In our last post we talked about value added, what it is, and more importantly, why you should care about it. The next question to ask: Is your value added where you want it to be?
The graph below tracks value added per salesperson for the top 20% (black line) and bottom 20% (red line) of NAPL Performance Indicators participants. Figures are 12-month moving averages, with the top 20% and bottom 20% defined for the 12 months ending in December 2008. (Value added per salesperson one of 13 vital-few metrics in NAPL Performance Indicators.
As the graph shows, value added per salesperson declined progressively through 2008 for the bottom 20% of the Performance Indicators group.
Does your value added per salesperson look like the red line? If it does, maybe your sales compensation structure isn’t targeting the right sales. It isn’t uncommon: Over 70.0% of participants in the soon to be released NAPL Sales Representative and CSR Compensation Study, Second Edition use gross sales as the basis for determining sales commission, while only 17.8% use value added and 4.7% use profitability. Yet many of those companies recognize the need for their sales reps to focus more on consultative/solution-based selling instead of traditional transactional selling.
What can we learn from all of this? One lesson is that unless sales compensation is structured to encourage selling projects with additional value added, sales people will almost always chase after the easier transactional sales, as oppose to the much difficult consultative/solution-based sales.
In an environment where structural changes are making our industry more competitive than ever and margins continuing to shrink at an alarming rate, ignoring value added in sale representative compensation can be harmful to your bottom line.
For more information on effective sales compensation, contact NAPL Vice President and Consultant Mike Philie at 410-489-7188, mphilie@napl.org.
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