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SMA Webcast
June 07, 2011
Presented by
© Copyright 2011 The Sales Management Association
Compensating Sales Channels
About the Sales Management Association
A global, cross-industry professional association for sales
operations and sales management.
Focused in providing research, case studies, training, peer
networking, and professional development to our membership.
Fostering a community of thought-leaders, service providers,
academics, and practitioners.
1
© 2011 The Sales Management Association . All rights reserved
Learn More: www.salesmanagement.org
JUN
23
Workshop: “Mastering Sales Management”
This one-day workshop offers an advanced survey of competencies
shared by high performing sales leaders, practical insights into
enhancing sales management impact, and proven models for
structuring essential sales management activities.
Held at DePaul University’s Center for Sales Leadership in Chicago.
Join Us for this upcoming SMA event
Slide 2
Today’s Presenters
© 2011 The Sales Management Association . All rights reserved
Anne Coughlan John L. and Helen Kellogg Professor of Marketing, Kellogg School of Management
Northwestern University
Slide 3
Fred Sass Director, Product Marketing
Varicent Software Inc.
Scott Sands National Practice Leader Sales Force Effectiveness
AON Hewitt
Presenters’ Background
4 Slide 4
© 2011 The Sales Management Association . All rights reserved
Anne Coughlan
• John L. & Helen Kellogg Professor at the Kellogg School of
Management with 30 years of teaching experience
• Anne‟s main research interests are in the areas of distribution
channels, sales force management and compensation, and pricing.
• Lead author of Marketing Channels (now in its seventh edition from
Prentice Hall). Area Editor and member of the Editorial Board of
Marketing Science, Co-Editor of the SSRN Quantitative Marketing
Research Network, and as a member of the Editorial Board for the
Review of Marketing Science.
• Ph.D. in Economics at Stanford University.
Scott Sands
• Principal and Sales Force Effectiveness Practice Leader at AON
Hewitt. Scott has 18 years of experience with leading professional
service firms, including Briggs & Sands Consulting, Sibson
Consulting, The Alexander Group, and Watson Wyatt.
• An expert in Sales Effectiveness, Compensation, Marketing
Program Implementation, Process Re-engineering and Change
Management.
• A frequent author and speaker at national conferences. He co-
authored the WorldatWork’s bestselling book Sales Compensation
Essentials.
Presenters’ Background
5 Slide 5
© 2011 The Sales Management Association . All rights reserved
Fred Sass
• Over 20 years of experience in technology companies – AT&T,
ConceptWave Software, Tira Wireless, Casero, Varicent Software
• Responsible for product marketing strategy and execution for the
Varicent Sales Performance Management (SPM) software solution
• MBA from McMaster University
Compensating Sales Channels
June 07, 2011
Presented by
© Copyright 2011 The Sales Management Association
Anne Coughlan Professor of Marketing, Kellogg School of Management,
Northwestern University
Compensating Sales Channels
June 07, 2011
Presented by
© Copyright 2011 The Sales Management Association
Paying for Value
How do channel partners deliver value?
Channel Coverage Intimacy Loyalty Bundling Service Maint. Staff Inventory Logistics
Field Direct
Low High High Medium Medium Medium High Medium Medium
Inside Direct
Medium Medium High Low Low Low Medium Low Low
OEM Low High Low High High High High High High
VAR Medium High Low High High Medium High High Medium
SI Medium High Low High High Low High Low Low
Distrib. High Low Low High Low Medium Medium High High
Agents Medium Medium Medium Medium Medium Medium Medium Low Medium
Retail Medium Medium Medium Medium High Medium Medium Medium High
Internet High Low Low Low Low Low Low Low Low
Slide 8
© 2011 AON Hewitt. Used with permission by The Sales Management Association . All rights reserved
How do internal channel managers add value?
Channel Mgr Direct Rep $150K $150K
= 5 customers at $100K per
or $4 million direct at 50% margins
vs $32 million indirect at 30% margins
($150K / $2.0 million = 7.5% of profit)
($150K / $9.6 million = 1.6% of profit)
Slide 9
© 2011 AON Hewitt. Used with permission by The Sales Management Association . All rights reserved
Channel Trends
• Globalization
• Managed Conflict
• Process Division
• Disintermediation
• Technology
• Customer Data
• Margin Pressure
• Comparable Pay Levels
• Less Variable Incentive
• Improving Performance Data – Sales In
– Sales Out
• Separate Pay Programs for Channel Recruitment vs Management
• More Shared Goals
• MBOs for Training
Macro Trends Compensation Trends
Slide 10
© 2011 AON Hewitt. Used with permission by The Sales Management Association . All rights reserved
© Copyright 2011 The Sales Management Association
June 7, 2011
Presented by
Compensating Sales Channels
Enabling Channels with SPM Software
Fred Sass Director, Product Marketing
Varicent Software Inc.
Discussion Topics
Slide 12
© 2011 Varicent Software Inc. Used with permission by The Sales Management Association . All rights reserved
• About Varicent Software
• Channel Management as Part of SPM
• Five Key Requirements for Compensating
Channels
• Questions & Answers
About Varicent Software
Slide 13
© 2011 Varicent Software Inc. Used with permission by The Sales Management Association . All rights reserved
Addressing the problem that existing Incentive Compensation Systems are slow, rigid and error prone
Typical Problems
Too much time and effort to administer and maintain
incentive compensation processes
Sales create their own „shadow accounting systems‟
Challenged to meet audit and compliance requirements
Difficult to manage third party channel relationships
Some customers…
Example of a Complex Distribution Channel
Slide 14
© 2011 Varicent Software Inc. Used with permission by The Sales Management Association . All rights reserved
Insurance
Carrier
Agencies
Customers
Direct
Indep. Agents Brokers / Dealers
Wholesalers
Captive Agents
Channel Management as Part of SPM
Slide 15
© 2011 Varicent Software Inc. Used with permission by The Sales Management Association . All rights reserved
Incentive Compensation
Calculations, adjustments …
Territory Management
Assign, manage splits ...
Quota Planning
Assign quotas, adjust ...
Channel Management
Direct & indirect, eligibility ...
Report / Analyze / Model / Plan
5 Key Requirements for Compensating Channels
Slide 16
© 2011 Varicent Software Inc. Used with permission by The Sales Management Association . All rights reserved
Accurately pay commissions for 3rd party organizations
In-depth insight into sales performance for each channel
Ensure compensation plan eligibility
1
2
3
Single view of internal and external sales resources 4
Model and analyze sales & distribution strategies 5
Commission Statement
ETR Miami
Souljoy
of America
1) Accurately Pay Your Channels
2) Insights Into Channel Performance
Slide 18
© 2011 Varicent Software Inc. Used with permission by The Sales Management Association . All rights reserved
Distribution Channel Report
Top Products
Top Channels
P1095
P1132
P576d
P5136
P1076
35g WAN router $141,560
Satellite receiver $111,080
Transponder backup $75,976
HRS switches $64,484
Testing console $18,079
Sales
A&G Technologies $123,188 $7,042
Doomsfield Inc. $77,969 $3,721
HighSpeed Solutions $73,249 $3,135
Smith & Johnson Ltd $66,979 $2,168
Jensen Sales & Service $66,794 $2,964
Sales Commissions
Slide 19
© 2011 Varicent Software Inc. Used with permission by The Sales Management Association . All rights reserved
2) Insights Into Channel Performance
3) Ensure Compensation Plan Eligibility
Slide 20
© 2011 Varicent Software Inc. Used with permission by The Sales Management Association . All rights reserved
4) Single View of All Sales Resources
Slide 21
© 2011 Varicent Software Inc. Used with permission by The Sales Management Association . All rights reserved
4) Single View of All Sales Resources
Slide 22
© 2011 Varicent Software Inc. Used with permission by The Sales Management Association . All rights reserved
5) Model & Analyze Distribution Strategies
Slide 23
© 2011 Varicent Software Inc. Used with permission by The Sales Management Association . All rights reserved
Summing up the ROI
Slide 24
© 2011 Varicent Software Inc. Used with permission by The Sales Management Association . All rights reserved
Administrative Process Efficiencies
Reduce errors by more than 90%
Reduce processes times by more than 40%
Reduce IT and administrative staffing by more than 50%
Sales Effectiveness
Through 2012, enterprises will miss the equivalent of 5% to 10%
of annual sales as “lost opportunities” that could have been
captures through improved management of sales territories,
quotas and compensation plans.
© Copyright 2010 The Sales Management Association
Thank You.