects to their respective rep for follow up in closing the sale. They should also have every one of their reps create accounts and learn to use social media immediately! They seem to have a golden opportunity.