Why are sales force incentives so seductive for businesses?-Understanding attribution

Attribution of the sale closed-incentives-StratoServe
The total US sales force incentives paid out to sales people is probably over $240 Billion/year. This compared to about $60 Billion spent on digital advertising according to the IAB. That works out to sales person commissions and bonuses that are four times the digital marketing spend. We exclude sales force salaries and benefits for this estimate.

In other words, businesses cannot resist the idea of giving out an incentive upon concluding a deal. You hope that the dangling commission of a carrot will keep the sales team motivated. On the face of it, it makes great sense because you pay for results – no results – no pay … how can you go wrong?

In contrast, its hard to pinpoint the particular ad view that “caused” the sale. Or to what would you attribute a particular sale.  Attribution is a difficult idea to grasp in the context of business and marketing.

Consider the attribution challenge in business generally. If you are a builder and are required to complete a home delivery by fall – you know that you need to put more worker resources. Now. If quality of work is important to you, you will involve highly skilled workers. For keeping on time you could get a project manager. All of this will mean increased costs.

If your customer is very happy at project delivery the attribution problem is:Is the customer happy because of timeliness ? (your project manager), Great quality of materials and work?( your skilled worker team, your quality suppliers) or your regular communication and updates ? (that’s you, keeping the customer informed). Probably all these factors had roles to play for a happy customer and you can’t really attribute customer happiness to just one factor.

Similarly, while you feel “in control” giving out a commission on a completed sale – the salesperson’s effort is not the only thing that is working. The customer who signs up has done her research, potentially talked with your other customers and that is why the sale occurs. These other inputs that the customer relies on , before deciding together makes up the marketing effort. Hence both marketing and sales work together. Marketing messages help in smoothing the difficult challenge that salespeople face everyday. If a customer is already aware of a brand(through marketing) , she is much happier to listen to the sales pitch.

And then there are downsides to relying only on  sales force  incentives as this Harvard Business Review piece suggests. Commissions and incentives are a great motivator, except that the sales force becomes short term oriented. Salespeople are not entirely committed to customer satisfaction over the long term, they just want to make the sale. Since rewards are tied to signed contracts and there is really not much incentive in uncovering customer priorities. Perhaps some of these priorities are not met by your offering. There is every chance of “dropping the ball” between sales and the rest of the organization when sales is incentive driven.

In summary, sales force incentives do motivate salespeople. However, attributing the sale entirely to the sales person is an error. Your offline and online advertising,website,social media,current happy customers are all making the sale possible.

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