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Motivating Sales with Compensation and Competition

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Is your sales compensation plan enough to motivate sales? New research from Aberdeen indicates compensation plans paired with a gamification strategy can increase quota attainment by as much as 9%! …

Is your sales compensation plan enough to motivate sales? New research from Aberdeen indicates compensation plans paired with a gamification strategy can increase quota attainment by as much as 9%! In this presentation we'll cover key steps you can take to incorporate gamification practices into your compensation plans to increase sales engagement and motivate sales.

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  • Sales aren’t coin operated, you don’t just put money in and get it out the other side. In a lot of cases and industries, the role of sales rep has changed. Customers are more knowledgeable then ever, more of the sales cycle is carried out without the sales person being involved. Think about the newly launched ipad4 and ipad mini. By the time you turn up to the apple store to go buy one, you’ve already watched the product videos on apple’s website, read the millions of blogs talking about the new power cord, or the tenth of an inch they’ve shaved off the thickness of it. You may even have seen comments from your social networks on how amazing it is and how much people love it. So you convince yourself you’ve got to have it and go to the store, ask a couple of questions but really your mind is made up. If the sales rep gets even close to the answers you are looking for to re-enforce your buying decision then it’s done and your reaching for your wallet.An incentive plan is not going to drive you to spend the time in your learning management system brushing up on the release notes for the new product. It doesn’t drive you to offer a specific accessory with the new product. It doesn’t drive you to research what customers are talking about on social. A comp plan can not and should not be relied upon for this. This is about driving behavior that results in a successful sale.Cambridge professors and MIT performed a detailed study brought to life on an excellent video which we’ll send out after the webinar. Tells us that for anything more than a basic task money doesn’t link to improved performance.Competition and recognition big drivers – leaderbords
  • Need to add
  • CSO insight survey
  • Edward Deci Carnegie MellonHarry Harlow Univ of WisconsinConducted behavioral research on monkeys and humans on motivationCoined intrinsic motivation – as something that we choose to do when given free choiceThe Question About Free Choice Led to an Interesting Experiment Which Has Been Revised / Duplicated Many TimeRoom with Soma Puzzle – 3D puzzle pieces and some distracting magazines, Time, New Yorker, Playboy (1969)Group A asked to form puzzle pieces into shapes shown on sheets of paper. Attendant excuses himself to get the next set, and they observe what is done with free time – do they continue to play with the puzzle, or go for the distractionsGroup B – same setup but they were paid to play with the puzzleResult – About a third less puzzle activity during the free time when the attendant left the room
  • Our society is drenched with extrinsic motivation. From a young age, we are given rewards and punishments for wanted and unwanted behavior respectively. It is no wonder we don’t know better than to use extrinsic motivation to get what we want from others…They can work to maximize productivity for menial tasks however, they do not foster engagement and loyaltyThey also do not work for activities requiring problem solving and creativityThe financial crisis has shown that these extrinsic motivations do not actually produce the results we expect from them. We would expect highly incentivizedpeople to improve their performance if we give them the proverbial carrot to chase. What motivation makes someone want to climb Everest or be the best golfer?
  • Achievement motivation is about mastery, adventure and statusPersonality is able to delay gratification as the ultimate achievement can take yearsPeople who have a competitive streakMany sales people can be motivated through achievement motivators (presidents club, leaderboards, rep of the year etc.)Fear of failure can be just as powerful - student wanting the A+, would be horrified by a CThe last motivator hasn’t been used in the developed world for quite a while …
  • This group of motivators have roots in our biologyAlthough we may choose to deprive ourselves of sleep, I cant think of any 21st century employers use sleep deprivation or lock the lunch room as a mean to motivate their staffWhat does all this mean to sales. First lets take a look at the responsibilities of the typical selling job
  • Good sales people are Self Starter (i.e., internally motivated) and Action Oriented but Measured PaceThese Are not Menial Tasks …
  • I think we’d all agree that these are not menial tasks and that they involve creativity and problem solving. The ability to read people and situations to know when to listen and when to be direct and assertiveExcellent listening skills to determine the clients priorities and then carefully position product/service to meet client goalsThe ability to quickly bounce back when rejected and work amongst a competitive group of coworkersGiven the complex nature of this job, its interesting to see what the most prevalent motivators are …
  • Extrinsic motivators play a big role in any sales jobGreat for achievement and status focused individuals, but need to be careful not to dull those who are intrinsically motivated
  • Feeds the status monster in all of usPublic recognition varies by culture and region, great in the US Raw, raw not so strong in some parts of Europe, needs to be more subdued
  • Paying for something fun turns it into workMaking something work fun pays off – Tom Sawyer getting friends to paint the fence for himExtrinsic motivators can become very complex to operate – thousands of products, many sales roles, geographic territories, sales support and overlay distribution partners, If the average sales guy can’t calculate their commissions in their head while chewing gum, its likely to be too complicatedWaste – not very meaningful recognition, every product group wanting their own SPIF etc.
  • Why games?Because people willingly choose to spend free time and become loyal followers
  • Engagement – Interactivity – Motivation – LoyaltyWorks especially well when there is a high educational component because it keeps people engaged. Diabetes Foundation HealthSeeker = Pokemon + FacebookChallenging but fun missions, small actions taken in daily life, report achievement, earn points for social kudos / supporting othersIts Interesting to See How What We Value Has Changed Over Time and Consumer Behavior is a Good Crucible to Inspect …
  • Redemption went from free goods to less clear redeemable currencies or stamps to …
  • Loyalty programs that started out as a chance to get free stuff but the redemption value really morphed into status and the pursuit of Silver, Gold, Platinum and Million Miler designations.Many frequent travelers choose to display these badges of achievement on their carry on bags because its all about the status along with some redemption value – boarding priority, upgrades etc.
  • People play games because they like a challenge and they get a thrill when they beat the gameFrom a incentive standpoint, we need to strive to make sure that the challenge is the same for all of the players.This can be difficult when people in the same role have different territories, new accounts, established accounts etc.Its very important the players view the game as challenging but fairRecognition is very also important ….
  • Games recognize early and oftenExtended round, free life, extra lap etc.Find many things of value to recognize and get creative – genuine email from senior leader, great progress from a mentor, accomplishment of a core group of activities (e.g., training, certification steps) etc.To effectively recognize, you need to be able to track whats going on – activities as well as results ….
  • Nobody would play video games if there wasn’t a score – any game for that matterSince we now live in a world with more data than we know what to do with it, keeping track of key performance metrics should be a piece of cakeHowever, you’d be surprised how many companies fail to do this well.Incentives & Tracking Go Hand in HandNew Account SPIF – annual kick-off hoopla, no reporting - top new account landers - how many new accounts in total - progress vs goalWe’ve learned some other interesting things from gamification …
  • If your score is 30,000 and the top ten players are all over a million … isnt that a little intimidatingGood recovery = extra life for achieving 50,000 points (it keeps you in the game instead of getting frustrated)We can also apply lessons learned from social media so make an even more meaningful leaderboard …
  • Rather than the over 1M point club, what if we took your peer group – tenure, performance, region, role whateverAnd place you in the middle – showing you who’s above and who’s belowEven better – would be some specific actions you could take to move up - BF2 goes on 1 more sales call per week, avg sales is 25,000 greater, etc.Making it fun drives engagement and gets results …
  • When we speed we get slapped on the wrist, but what if we don’t speed – we don’t get anything niceIn this example, VW and the local municipality created a lottery funded by speeding tickets to reward those who drove the speed limitIf the traffic camera snaps your plate doing 25 in a 25 zone, then you get entered into the lotteryThe result  a lot more people driving the speed limitEnticed by the gaming aspect, opportunity to win, and probably not wanting to be a contributor to the money fundCompetition also comes in to play in games ….
  • Competition is natural when multiple people are competing for any kind of rewardHuman nature is to game the game … that is find the way to do the least work to get the biggest reward - sand bag quota, shift sales to the next quarter, get on a split to jump up to the next performance tier, enter a big order end of quarter and process a return next quarter etc.This is where leadership is required to enforce both the written and unwritten rules of the gameIn online games, moderators monitor and police interactionsIn sales comp, that’s left to sales management and the home office who are the rule writer and enforcers. There is a big benefit in being the one who writes the rules. Here’s a interesting example, that most people have heard about ….
  • Cooperation becoming very prevalent in online games as well as some marketplacesGiving a challenging goal to a team can be a powerful motivatorJigsaw combines achievement and extrinsic motivators to get people to cooperate by maintaining their database of lead dataEverytime you add or correct information this is tracked. This data can now be used by other people, even your competition, but you never know who’ll use it.You receive online valueless status and when you reach rainmaker status you get to a real reward – a conference.As a result, Jigsaw / Data.com has one (if not) the largest lead databases in the business and has enjoyed exponential growthSo. How do we pull all of this together ….
  • What are the fundamental parts of the job that sales people love?meeting new people, the thrill of the pursuit, organizing and directing effortsWorking in a teamLearning new skills - industries, products, Helping people solve their problems and finding exactly what they whatTraditional MethodsDesign jobs that allow for lots of variety - account rotation, different roles on the sales team (opportunity lead, sales support etc.)Offer other non traditional ways for people to get their intrinsic high - Projects to deepen engagementGamification TwistCreate a challenge/game to collect points from these intrinsic activitiesTrack intrinsic measures (e.g., chatter activity, skill breadth, engagement initiatives) Recognize achievements Check out Autonomy, Mastery & Drive by Daniel Pink on Youtube for some companies that have helped – Fedex days – you can work on whatever you want but it ships at end of day
  • Many Opportunities to Win - Clear Path to the Prize – well defined sales process, access to experts, path to status for jobs requiring specialized skillsetsFrequent Positive Feedback Different Types of Status - New Accounts, Cross Selling, Mentoring, Account TurnaroundGamification Twist - Competition - Be careful with Extrinsic …
  • Many people attracted to the sales role for high earning potential, however, job design and rewards need to be in alignment with organizational goalsBest customer service and no incentive for long term account development or high turnover repsKeep it simple, keep it reasonableHigh stakes rewards are one of the best ways to incent bad behavior extra $ gets you into 200% accelerationA few more things to leave you with …
  • Transcript

    • 1. Sales Aren’t Coin OperatedMotivating Sales withCompensation &GamificationMarch 12, 2013
    • 2. CallidusCloud – Compensating the Business World 1,700+ Customers 600+ Employees 30+ MEDIA & COMMS Partners FINANCIAL SERVICES HI-TECH #1 INSURANCE Gartner PHARMA Aberdeen Group Forrester 12 Awards:New ProductBest CompanyBest Cloud AppFavorite Company
    • 3. Agenda • What Motivates? • Traditional Approaches to Sales Compensation • What can we Learn from Game Dynamics? #caldicm
    • 4. Impact of Compensation Plans on SellingBehavior Consistently Drives Precise Selling Behavior 8.9% Do Not Know 12.3% Minimal or No Impact on Selling Behavior 19.4% Generally Drives Precise Selling Behavior 59.4% CSO Insights Survey, 2012 #caldicm
    • 5. Selling Behaviors Impacted by Comp. Plans Selling to New Accounts 70.3% Retaining Existing Business 63.2% Farming More from Existing Customers 56.5% Cross-selling/Up-selling 53.1% Selling New Products 46.9% Selling Higher Margin Products 37.2% Avoiding Excessive Discounting 37.2% Consistently Utilizing CRM System 28.5% Selling as Part of a Team 28.0% Consistently Utilizing Sales Process 27.2% Sharing Best Practices With Other Sales Reps 19.2% Accurately Forecasting Business 15.5% Other 0.8% 0% 10% 20% 30% 40% 50% 60% 70% 80% #caldicm CSO Insights Survey, 2012
    • 6. What Motivates?#caldicm
    • 7. Compensation Analytics – Mark Coleman Mark Coleman has over 20 years of experience designing and delivering complex business and technology solutions. He is also a pioneer in the sales compensation space having worked with many of the major SPM vendors assisting with the evolution of their offerings. Prior to starting Compensation Analytics, Mark was a Partner with Accenture, a global management consultancy where he started Accentures first Enterprise Incentive Management practice. Managing Partner, Compensation Analytics markcoleman@compensationanalytics.com #caldicm
    • 8. Intrinsic Motivation driven by an interest or enjoyment in the task itself, and exists within the individual #caldicm © Copyright 2013 8
    • 9. Extrinsic Motivation external pressures make a person act to produce an outcome … they don’t necessarily enjoy it © Copyright 2013 9
    • 10. Achievement Motivation an individuals need to meet realistic goals, receive feedback and experience a sense of accomplishment #caldicm © Copyright 2013 10
    • 11. Physiological Motivation driven by underlying biological mechanisms - hunger, thirst, sleep etc. #caldicm © Copyright 2013 11
    • 12. Sales Responsibilities Seek Out New Clients & Prioritize Best Opportunities Diagnose & Solve Client Problems With Your Product/Service Negotiate and Close Deals Build, Nurture and Grow Long Term Profitable Relationships © Copyright 2013 12
    • 13. Most Sales Job Are Not Made Up ofRepetitive Menial Tasks - They Require #caldicm © Copyright 2013 13
    • 14. Sales Compensation Uses Many Extrinsic MotivatorsCommi$$ion$ Bonu$e$ Accelerator$ $PIF$ © Copyright 2013 14
    • 15. … and Achievement Based Motivators #caldicm © Copyright 2013 15
    • 16. However, There Are Challenges WithThese Motivators …They Can Kill Intrinsic Motivation• Pay makes the task an obligation (i.e., work) not fun• Reps can lose interest and it requires more $$$ to motivateThey Are Complex & Costly to Operate• Designing territories, account coverage models and setting effective sales quotas is time consuming, confusing and can obfuscate true goals• Increasingly complex administration & reportingThey Can Be Wasteful or Irrelevant• Same top performers / winners every year• Out of reach for most participants• Wasted SPIF dollars © Copyright 2013 16
    • 17. Traditional Approaches to Sales Compensation#caldicm
    • 18. Gamification is the use of game-thinking andgame mechanics in a non-gaming context in order to engage users #caldicm © Copyright 2013 18
    • 19. Some Benefits of GamificationAccelerated Feedback Cycles• Interaction increases the velocity of feedbackClear Goals & Rules of Play• Empowerment to achieve goalsCompelling Narrative• Builds a narrative which engages participants to achieve the goals of the activityChallenging But Achievable• Many short term achievable goals © Copyright 2013 19
    • 20. Recent History of Consumer Incentives Tangible Goods Incentive Clear redemption value. e.g., Bakers dozen, buy 12 get one free Clear redemption value Virtual Currency (1930s) Encouraged repeat business. Difficult for users to determine true redemption value #caldicm © Copyright 2013 20
    • 21. Recent History of Incentives Loyalty Programs (1980s) Loyalty programs incent action when offerings across competitors are mostly equivalent. It’s not about redemption, it’s about the status. Virtual Rewards (2000s) No redemption value, perceived social or status value drives behaviors. © Copyright 2013 21
    • 22. The Basics of Gamification #caldicm © Copyright 2013 22
    • 23. Challenge• Interesting work, opportunity to develop oneself. Autonomy to determine how to perform the work• Small challenges that become increasingly difficult over time. Maintain a balance between difficulty and attainability• Fair and equitable - everyone should have to put in the same effort to achieve the reward © Copyright 2013 23
    • 24. Recognition• Frequent feedback to get “hooked” on the game• Recognition for little things as well as the big things (e.g., Facebook birthdays)• Achievement badges - pipeline accuracy, process compliance, sales results, tips via Chatter etc. #caldicm © Copyright 2013 24
    • 25. Tracking• Games have a long history of giving players feedback about their progress and when they’ll finally reach the end• It’s easier than ever before to harness data to enrich any experience and deepen the engagement one has with it• Using games can help you help your reps better understand their performance and help them improve. © Copyright 2013 25
    • 26. Early Games Had Poorly Designed Recognition I’m Never Going to Make It  © Copyright 2013 26
    • 27. Much More Effective Tracking Peer Comparison In Order to Beat Best Friend #2, Best Friend 1 Do This … Best Friend 2 *** ME *** Best Friend 3 Best Friend 4 #caldicm © Copyright 2013 27
    • 28. Gaming Includes an Element of FunExample - Volkswagen Speed Lottery Speeders get ticketed and fined Good drivers get entered into a lottery to win some of the fine money Avg Speed Before Game = 32mph Avg Speed After = 25 mph © Copyright 2013 28
    • 29. Competition• Games produce winners, losers and everything in between.• When designing Sales Comp, begin with the assumption that if you build something that delivers value (status, adventure, money) then people will game the system (get rewards for as little work as possible).• Benevolent autocracy to ensure fair competition between players (e.g., Presidents Club cheaters) #caldicm © Copyright 2013 29
    • 30. Cooperation• As much as people like to compete, they like to achieve things together even more, and social games have taught us lessons about that fact for several years now• Making them participants in a gaming experience, and encouraging them to work together toward those wants can be a powerful motivator. © Copyright 2013 30
    • 31. What can we Learn from Game Dynamics?#caldicm
    • 32. Pulling it All Together - Maximize Intrinsic Motivators Maximize Achievement Motivators Be Careful With Extrinsic Motivators #caldicm © Copyright 2013 32
    • 33. Maximize Intrinsic MotivatorsJob Design for Variety & Fulfillment• Responsibility / Account Rotation• Leadership Opportunities• Special AssignmentsEncourage Non TraditionalContributions / Volunteering• Mentoring Opportunities• Sporting Competitions (e.g., softball tournament with a top client)Autonomy • Create a challenge/game to collect points from• Employee Driven Choices Along Path these intrinsic activities• 1 day / month to work on Personal • Track intrinsic measures (e.g., chatter activity, skill breadth, engagement initiatives) Project (work related) • Recognize intrinsic achievements © Copyright 2013 33
    • 34. Maximize Achievement MotivatorsReview Recognition & Status Programs• Create multiple definitions of success by role, tenure, with multiple ways to win and be recognized• Keep “upping” the game so that top achievers don’t max out and begin to lose interest • e.g., Different conference levels (Summit, Pinnacle, Chairman’s Club etc.)• Consolidate and administer all contests to ensure alignment across the organizationClear Path to the Prize• Chunk up the path to the ultimate prize • Make it fun - track and report progress against (e.g., mthly, quarterly leaders) peer groups as well as broader rankings• For jobs requiring skill mastery, leverage • Build meaningful non redeemable status (e.g., 5 star reviewer) gamification to delivery and track training • Recognize collaboration and cooperation where appropriate © Copyright 2013 34
    • 35. Be Careful With Extrinsic MotivatorsGet The Mix Right• Shooting range (high variable comp) or elephant hunters (low variable comp)• Don’t try and manage behaviors with the plan, that’s what managers are forAvoid High Stakes Performance Thresholds• Steep acceleration will incent bad behavior $275M 10yr Contract Before .454 , After.200Pay for Results not Activities • Frequent feedback - pay in a timely• Simple, easy to track measures (e.g., new fashion as close to performance as possible revenue, renewals) • Tracking - reps should understand their• Incenting for activity chips away at intrinsic pay and what’s in the payment pipeline • Status & recognition - hand deliver the motivators big bonus checks #caldicm © Copyright 2013 35
    • 36. © Copyright 2013 36
    • 37. CallidusCloud Connections – C3 6 Keynotes 28 Breakout Sessions 800 Attendees Speakers confirmed: • CDW • Zimmer • Verizon • Xirrus • Blue Coat • Gartner • Aberdeen • Forrester • Accenture • Canidium • Compensation Analytics #caldicm
    • 38. Q&A#caldicm