DNA OF TOP PERFORMINGSALES ORGANIZATIONS25th February 2014

Michael LiMercer

MERCER

The DNA of Top PerformingSales Organisations

MERCER 2

The DNA of Top Performing Sales Organisations

Key drivers of growth2

Cust.Seg. Retention Expansion Acquisition

Tier 1 95% $100M $10M

Tier 2 85% $75M $100M

Tier 3 75% $25M $40M

1Customer Segmentation &

Targeting

Targets

Channel Strategy3

4. Commitment

4Sales Organization

EVP,Americas

VP,Channel

SalesVP, Direct

Sales

AccountManager

Director,Midmarket

Director,StrategicAccounts

Director,Hardware

Sales

AccountExecutiv

e

5Role design

6Performance

Build – Reconcile – RefineBuild – Reconcile – Refine

SeniorManagement

SalesManagement

Salesperson

SeniorManagement

corporateexpectations

SeniorManagementreviews with

Sales Managerand makes

adjustmentsbased on trendline data and

corporateexpectations

SalesManagement

Salespersonbasis

SalesManagementdetermines

how toachieveadjusted

goals on aSalesperson

basis

SalesManagement

on an Accountbasis

SalesManagementstrategizes

withSalesperson

on how toachieve goal

on an Accountbasis

Salesperson

year

Salespersoncombines datawith customer

insight todevelop

Account-levelPlanning for the

year

Salesperson

Account Plans

Salespersonand SalesManager

review andagree on the

Salesperson’sAccount Plans

Sales ManagerSales Managerrolls up

Salespersons’Account Plans

to SalesManager Level

7Motivation

MERCER 3

The DNA of Top Performing Sales OrganisationsRight Client Segmentation

Revenue$

Revenue$$

Revenue$$$

LargeCompanies

SmallCompanies

LargeCompanies

SmallCompanies

Internal

External

Com

mer

cial

Indu

stria

l

External Variables• Company size (revenues/# of ee’s)• Industry/Industry sector• Company dynamics (growth rates)• Private vs. public• Degree of organizational change

(M&A activity)

Internal Variables• Revenue• Profitability• Volume• Products purchased• Strength of

relationship

Maintainselectively

Maintainminimal

resources/investment

Withdraw

Evaluategrowth

opportunity/maintain

Maintainminimal

resources/investment

Maintainselectively

Develop &grow

Develop &grow

Protect &grow

Opportunity HighLow

Low

High

Fit

Profile-based SegmentationProfile-based Segmentation Opportunity-based SegmentationOpportunity-based Segmentation

MERCER 4

The DNA of Top Performing Sales OrganisationsSmart Key Drivers Of Growth

Beginningof Year

Revenue

End ofYear

Revenue

- +

+

=+

-

StartingRevenue

EndingRevenue+

+X%

Enable sales force withconsultative selling skills toexpand current clients

Minimize customerchurn, while focusingon new customers

CustomerAcquisition

CustomerChurn

Up-selling&Expansion

Cross -Selling

PriceIncreases

CustomerScale-Back

MERCER 5

The DNA of Top Performing Sales OrganisationsBalanced Channel Strategy

Target MarketDynamics• Type: New/Existing• Political/Regulatory

Requirements• Access & Implementation

Logistics• Engagement Model

Preferences (VOC)

Coverage Needs &Priorities• Branding/Awareness• Sales Capacity• Access• Service/Implementation• Differentiation

Cha

nnel

Stra

tegy

External Factors Internal Factors

MERCER 6

The DNA of Top Performing Sales OrganisationsStrategic Sales Organization Design

Customer SegmentGeography

Product/Solution Channel

Revenue Stream

Key

Strategic

SMB

HW

Server

Worksta-tion

SW

CRM

Security

Services

Maintenance

Implemen-tation

Retain/Defend Grow

ExistingCustomer

More Volume CurrentProduct

New Product

NewCustomer

New Product

Existing Customer

Same Volume Current Product

WWSales

Direct

AccountMgmt

TechSales

Indirect

Reseller

MERCER 7

The DNA of Top Performing Sales OrganisationsCustomer Oriented Role Design

Sales Process Step IdentifyOpportunity Qualify Propose Close Implement Care/

Service Renew

Client Managers I I C C A A A

BusinessDevelopment

ManagersA A A A C I I

Inside Sales(Lead Gen) A A

Inside Sales(Revenue) A A A A I I A

Sales Operations C C C I I I C

Product / TechnicalSpecialists C C R C C

Delivery /Implementation R R C

Sale

sR

oles

Supp

ortR

oles

Illustrative Direct Channel ARCI(A = Accountable ,R = Responsible,C = Consulted, I = Informed)

MERCER 8

The DNA of Top Performing Sales OrganisationsAppropriate Quota Management

Threshold 100%

Number ofSalespeople

30-40%of Sellers

60-70%of Sellers

Excellence

Top10%of Sellers

Quota Performance

Bottom10%of Sellers

Target level equates to 100of plan.

Performance level requiring minimal effort –set based on historical performance or fixedcosts.

Excellence level allows 10% of sellers toearn upside, it is usually set usinghistorical data

MERCER 9

The DNA of Top Performing Sales OrganisationsComprehensive motivation system

Type of performance Fixed Pay CompanyBonus plan

Salesincentive

plan

Recog’n &awards*

‘Come to work’ activity Yes

Company profit Yes

Individual sales Yes

Division sales Yes

Individual behaviours Yes Yes

Mercer Survey of Sales Force Total Rewardsand Incentive Plan

MERCER

Mercer sales force total rewards and incentive plan survey willprovide solid and detailed market information of sales forcemotivation management

Total Rewards &Incentive

Best Practice&Industry AnalysisOrganization & Role

1. Pay philosophy

2. Base pay structure

3. City index

4. Incentive plan scheme

5. Sales quota

6. Performancemeasurement

7. Typical benefit

8. Career development

9. Sales recognition

1. Organization profile

2. Sales strategy

3. Sales effectiveness

4. Role clarification

1. Retention practice

2. Best practice collectionof sales motivation

3. Analysis acrossindustry among

• Consumer

• Medical Device

• Pharmaceutical

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MERCER

Mercer sales force total rewards and incentive plan survey hasfour key features, “D-C-B-A”

D: Deep Study C: Comprehensive Research

B: Best Practice A: Across Industry

Deep study in sales incentive plan§ Eligibility

§ Performance measurement

§ Quota management

§ Plan scheme

§ Pay out management ……

Comprehensive research on sales rewards

§ Total rewards perspective

§ Job clarification

§ Compensation strategy

§ Typical Benefit

§ Career development……

Best practice of sales motivation§ Case sharing of each participant

§ Innovative and effective program

§ Description of the motivation program

q Objective, key content, result

Analysis across industry of salesmotivation§ Compare sales motivation practice

§ Across industry analysisq Consumerq Medical Deviceq Pharmaceutical

12

MERCER

Feature 1: Deep StudyAround 40 questions are focusing on sales incentive plandesign, which logically follow Mercer’s 10-Step methodology

1: Create Sales Compensation Philosophy

2: Determine Eligibility

3: Set Total Target Cash Levels

4: Choose Mix of Base and Incentive

5: Select Upside Ratios

6: Determine Measures and Weights

7: Design Plan Mechanics

8: Set Performance Objectives

9: Set Payout Timing

10: Administration and Effectiveness

13

MERCER

Feature 1: Deep StudySample report

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Contents

Introduction and Research Objectives............................................................................. 1

Participant List and Profile .............................................................................................. 3

Sales Incentive Plan Effectiveness ................................................................................. 7

Sales Force Demographics ........................................................................................... 15

Sales Models ................................................................................................................ 22

Sales Force Reward – Pay Management ...................................................................... 25

Sales Force Reward – Sales Incentive Plan Design...................................................... 32

Sales Force Reward – Sales Incentive Plan Quota setting and Administration ............. 48

Sales Force Reward – Recognition ............................................................................... 52

Sales Force Reward – Benefits ..................................................................................... 58

Appendix - Glossary ...................................................................................................... 64

Organization profile

Plan Mechanics (% of responses) High productivity17 responses

Others26 responses

Straight line; first dollar 0.0% 5%

Straight line with threshold capped 0.0% 25%

Straight line with threshold uncapped 15% 20%

Drop dead/all or nothing 0.0% 5%

Accelerator with threshold capped 40% 30%

Accelerator with threshold uncapped 20% 0.0%

Accelerator first; then decelerator 25% 15%

MERCER

Feature 2: Comprehensive Research On Total Rewards

• Job grading and Job titling

• Job scope

• Career development program

• Job Promotion management

• Job rotation management

• Compensation approach

• Compensation strategy

• Salary structure of sales

• Pay mix

• City index

• Incentive plan

• Benefit strategy

• Allowance policy for sales

• Car benefit for sales

• Sales recognition plan

• Exit analysis

15

MERCER

Feature 2: Comprehensive Research On Total RewardsSample Report

16

Headcount

MERCER

Feature 3: Best Practice Study In The Area Of Sales ForceAttraction, Retention And Motivation

ProgramName Company Car

Objective To encourage sales visit clients frequentlyand develop business with new clients

Key points

1.Each sales person has one company carwhich is purchased by company.

2.There are over 150 sales person aroundChina.

3.The company car could be for bothbusiness and private use.

ResultsThe times of client visit are maintained athigh level and enhance the productbranding.

ProgramName Outstanding Bonus

Objective To motivate sales continuously achieve thehigh performance year by year

Key points

1.If the sales performance are ratedhighest with 2 consecutive years, exceptthe regular bonus for annual highperformer, the sales will be also grantedthe additional "Outstanding Bonus" at theend of second year to recognize theconsecutive high performance.

2.The Outstanding Bonus is equal to 2months of base salary.

ResultsThe sales are well motivated and theturnover rate of high performer is below5%.

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MERCER

Feature 4: Analysis Across Industries

Q:“when does a sale count as a sale?”

CONSUMERINDUSTRY

PHARMAINDUSTRY

MEDICALINDUSTRY

18

MERCER

The Survey Timeline

Sales Force Total Rewards &Incentive Plan Report

Data submissiondeadline Report release

- Consumer Industry June 15 Sep 15

- Medical Device Industry July 1 Sep 30

- Pharmaceutical Industry July 15 Oct 20

19

MERCER

The Survey ReportFor survey participants who submit data and purchase

Submit and Purchase Report

1 Main Report:(Both Full report and spotlight

version)

“Sales Force total Rewards and Incentive Plan Report”• Consumer Industry• Medical Device Industry• Pharmaceutical Industry

2 Added Value Report

“Best practice study on sales motivation”

“Analysis report of sales incentive plan Cross industries ”

20

MERCER

The Survey ReportFor survey participants who only submit data

Submit and Purchase Report

1 Main Report(Only Spotlight Version):

“Sales Force total Rewards and Incentive PlanReport”• Consumer Industry• Medical Device Industry• Pharmaceutical Industry

1 Added Value Report Best practice study on sales motivation

21

MERCER

The Survey Value For Participants

The survey will help the participants :

§ Strategically Aligned – developing, managing and optimizing the sales forcemanagement strategy.

§ Comprehensive market practice and policy information regarding the salesforce motivation.

§ Focused on metrics and measurement – providing the business withinformation and methodology to guide fact-based decisions.

§ Best practice– ensuring sales force total rewards and incentive plan isoptimized to perform in the most efficient manner.

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