Motivating Sales Representatives to Make Profit-Oriented Decisions

Situation
A mid-size manufacturing company was struggling with the effectiveness and predictability of payout of their sales compensation program. The leadership also felt the current program was not driving the appropriate behavior amongst sales representatives.

Approach
Price for Profit assessed the current compensation program and worked closely with the client to build upon the program’s strengths; namely the fact it was based on Gross Profit Dollars (versus revenue), incorporated sales representatives expenses, and was a good mix between base salary and variable pay.

The modified program included several additional factors, such as:

• Compensating the sales representatives on additional price waterfall elements they had influence upon: terms discounts, freight revenue, and invoice deductions.
• Establishing a gross profit plan per individual, setting expectations for the representatives, enabling changes based on market conditions like price increases, and accurately modeling payouts based on performance.
• We also built an interactive tool that gave the sales representatives the ability to clearly understand the program and see how their daily decisions impacted the companies profit and their resulting pay.

Results
The new sales compensation program was introduced at the annual sales meeting and successfully implemented, meeting the client’s key objectives: Empower the sales force, align payout closely with business performance, reward the individuals for making profit-oriented decisions, and build a robust program able to handle continual business changes.