Develop an insentive structure
Case #1
Executive summary
Our company operates in a small but lucrative market. We make expensive hi-tech widgets. Due to one of the broadest product portfolios in the market we have a sustainable, long-term relationship with our customers.
The market we operate in is narrow from both customers and competitors’ perspective. At this point in time we command approximately 40% market share, while our closest competitor holds 25%. The remaining 35% is divided between 6 other major competitors. From our customers perspective there are 80 companies, 15 of which make up 60% of the market.
For our employees the industry is highly demanding. Due to our hi-tech products we need a highly qualified sales force. Also due to proprietary technology we prefer to recruit sales personnel from within company. We prefer our sales employees have a strong engineering background. Furthermore we put great emphasis on training our sales personnel. We lost two of our “Key Account” sales personal to our largest competitor. Due to the competitive nature of our industry and the great investment input into our sales force employee retention is of paramount importance. A downturn in the industry is highly likely in the near future.
Problems to solve
Company’s strategic goals for the next year are:
Increase Market Share
Improve Customer Satisfaction
Increase Gross Margin
Additionally we should not forget that we need to retain our employees and live through industry downturn as painlessly as possible. Retaining salespeople is a top priority, our sales force represents a large investment which is not easily replaced. We should not undervalue the experience and personal relationships developed by our sale force.
We have to decide: What mix of compensation will we use? How will we position our total compensation relative to the industry? What kinds of incentives will we use? Will we use accelerators, if so what kind? How will we motivate and retain our sales force?
Recommendations
Executive summary
Our company operates in a small but lucrative market. We make expensive hi-tech widgets. Due to one of the broadest product portfolios in the market we have a sustainable, long-term relationship with our customers.
The market we operate in is narrow from both customers and competitors’ perspective. At this point in time we command approximately 40% market share, while our closest competitor holds 25%. The remaining 35% is divided between 6 other major competitors. From our customers perspective there are 80 companies, 15 of which make up 60% of the market.
For our employees the industry is highly demanding. Due to our hi-tech products we need a highly qualified sales force. Also due to proprietary technology we prefer to recruit sales personnel from within company. We prefer our sales employees have a strong engineering background. Furthermore we put great emphasis on training our sales personnel. We lost two of our “Key Account” sales personal to our largest competitor. Due to the competitive nature of our industry and the great investment input into our sales force employee retention is of paramount importance. A downturn in the industry is highly likely in the near future.
Problems to solve
Company’s strategic goals for the next year are:
Increase Market Share
Improve Customer Satisfaction
Increase Gross Margin
Additionally we should not forget that we need to retain our employees and live through industry downturn as painlessly as possible. Retaining salespeople is a top priority, our sales force represents a large investment which is not easily replaced. We should not undervalue the experience and personal relationships developed by our sale force.
We have to decide: What mix of compensation will we use? How will we position our total compensation relative to the industry? What kinds of incentives will we use? Will we use accelerators, if so what kind? How will we motivate and retain our sales force?
Recommendations