New Research Reveals Account Growth Stalling, Compensation Plans Must Be Redesigned to Focus on Driving Growth
Forty-nine percent of account managers have a single revenue goal that makes no distinction between retention and growth, according to Gartner, Inc. However, sales leaders note that account growth is an essential component to meeting their organization’s revenue goals, yet only 28 percent report their account management channels regularly meet cross-selling and account growth targets.
“In most cases, sales reps look to account growth as a last resort,” said Craig Riley, senior principal analyst at Gartner. “This is because today’s sales compensation plans fail to motivate sales reps to grow their accounts; instead single-metric plans allow sales reps to receive most of their variable pay from renewals.”
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The median proportion of sales reps’ overall goal assigned to growth accounts for only 9 percent of sales reps’ variable pay, which is not reflective of the time and effort required to grow accounts, according to Gartner. In addition, Gartner research also shows that many sellers don’t actually understand how they will be paid, with only 24 percent of sales reps able to easily calculate their total variable compensation.
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“It’s not surprising that organizations struggle to use their incentive program to drive account growth,” added Mr. Riley. “If sellers don’t understand how they will be paid, then it is very hard to use compensation to motivate them to perform in a specific way.”
To solve this problem, Gartner recommends sales leaders re-evaluate how they compensate sales reps to better incentivize account growth. Specifically, sales leaders should follow three key steps to identify and implement appropriate compensation plan changes to drive growth:
- Identify Where and How Sales Efforts Fall Short: Sales leaders should diagnose whether sales rep behavior is aligned with strategic goals by evaluating current sales performance on renewals, cross-sells/upsells and new revenue against projections and growth targets.
- Include Account Growth in Compensation Plans: Motivate sellers using single-metric plans to grow their accounts by using thresholds and pay accelerators to limit their ability to earn incentive pay via renewals only.
- Ensure Sales Rep Understanding: Improve multimetric plans’ ability to motivate sellers by having each metric account for at least 15 percent of on-target earnings (OTE) and limiting compensation plans to no more than four metrics.
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