Maximizing a Product Rollout with Incentive Management
Bringing a new product to market or even a new version of an existing product is not what it used to be. Back in the day your market was probably empty, a green field where you could find opportunity under a rock. Everybody needed what you had and selling was relatively easy.
But things don’t stay that way for long and today you have to work hard to insert a new product into a crowded market. As a result, a product launch takes on the proportions of a military campaign. You gather information and make projections, your marketing team develops and positions their ammo, and you train your sales troops and drill their objectives into their noggins. Then you go to war.
Ok, so the metaphor is deliberately hyped but there’s still a grain of truth in it. Rolling out a product is a big deal, it does require careful planning, and there are a lot of moving parts, which is why there’s so much planning to begin with. In short there is risk. However, there is always risk in marketing and sales. There is risk the market will change and your core product will get on a fast track to commodity status, a risk that your sales team won’t be able or inclined to sell it. A product rollout is just one more risk.
Most often we handle risk through a portfolio strategy, we don’t put all our eggs in one basket, as Mom used to tell us. We get that but how do we use this wisdom in a product rollout?
If you have more than one product, you already have a portfolio though you might ignore this fact. Each element in the portfolio has a risk associated with it and — get this — the risk is perceived differently for the business and the sales person. The sales manager and anyone higher up understands the importance of selling the new, new thing. It usually has the best margin and is more profitable than older items that are rolling down the road to commodity-town. Everyone should want to maximize the new product, right?
Well, if you are a sales rep, the risk you see is in the grind to make quota. If you are compensated on revenue and not profit, loss, or margin, then the fastest and easiest route to the cheese is often by selling what you know best because, hey, revenue is revenue. That’s where compensation management makes a great contribution. Using compensation management gives an organization and the sales team the chance to balance out their respective risks.
For the business, this means assembling a portfolio of requirements or expectations that include supporting the new product rollout as well as maintaining the continuing business. Many organizations will put a separate quota on the new product to ensure compliance so that while a rep might be able to make a lot of money avoiding the new product, he or she will not be considered a solid citizen without also contributing to the rollout.
For the sales rep, it’s all a game anyhow, in the best sense of the word. A mixed portfolio of quotas is just grist for the how-am-I-going-to-make-club-this-time calculation that everybody does.
So the sides are evenly matched, except in one very important area. How are you going to keep score? For sales reps, score keeping is done on a W2 form, but for managers it’s much more difficult. Let’s agree that we never want to hand out a goal and an incentive unless we have a way to measure attainment. The spreadsheets that many businesses use for relatively simple, how-much-did-you-sell incentive compensation calculations basically roll over and play dead if you have to begin figuring out multiple products, their unique incentives, and attainment — and we aren’t even bringing splits into the discussion.
Very quickly several things become increasingly clear. First, while you might have gotten away with using spreadsheets for incentive compensation in the good old days, today is different. Second, taking a portfolio approach to selling makes a lot of sense, if you have the tools to do it right. Third, you have to stay ahead of your competition and in this case it means if your reps are using spreadsheets to track their individual performance, it’s time for you to get more sophisticated by using a modern, database-backed system that can easily track multiple people, products, incentives and more. Only then can you accurately and fairly reward the people who took the greatest risks and met or exceeded expectations.
Woody Allen once quipped, “To a knife fight, always bring a gun.” This is like that.