Sales & Marketing Series: "Six ways companies promote sales failure "

Article by Andrew Rudin, Outside Technologies Inc.

It’s a new year! There’s a new sales quota and new ways to stub your toe making the number. If you’re like me, you’d rather avoid the pain and learn from someone else’s difficult experience. So, pull up a chair while I share the latest 2007 Sales winners of the We-Have-Met-The-Enemy-And-It-Is-Us Awards.

1. Create commission incentives that reward the wrong results.

This winner comes from a software company that used a declining commission reward for increased revenue levels. Here’s the schedule from the company plan:

Up to $60 K revenue = 6% commission
$60 K to $100 K = 4% commission
$100 K + = 3% commission

I know. You’ve already done the math, and realize that a $50K deal will net a salesperson $200 more than if he sells a $70K deal. I can hear a salesperson saying to a customer “You want to spend $70,000, but Christmas is coming up—can you make it $50,000 so I can buy my kids a Wii?” When I asked the company’s VP of Sales about this possible absurdity, she remarked “Our view is that ‘it takes a village’ to close larger-sized deals. We pay less commission to reflect that.” Translation: A CXO at her company doesn’t want salespeople driving a later model Lexus than he does.

Solution: Champion the salesperson’s Lexus if meeting quarterly revenue objectives is part of your business strategy. Whatever your strategy, build your sales incentives around achieving it.

2. Provide no-value “special offers” for prospective clients

This company broke sales rapport by offering purchase incentives that were plainly hollow. The company compounded their misery by insisting their sales force push the incentive to every prospect each month—even though the monthly deadlines were asynchronous with the customer’s buying pattern. Customers resisted, and the more astute salespeople covertly abandoned the promotion. The company committed what author Tony Parinello calls a “reload.” Shoot yourself in the foot, reload, then shoot yourself in the other foot.

Solution: Listen to your customer and to your sales force. If customers aren’t buying the promotion, there’s a reason for it.

3. Measure and manage unproductive sales activities.

Holding steadfast to the simplistic view that sales is a “numbers game,” this company rated salespeople on how many prospecting calls they made and how many software demonstrations they provided to prospects. Since efficiency wasn’t part of the measurement, it’s worth pausing a moment to think about what behavior they encouraged—and got—from their sales team. It’s called indiscriminate prospecting. Jennifer’s numbers looked great because she averaged 70 calls a day last month. Steve was a bum because he averaged 38. Steve’s revenue is 3% lower. But who is working smarter?

Solution: Measure and manage efficiency. Ask yourself whether you want to reward more activity, or better activity.

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Andrew Rudin is the Managing Principal of Outside Technologies, Inc. and specializes in sales strategy for technology companies.  He holds a BS in Commerce (Marketing) and a MS in Management Information Technology (MS/MIT) both from the McIntire School of Commerce, University of Virginia, where he serves on the Advisory Board for the MS/MIT program.  He is Certified in Production and Inventory Management (CPIM) through APICS.  As a Faculty Adjunct at National Louis University, he teaches Strategic Uses of Information Technology.  He can be reached at 703.255.3732, or arudin@outsidetechnologies.com

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