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Should You Call a MEDDIC to Improve Your Sales Procedure?

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The Point: When should you call a MEDDIC to improve your sales procedure? Yes, we meant to spell it “MEDDIC” instead of MEDIC! Why? If you’re old enough to remember the television series M*A*S*H (or a Hulu Plus subscriber), you know the benefit a Mobile Army Surgical Hospital for the front-line position. We would argue that Business Sales/Marketing is similar to wartime, inasmuch you most likely will have casualties. Instead of these casualties being life/death, they are go/no go for the campaigns you run as an organizational Sales/Marketing Leader. So, in this post we explore the MEDDIC sales procedure… Enjoy!

Should You Call a MEDDIC to Improve Your Sales Procedure?

The MEDDIC Sales Procedure

An acronym, MEDDIC stands for Metrics, Economic buyer, Decision criteria, Decision process, Identify pain, and Champion. This sales procedure emphasizes better customer qualification—determining if you should expend effort getting a prospective customer into your sales funnel.

The MEDDIC Sales Procedure

The MEDDIC sales procedure is a B2B sales methodology that was developed in the early 1990s. The process focuses on better customer qualification, in other words, determining whether you should put effort into getting customers into the sales funnel. Supporters for the MEDDIC sales method assert that pitching more qualified customers leads to a greater closing rate, which in turn increases sales performance.

MEDDIC is an abbreviation for Metrics, Economic buyer, Decision criteria, Decision process, Identify pain, and Champion. These are the six steps concurrently utilized to identify customers within the MEDDIC sales process.

Metrics

The first step is to determine what the client hopes to achieve in gaining from your product. The gains must be easily quantifiable. For instance, the business may wish to increase the amount of products that they produce by four times the rate or they may need to bring their products out within a half-hour or to cut down at least 20% of manufacturing expenses.

These metrics allow you to explain the economic advantages from your service. Once you’ve identified this is important to the customer, it is possible to demonstrate that your solution can provide a high Return on Investment (ROI). If you are able to justify your solution from an economic perspective, in theory you’ll be just a few steps away from closing your deal.

Economic Buyer

You must know who’s the company’s buyer of economics that possesses the authority to decide and approve spending. In most cases, you’ll be speaking to someone additional in the organization than just your current contact (For example, the decision could come from a Consensus Committee). Knowing the business buyer’s mindset and their perspective will assist you in closing sales because the buyer’s veto power means they are the only one that needs to be convinced.

Plan on directly contacting the economic buyer to learn about their success metrics, their expectations, and their decision-making process. However, in certain situations speaking directly is not possible, and you must attempt to gather these details about the buyer from the person you have contacted. Utilize these details to ensure the purchase appeal to the buyer even if they aren’t going to necessarily be affected directly by the sale.

Decision Criteria

Also, you must know the business’s criteria when making its choices. Businesses are frequently faced with different options from various sources and are forced to review and choose. If you can understand why they arrive at their decisions then you can tailor your message accordingly.

The criteria for judging differ, but generally businesses consider factors such as ease of use/integration, budget restrictions, and possible ROI in making their decision. If the prospective company doesn’t have clearly defined criteria for making decisions, you could ask them to write it down on paper. This is a way to show that you meet all the criteria they have, and potentially showing them the “Why?” associated for them to not accept an offer.

Decision Process

The decision process will tell you what factors influence the decision-making capabilities of the company and the process that decision making takes as well as which are actually taken and then followed up on. The decision process should include the person who is responsible for making a decision, the deadline they work on, as well as any formal approval procedures in the process.

If you are aware of the process of making decisions, you’re less likely to miss out on the sale because of stagnation. You know precisely what has to be done for the company’s part to conclude the sale, and you are able to work to fulfill those requirements. If, for instance, you are aware that the economic buyer has ok’d the purchase but hasn’t completed the follow-up procedure documents, you may make an effort to have that paperwork completed, thus closing the deal.

Identify Pain

A client must be in need prior to deciding to seek the solution. In other words, no change will occur until the pain associated with staying the same (doing nothing) is greater than the pain associated with changing (switching vendors to you!) It’s essential to determine what that requirement is or what’s making them feel pain (suffering?). The pain may be manifested in various ways, such as high costs as well as slow production and poor revenues. Find out what pain your customer is feeling and figure out what solution you can offer to alleviate the discomfort. What happens in the event that they fail to choose the right solution, or make a mistake? What will be the solution to be able to fix the problem?

Be as precise as you can about the customer’s issues. For instance, knowing that the customer is losing money because of slow production is vital. However it’s not sufficiently specific or abstract to put into use. It is specific though if you know that they’re losing $300,000 per month due to their production process because it isn’t nearly the speed it ought to be. In this scenario, you could propose your solution with a specific and persuasive method for improvement therein.

Champion

Find a person on the inside who’s invested in your progress and who pushes to help you. The person who champions your cause is likely to be the one who is the most affected by the company’s struggles or who will benefit the greatest from the solution. Since they’re interested in your solution, they want you to succeed and will leverage their influence to market the solution internally.

Your champion doesn’t necessarily need to be in an executive or other executive position (but it sure does help), but they should be respected. A person who is known as self-centered and uninterested in advocating for you is never the best choice. However, having a champion who has influence and respect on your side could make all the difference in closing future deals.

Should You Use the MEDDIC Sales Technique?

The MEDDIC sales technique is an easy checklist for your sales operation. It will ensure that your sales are backed by all of the details that you need and the easy acronym makes it simple to recall what that you’re required to know. Since the MEDDIC sales procedure is based on learning rather than making sales through tricks it’s simple to use even for people who aren’t considered to be “salesy.”

Furthermore, the MEDDIC sales strategy provides you with the data you need to be able to precisely assess your prospects. Once you understand more about your prospective clients you will then know if they’re worth your time. This will aid in forecasting your sales since you’ll not be creating leads that won’t be profitable in your pipeline for sales.

Implement the MEDDIC Sales Procedure – Where to Start?

As you can see from the previous steps, the MEDDIC sales procedure provides specific guidelines on how to gain more information about the potential customers you are targeting to convince them of your service or product’s worth. How do you get your sales reps to use this method?

Begin by visualizing the process. It’s not only the basics of MEDDIC, but how the steps are tailored for your company. This could involve creating an outline of the collateral you should use at each step or conversation trees to aid reps in identifying winners and points of contention (These are in your Sales Playbook, right?)

Next, make sure that your sales reps keep accurate records of meetings with prospective customers and other interactions using their MEDDIC procedures to make sure they are following the entire MEDDIC process. For instance, you could add fields to your CRM that correspond to each of the steps or develop a template such as the one below.

SUMMARY

If you are able to qualify and understand your clients Your sales team will be able to focus their time on opportunities that are most likely to work and discover the value that will get this deal across the line to “Closed Won” status! If you’d like more information on how we can help you implement MEDDIC or other Sales/Marketing best practices, CONTACT US today.

Sam Palazzolo, Managing Director

How Brands Use Pricing Strategy to Improve Customer Experience and Increase Brand Value

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The Point: Is the pricing strategy you establish for your organization’s products/services the “right” price? By the “right” price, what’s really at stake is what will enhance the customer experience and increase your brand value. From the pricing studies that we’ve conducted, we’ve seen a number of organizations that are challenged while at a 3-pronged fork in the road when it comes to establishing pricing strategies. In this article, we’ll explore an overview to pricing strategy and the inherent benefits associated with customer experience and brand value… Enjoy!

Pricing Strategy 101

Pricing Strategy can be a powerful tool to increase brand value and attract new customers. Brands use value-based pricing to create a range of products and services at different price points. The goal is to make each product or service stand out from the rest of the market. To do so, brands must create a meaningful difference between their products and those of competitors, and give consumers an apparent reason to pay more. Brands that employ a premium pricing strategy often target a particular segment of consumers.

Pricing Strategy as Competitive Advantage

While low prices are often appealing to consumers, they are also perceived as cheap and can erode brand value. Price changes must be carefully considered, as they are almost impossible to reverse. If a competitor is already offering a product or service at a low price, they may have the upper hand. Using discount pricing can help a business to attract more foot traffic and to clear out old inventory, but it could also lead to negative effects on the perception of quality.

Pricing Strategy and Organizational Goals

Developing the right pricing strategy is essential for any business. There are many factors to consider, so it is a good idea to calculate COGS, profit goals, and customer needs to create the optimal pricing strategy for your product or service. Once you’ve done that, you’ll be ready to start your pricing journey.

Pricing Strategy – First Steps

The first step in creating a profitable pricing strategy is to define your target audience. A target audience’s price sensitivity will help you determine the appropriate pricing strategy. For example, if you have a product with high price-sensitivity, price-skimming may be a good strategy. If you have a limited market, a low price strategy may work well for you.

Pricing Strategy is an ongoing process. Ideally, you should use CRM software to segment your customer base and test different pricing strategies. Developing a successful pricing strategy requires time and effort. However, the right pricing strategy should be well-supported with your go-to-market strategy and marketing plan. In order to determine the best pricing strategy, it’s important to gather feedback from your sales team. You should also evaluate your competitors and gauge their pricing strategy.

There are many different ways to price your products and services. For instance, you can price a product or service above your competitors, while you might be able to match them using a value-based model. For a more profitable strategy, you might want to price your products or services below your competitors. This strategy, however, requires more research and insight into your competitors. It’s also important to evaluate your own costs and resources in order to determine which pricing strategy works best for your business.

Another pricing strategy is loss-leader pricing, where you offer a low-priced item with the hope that consumers will buy more. This strategy works well if you want to attract new customers. If the price of your product or service is a significant part of your business, you might choose to charge higher prices for ink to attract more potential customers.

SUMMARY

In this article, we’ve explored pricing strategy from an overview perspective along with inherent benefits associated with customer experience and brand value. Crucial in establishing the pricing strategy are identification of competitive advantage and organizational goals. We’ve also explored a few additional “first steps” that should be considered in doing so.

Sam Palazzolo

KEYWORDS: Pricing Strategy, Competitive Advantage, Customer Experience, Marketing, Competitive Strategy, and Organizational Goals

Scaling Sales Entrepreneur-Style!

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The Point: Wouldn’t it be nice to experience scaling sales entrepreneur-style? I mean think of it… Cruising along at 30,000 feet without a worry in the world! Seriously, entrepreneurs that scale a business from $0MM to $50MM achieve no small feet. So, are there lessons we can learn from entrepreneurs as we attempt to scale sales, regardless of the size of our business today? In this post we’ll explore scaling sales entrepreneur-style… Enjoy!

Scaling Sales Entrepreneur-style!

When starting a business, how do you succeed? You must be willing to face your shortcomings and learn to be a leader needed by your startup company. Learning to scale is not an easy task. You need to have the right mindset, strategic capacity, and grit to make your dream a reality. You also must create meaningful value for potential clients. Fortunately, there are many tools that can help you grow your organization.

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Scaling Sales by Listening

First, learn to listen to others and learn from them. If you are not willing to take the time to learn from others, you can’t become a successful leader. You need to take other’s perspectives into consideration. Todd started his own company to develop software applications for wireless devices. He was confident in his concept, but he also listened to the opinions of his team. He publicly acknowledged their contributions and stressed the importance of making them feel valued.

Scale Sales by Leading the Team

As you scale your business, you must become the leader that your team needs and want. Ultimately, you must focus on your organizations top priorities, but it’s the implementation/execution of these priorities through input from your team members that will count. It seems essential to make sure that you’re making the most of your time in doing so. This means stepping away from the details of your business and focusing on the core of your business. You can also automate certain processes to increase your time. As a leader, you should be comfortable letting go of some of — if not all your business activities.

Scale Sales by Eliminating Bottlenecks (i.e., YOU!)

Learning to scale your business means letting go of your role as a bottleneck. Instead of being a bottleneck, you must build structures, processes, and rhythms that won’t rely on you. This is where you’ll be more productive. By creating a culture that supports the growth of your business, you’ll create a company that can grow without you. In theory, the more people you have the faster you’ll be able to scale.

Scale Sales like Eating an Elephant

The first step in scaling your business is to focus on one thing at a time. If we were going to attempt to eat an elephant, we’d do so one bite at a time. The more things you can focus on, the more ineffective you’ll be. By focusing on a single task, you’ll get more done and improve your company’s overall efficiency. You’ll be able to direct your team’s efforts towards the work that will truly make your company successful. It will also be easier to scale.

SUMMARY

A successful company has a clear vision and a strategy for scaling during it’s business transformation. Its vision will help it grow. It will need technology capabilities to enable growth. It will also need to integrate AI and IoT into its business. Developing a business transformation business model is a vital step in scaling. It can be difficult to grow a business without it, but it can be done. It can be a huge help for your business though if you are looking to transform your business.

Sam Palazzolo

SKO Essentials for Sales Kickoff Success – 8 Tips + PDF Guide!

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The Point: Let’s face it – selling in recent years has been tough. The COVID-19 pandemic and its various delta variants have changed everything about our lives as we know it, as well as redefining the definition of being efficient in the field of sales. This is why sales calendars with a sales kickoff (SKO) at the beginning of the year are essential for starting the year off on the right foot. They’re the most important sales training event of the year where we recognize the successes of the previous year, discuss plans for the year ahead, and set the tone for key initiatives. But if you agree that these SKOs are important, why do so many miss the mark? In this article we’ll explore SKO Essentials for Sales Kickoff Success along with 8 Tips… Enjoy!

Tip of the Spear Ventures | The Zeroing Agency SKO Essentials for Sales Kickoff Success

Achieve Sales Kickoff (SKO) Liftoff!

Many of us choose to work at home, don’t make your usual in-person kickoff and put it to the internet. Take a look at the following essentials for creating the ideal online sales kickoff plan.

(Looking for additional tools to help you plan your SKO? Read our guide for how to organize the most effective virtual sales kickoff.)

Basics of the SKO Agenda

Making the schedule is the most crucial aspect of making plans for your SKO. It is possible to invite the right people and organize an ideal party – either in person or online, however if no one actually is able to take anything away then what’s the reason?

When we design an SKO plan at The Zeroing Agency, we concentrate on four goals:

  1. Believing in the mission
  2. Finding a balance between sales enablement, technology capabilities, and customer-centricity
  3. Motivated and energized people
  4. Encouragement of participation and networking with peers

Begin by thinking about what your sales teams must remember for the weeks and months following the event. You can then proceed from there.

8 Tips for Sales Kickoff Success

So with these four goals in mind, let’s go over the eight things to do for the successful sales kickoff!

1. The Importance of the Keynote

Every worthwhile SKO begins with a keynote presentation. This initial session sets the tone for the entire sales kickoff. A great keynote will leave sales reps motivated to attack their goals, while a bad keynote will have them looking at their phones (or the exits!) Make use of this initial session to inspire everyone to join the team and to be a part of the business. If everyone is enthusiastic about selling collectively, the aspirations of everyone feel more achievable. Get into the excitement in the beginning by bringing in a lively speaker (or two!)

Why would you want to engage an external speaker? At The Zeroing Agency, we’ve discovered that fresh external perspectives can make a huge impact. The investment in a topnotch keynote presenter will not only motivate and align all for success, but make a lasting impression (We still talk about a keynote presentation from famed Green Bay Packer – Bart Starr!)

2. Engage, Engage, and Engage!

Be it the main SKO session or Breakout sessions, a successful sales kickoff is similar to real estate, but instead of the secret being location, location, location its engage, engage, and engage! The bulk of your sales kickoff agenda will consist of breakouts, so keep these sessions engagement levels in mind as you plan not only the content but cadence. In SKOs we’ve observed that breakout sessions are typically 30 to 50 minutes in length. It’s possible to think about shorter sessions (think of TED Talks on a 10-15 minute timeframe) for those who want to cover more complex topics in a short amount of time. If you want to present more complex content, you’ll need more time. However, one of the biggest complaints from sales reps in post-SKO surveys was that there was too much content in too short a time period.

These breakout sessions should concentrate on your company’s biggest bets as well as how you can handle issues, and practical tips from your sales superstars. To keep breakouts interesting, you can organize hackathons in real-time, practice learning in role-plays, using live feedback, design authentic or fictional cases studies, and foster an element of competition with games and prizes. If you’re hosting diverse attendees from different departments or regions, you can arrange specific breakouts that follow these same guidelines. It is important that attendees walk away with the thought, “This was relevant – and I have learned something that I can use in my work today from participating.”

3. Ask Your Customers to Present

We’ve learned from our past SKOs that customer speakers are an evergreen favorite. We also know that customer testimonials are a key in providing social proof that your products/services work. So find out the reasons your customers picked your company and what is most important to them in their field as well as how they’d suggest that you interact with similar customers in the near future.

The stories they share can (should?) be the base for case studies in the course of your kickoff and sales initiative for the year. It is also possible to invite these customers to speak about their experiences at a deeper level during a breakout or even join virtual focus groups that provide immediate impact.

4. Give out Recognition and Celebrate Achievement

Let’s face it… The celebration of achievement is what sales reps most excitedly look forward to at an SKO. Honor this long-standing tradition by honoring sales reps and their major successes from the year before.

Know that recognition takes many forms for your sales reps. So make certain that all that are recognized can enjoy the celebration. Sales Kickoff meetings often overlook leveraging humor, so make certain you create some categories that are certain to bring laughter and joy among your staff. The recognition could include items such as extravagant headsets, gift cards, as well as engraved gifts (One of our clients does something A-M-A-Z-I-N-G!!! If you’d like to know what, email us at sales@tipofthespearventures.com).

5. Make Leaders a Focal Point on the Agenda

If you’re like the majority of sales teams, you’re on the verge of a schedule that are stuffed with meetings and you’re constantly in motion. Utilize this time where everyone is focussed on the same goal to hold discussions with the top leaders and talk about the goals of everyone for the year. Keep in mind that for some (or perhaps the majority), this will be their only opportunity to directly hear from organizational senior leadership.

6. Promote Consistency as a Focus.

A memorable sales kickoff unites everyone with a common objective. Therefore, there’s no better way to bring everyone together around the aim of creating more inclusive communities.

In your SKO, think about creating an affinity group or equality group organize a workshop to be better friends and create more inclusive team bonding events that aren’t centered around happy hours. For instance, random conversations groupings on video calls could enable members of the team to understand the perspectives of their less familiar colleagues.

7. Make Networking a Must

Don’t let this annual opportunity to network internally pass you by. Make it possible for your employees and leaders of different teams to get out of their networks and create valuable connections. Games for icebreakers such as speed dating-inspired coffee conversations and leaders-hosted meetings and greets help people get outside their circle of influence.

8. Add Community Support and Volunteer Opportunities

Add time to the schedule to allow groups to connect informally. It could be via online activities such as cooking classes or a murder-mystery escape rooms, or even volunteering for a special interest project. We love to include volunteer-based activities, for example creating greeting cards for the elderly in retirement communities during our kickoffs to ensure that participants can enjoy themselves while contributing to the communities they serve.

SUMMARY

In this article we’ve explored SKO Essentials for Sales Kickoff Success along with 8 Tips. As we mentioned before, let’s face it: selling in recent years has been tough. The COVID-19 pandemic and its various delta variants have changed everything about our lives as we know it, as well as redefining the definition of being efficient in the field of sales. This is why sales calendars with a sales kickoff (SKO) at the beginning of the year are essential for starting the year off on the right foot. They’re the most important sales training event of the year where we recognize the successes of the previous year, discuss plans for the year ahead, and set the tone for key initiatives. But if you agree that these SKOs are important, why do so many miss the mark?

The Sales Kickoff Success – 8 Tips listed above are only the beginning. We’ve got more information on how to host the best SKO in our book, Virtual Sales Kickoffs (Virtual SKOs): A Playbook. If you’d like more information on how this or how we can help, please Contact Us.

Sam Palazzolo

Sales On-Target Earnings (OTE) Compensation Plans

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The Point: The most frequently asked inquiries that we receive at The Zeroing Agency — Tip of the Spear Ventures’ consulting side of the firm — is regarding OTE or on-target earnings. It’s clear why, because if you show us a salespersons’s compensation plan, we’ll show you what it is that they are going to do (and what will get done as a result!) On-target earnings allow companies to better plan their budgets. Additionally it helps sales reps to know the amount they’ll be able to earn should they reach their sales goals. This in turn increases the motivation of both sales leaders and their sales representatives to help boost their efficiency, revenue and increase growth to make the most of OTE. However, there are many important factors that companies must be aware of when implementing OTE within their incentive compensation pay plans. If they do implement the OTE methodology improperly it could result in lower morale, low performance, and eventually the loss of revenue for the business. What factors should you take into consideration when you are using OTE? In this article, we’ll discuss the OTE considerations in greater detail and guide you through the process of creating an effective compensation plan with it… Enjoy!

What is OTE?

In simple phrases, OTE or on-target earnings is the total of a sales rep’s annual base salary as well as their on-target commission. Then, OTC or on-target commission is essentially the commission sales reps receive if they achieve their sales targets.

In simple words, OTE is the total amount of compensation that sales professionals are expected to receive if they meet the 100% mark of goals or the quotas. The majority of the time, this quota is going to be an annual number, instead of the weekly or monthly numbers.

That’s an enormous amount of information to decode. In order to understand the concept more clearly let’s examine an illustration. Suppose you post an advertisement in order to locate an employee for sales. You plan to give the employee a starting salary of $100,000, provided you can prove that they meet their annual sales target. The job description you include in your advertisement will typically mention the compensation for the position by the number “$100,000 OTE”.

That’s why that, if a salesperson is interviewed and is hired, they should realistically expect to make $100,000 annually. The compensation will be contingent upon them meeting 100 percent of their sales targets for the year. Remember, the on-target earnings (OTE) figure of $100,000 is only an approximate figure. It could be a bit off, but it could be higher or lower depending on their performance to goals.

Benefits of using On-Target Sales Earnings in Compensation

There are numerous advantages of using on-target earnings in your compensation program both for you as well as those who sell:

  • Forecasting Sales Commissions – If you are able to calculate on-target earnings you’ll be better placed to accurately forecast sales commissions. This will make it simpler to plan and budget your financials.
  • Estimating Earning Potential – Your sales reps using OTE allows them to see the exact amount they’ll be earning should they be able to meet their sales goals. Another benefit is that when you have an OTE is competitive sales reps will be motivated to reach their quotas.
  • The Process of Determining the Realistic Commission Rate – If you choose an OTE number that is both realistic and competitive and realistic, you’ll be able decide on a commission rate that is suitable. That is you’ll be in a position to decide on the appropriate base amount for the sales reps you employ.

Employing OTE as a Part of Your Incentive-based Compensation Plan

We’ve now covered what on-target earnings (OTE) are and the benefits it offers. Now it’s time to consider ways to utilize OTE to enhance your compensation strategy. There are three key aspects to take into consideration when you plan to employ this type of incentive structure for compensation:

  • Set the Compensation for OTE. As mentioned previously, OTE is the total of sales rep’s annual base salary as well as the commission on-target, OTE is the total earnings that sales reps will be capable of earning. This means that it is essential to get this figure correct if you wish to retain and attract the top talent.
  • Calculating the Pay Mix. This is simply the ratio of base salary to the on-target commission. It reveals sales reps the level of risk that comes in reaching their OTE. The higher the ratio, the greater the risk.
  • Quotas and Setting Sales Goals. These sales targets are the objectives which sales reps must achieve in order to earn the entire OTE as compensation. In this case, it is essential that the goals you set are accountable and achievable, or sales reps may lower them in line with the goals they receive.

Set the Compensation for OTE

In order to retain and attract the top-tier talent, it’s essential you get your OTE in order. The first thing you should be aware of is what your market-based compensation is for your particular sector. Sales reps have to feel as if they’re receiving an equivalent amount to employees of other companies. If they’re not and your OTE isn’t in line with other businesses in your industry, it will be difficult to hold your sales reps’ good qualities and turnover will result.

Be aware, there aren’t any strict and fast rules for calculating OTE. Therefore, it can vary depending on the industry you’re operating in, the kind of products you’re selling, the complexity of the sale, and the amount of expertise you’d like your sales reps to possess. In this case, a site like Glassdoor is a great resource. It can provide information about what market-based compensation plan for your job and the industry you work in looks like.

Another factor to take into consideration in determining the OTE must be the fact that your OTE needs to be similar to other sales and other non-sales positions within your business. The most important thing is to make sure that you provide similar pay rates for the same amount impact a particular job position can have on your business and its profit.

This means that you must be wary of overpaying or underpaying for the performance of your sales team. If you overpay you will incur costs for customer acquisition that will be excessively high. Likewise, underpaying can result in poor results, low morale, and lower retention rates for employees. In the end it’s all about finding the right balance.

Calculating the Pay Mix

As previously mentioned the Pay Mix is the ratio of the base salary to commission paid. The ratio determines what actual earnings will be for particular roles. Our experience suggests that OTE plans average 65% base salary and 35% commission. However, the Pay Mix ratio will vary based on the particular market or the expertise of the sales representative.

But the most important aspect to take into account when determining the Pay Mix ratio is the extent to which a sales representative is able to influence sales that, in turn alter the ratio. For instance, when a sales representative generally has no control over the result of a transaction, their base pay should comprise an increased portion in the OTE. If, however, the sales rep is able to significantly influence sales and influence the outcome of a sale, commissions should constitute more of the OTE.

Quotas and Setting Sales Goals

From a sales rep’s standpoint, one of the primary aspects they should consider when they’re evaluating their compensation plans are the sales targets, or the goal. In order to achieve the anticipated total salary (OTE) and to earn it, they must meet their sales targets. This means that sales targets must be achievable. However, if it’s not so, the sales representatives are likely to, as previously mentioned, simply reduce their sales. That is, they’ll calculate their pay by calculating their targets — More proof for the previously mentioned “show us a salespersons’s compensation plan, we’ll show you what it is that they are going to do (and what will get done as a result!)”

Based on our experiences, sales quotas must be achievable for 60 – 70 percent of your sales representatives. This gives the majority of them the chance for them to achieve their OTE. However, those who aren’t will realize the possibility of it. They’ll also be driven to be more efficient — Think “stretch” goals here!

However when your quotas and/or goals are not achievable in less than 60 percent, it’ll result in the opposite. The result is that morale overall will decline. If the percentage is higher than 70 percent, you’ll probably overpay for the performance.

Remember, when setting the OTE and setting the Pay Mix various factors can affect the quotas you set. In this case, the majority of companies begin with their historical performance, and then adjust the quotas according to the market conditions.

But, that means for more recent products and markets that are less developed this could make it more difficult to set limits. Considering the COVID-19 pandemic, this is an extremely important point. The most effective solution is to establish quarterly quotas , and then adjust them over the course of the year as information becomes available.

SUMMARY

The use of on-target earnings (OTE) in your compensation plans is a great option to improve the performance of your sales reps and encourage them to generate more sales. But, it is important to be careful when setting the OTE as well as the pay structure, and establish sales limits. Once you’ve finished this, you must determine the salary for each employee. This is where we can help. We can streamline the process of commissions for sales, which means you’ll be able to concentrate on developing your company.

We love helping businesses lessen the burden of the process of calculating sales commissions. If you’d like more information more about the concept of OTE and how we can assist you in improving your sales, we’d love to talk. Contact Us today to learn more.

Sam Palazzolo