September M&IT Fishers File
John Fisher argues that incentive techniques come into their own when times are tough and you have think of new ways to make the budget work better
Plateau or trough? Whether you think we are at the top of the market looking down or at the bottom of the market looking up, there is no doubt that we’ve all been treading a very thin, flat line for a few years with no real sign of a dramatic change. The tortoise-like slowness from the Eurozone in taking ‘decisive action’ is not helping matters much. Naturally Amalgamated Creative Solutions have had a wonderful year and they have never had it so good…according to their PR machine. Some specific industries have also proved themselves to be particularly market trend resilient. But not many. So, well done to them. But for most product marketers things have been pretty tight… and the tighter it gets the more times you have to try and do more with even less money.
Have you thought about incentives? No, not the idea of doing them, but how they could be constructed in a static market? When the economy is static it means that the market has stayed at the same level compared with previous periods. In other words demand has not actually grown, but there is still significant demand (sales) to be had. Zero percentage growth does not mean zero business…it means we have to work with the trading conditions of last year or the previous two years or whatever. So it is illogical to stop promoting or communicating, unless you actually want your competitors to take your share of this static market. If you sold the same as last year, you will have the same or similar marketing margin to play with, so you do actually have a budget. In this case it could be used to defend your position rather than simply ‘sell more’ than last year.
Some obvious incentive structures spring to mind to reflect this different overall market. If your aim is to defend your position…sell the same volume as in previous years…the incentive rules should reward sales volume, pure and simple. It may be that in order to achieve this in a competitive market you may have to compromise on the quality of the business…so allowing smaller contracts than is normal or relaxing the rules about having to sell on peripheral sales to the same customer etc. But beware. Over the years incentive rules often acquire a complexity all of their own. No-one is quite sure why there are so many restrictions and caveats. So now may be the time to declutter and ditch ‘historical’ rules that no longer make sense in the current climate. It can be very constructive to throw the old rules away and start again from scratch.
The downside of a volume-driven incentive is that you tend to get the same old faces winning all the prizes, simply because they have been working in the market for longer and already have lots of contacts. One way round this syndrome is to create ‘volume leagues’ where the bigger, more experienced sellers compete amongst themselves, with the medium or smaller volume participants competing in their own leagues. So, instead of allocating all the rewards to the top ten volume achievers you could allocate only, say, 6 awards to them with 4 reserved for the lesser volume achievers. Why would you do this, apart from just ‘ to be fair’? Because the total sales volume from the top ten may not be enough to hit the overall campaign target, having taken into account your promotional costs. After analysis of the distribution of normal sales without an incentive it may well be that a modest increase from the middle-band may actually produce more sales in total than a big increase from the top ten, overall. It’s a judgement call based on the best chance of achieving that elusive overall volume target.
It may be that your main competitor has some great new product and you don’t have anything in the pipeline. So it’s very hard to get heightened activity with nothing new to say to the same customers. So one technique is to offer a ‘fast start’ to your incentive campaign through double points for the first half of the campaign and/or perhaps reduced cost add-on services for the duration of the competitive campaign. That means you would plan to distribute say two thirds of the incentive reward over the first half of the campaign in the belief that it will galvanise the sellers into early activity, creating a contacts and appointments momentum which will carry on after the actual incentive period is over…which is the point of most incentive schemes anyway. One sales does not a long-term client make.
Or let’s say you have an enhanced product to sell and your main aim would be to get additional sales from existing clients for this new revamped product. In this scenario ideally you want to only reward an increase in sales over previous performance…you don’t really want to pay out for sales that will happen anyway. So the measurement could be ‘percentage increase’ in sales. In this scenario you would have no advantage as a volume seller to compete for the top rewards. This works well to encourage all levels of the sales team to be more active and in the case of an enhanced, existing product, the door is already open as they would be dealing with existing clients. So, arguably appointments would be easier to make.
In a static market, many customers stick to their existing suppliers and drip feed what new business they may have to them without a formal review. Or they consciously look to find new suppliers in order to reduce margins and therefore improve their trading position that way. In many markets it would be appropriate to forget the whole idea of rewarding new sales and simply reward ‘activity’…because activity leads to new contacts which eventually lead to new sales when the market picks up. So you could construct incentive rules that purely concentrate on activity, making appointments, doing presentations, having informal meetings and then let the sales come through as part of the process at some future date.
Another approach in a static market is to incentivise back-up staff to pass leads through to the sales team. After all, the admin guys who service existing clients or take calls from new potential clients are in the perfect position to suggest additional services or make appointments for those who are more adept at face to face business relationships and persuasion.
There is nothing new in any of these ideas and no doubt most marketers have tried any or all of these systems at many times in the past… in growth markets. But the oddities of a static or declining market are such that achieving five per cent less than last year could well be deemed to be successful, if you have no new product to market against an innovative competitor. With some significant European markets actually experiencing double digit decline this year, it’s even more important to be very clear what your objective is right now, rather than simply say ‘ we want more sales’. And tweaking the rules of incentive programmes could be the way to do it.