What is the Revenue Impact of a Good Sales Compensation Plan?
We all know a good sales comp plan is important in driving results. We’ve all heard the importance of re-evaluating your comp plan regularly, and keeping it closely tied to new business objectives, and monitoring how changes impact performance at the rep level, and so on and so forth.
That being said…all that can be a lot of work. Sure, automation can help make it easier. Even then, is it worth it? What is the actual revenue impact of optimizing your comp plan, versus all of the other things you could be doing with your time?
Business school researchers set about answering this question in 2011. Sanjog Misra at UCLA and Harikesh Nair at Stanford published the study “A structural model of sales-force compensation dynamics: estimation and field implementation” in the journal Quantitative Marketing and Economics. Working with a Fortune 500 company, they started by looking through all of the sales and comp plan data at the company. They estimated that the company could increase sales by 8% through a set of relatively straightforward actions, most notably eliminating caps on earnings, and eliminating ratcheting based on past performance, both of which were demotivating reps.
The company implemented the recommendations the following year, and revenue rose by 9%, translating to about $12 million in incremental annual revenue.
Is spending time on your comp plan worth an incremental revenue increase of 9%? If your comp plan is giving you a stress ulcer, book a demo with Palette to learn how we can help.
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Why Palette?
Automate calculations
Automate sales commission payments. Create commission rules, define a payout schedule and access monthly statements for each sales rep.
Motivate and coach with real time dashboards
Motivate sales professionals with real-time visibility into commissions. Coach your team, align everybody with company goals and drive long term sales performance.
Compare, simulate and design commission plans
Roll out new commission plans with ease. Compare plans and simulate new rules with a single click.
No more errors
Palette keeps history logs and tracks every calculation detail, helping you to reduce sales commission errors.
Reconcile revenue with CRM data
With Palette you can reconcile invoices and payments with CRM data and pay commissions to your reps only when the money is in the bank.
Create challenges with one click
Incentivize your teams on short term goals. Create a challenge targeting any KPI you want to uplift, drive better results and boost your company’s culture.
