Align sales territories and incentive compensation plans for sales performance excellence

[Webinar wrap-up] Align sales territories and incentive compensation plans for sales performance excellence

In a recently concluded webinar, we explored how businesses can align their sales territories with their incentive compensation plans to achieve optimal sales performance.

The webinar opened by breaking territory planning down into three parts:

  • Maximizing sales results from market opportunities
  • Allocating time for sales to appropriately cover current and potential customers
  • Ensuring a business can profitably cover all of the relevant accounts

Using this definition, companies can then dive further into their territory planning by organizing and evaluating accounts, choosing how to cover those accounts, and setting account expectations.

Additionally, discussion arose around insights and best practices for planning sales territories:

Organizing and evaluating accounts

When organizing and evaluating accounts, companies should identify and group accounts into logical coverage segments based on geography, company size, product applicability, and related sales force skill sets required. Best-in-class companies take their account coverage to the next level by using external market data to help assess opportunities and paint a bigger picture. While this is a known best practice, in the webinar we discussed the results from the Better Sales Comp survey, where only 35 percent of respondents said they use third party data when growth planning for accounts and setting quotas.

Covering accounts

When choosing how to cover accounts, companies should define their deployment approach and decide which reps—and how many reps—will cover which accounts. Companies who take their account coverage to the next level analyze how their reps spend their time, and ensure enough time is allocated for quality selling activities. Industry best practices show that 75 percent of a sales rep’s time should be spent on quality selling activities, and not superfluous administrative tasks, redundant internal meetings, and unfocused professional development. Overloading reps with too many accounts further diminishes their ability to focus their time. To avoid this, companies should use time-based coverage methodologies to take a hard look at how much time is needed to cover each account’s full sales process, and then plan their coverage accordingly.

Setting expectations for accounts

Planning for account growth is closely tied to setting quotas. When identifying growth opportunities, companies should look at current sales results, the degree of account penetration, and sales funnel analysis. Quota planning can be a difficult process, but using industry best practices, such as bottom-up planning, and using relevant external data to inform decisions, can help. Taking regression analysis into account can help forecast reasonable expectations and the appropriate quotas as well.

Effective territory planning requires effective sales compensation plans. Many moving parts are involved in compensation planning, and often times the mechanics of a compensation plan can “break” territory planning efforts. An example of this could be when companies pay on absolute commission versus quota-based plans. While they are simpler than quota-based plans, absolute commission plans are typically not as precise and usually deliver less optimal territories. Setting sales quotas is not always a comfortable task, but can result in territories that are built on an optimal workload and deliver optimized territories.

The webinar identified four issues usually found when companies pay on absolute commission issues, and highlighted a process companies can use to identify if they should make the switch from commission to quota plans. 

Explore the issues identified and insights discussed by watching the webinar on-demand.

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