There are a number of things to consider when looking at variable metrics: Revenue growth, contribution margin, new logo acquisition, renewals and retention, customer satisfaction, market share, wallet share, etc. It’s important to first determine what your objectives are as a company before making this decision. For instance, if your goals are to generate higher profits from current customers, a plan that rewards retention and contribution margin might be the way to go. 

 

It’s all about keeping it simple. Making sure this part of the plan focuses on 2-3 metrics is important if you want your reps to be able to understand and focus on the activities that drive desired results.

 

Other factors to consider when determining variable metrics:

 

  • Bonus v. Commissions – Does it make sense to pay a bonus based on performance attainment or a commission percentage of every dollar sold?
  • Product Maturity – Do you have new products to sell or are you prying existing market share from competitors?
  • Sales Cycle Length – How long does it take to sell a deal? What impact does this have on the rep’s ability to earn incentives commensurate with company performance?
  • Activity v. Productivity – Are you paying for activities (leads generated, prospect meetings, pipeline growth) that will ultimately lead to results or are you focused purely on the results (new logos, revenues, profits)?

 

Sales Force Effectiveness

 

As I mentioned at the beginning of this blog, compensation is the biggest expense in the sales budget. Are you ready to go all-in on your comp plan?

 

View Ryan Tognazzini's profile on LinkedIn Follow ryantognazzini on Twitter