A best practice being widely adopted by business-to-business firms is to institutionalize Voice of the Customer (VOC) or Voice of the Market (VOM) programs.    Most business leaders we work with embrace the idea of putting more effort into learning from customers and are genuinely interested in whatever the market has to say – good, bad, or ugly.

However, organizations and people are ‘wired’ to interpret data and feedback based on their own experience or proclivities.   When new information is filtered through prior experience and beliefs, even the most honestly receptive managers are prone to misinterpret what the market is saying.  As a result, effort and resources invested in VOC or VOM programs don’t provide hoped-for early indications of risk or opportunity that would give the firm an edge over rivals. 

The misread doesn’t need to be large to significantly affect end results.  For example, a provider of industrial packaging solutions was engaged in a significant initiative to improve the sustainability benefits and reduced environmental impact of its products. This sales messaging focus on sustainability was generally producing good results for the firm. So they were perplexed when potential customers did not respond more positively to a new product.  

We used our Nine Voices of the Market^TM approach to discover why potential customers were not responding more positively.  While the new product was demonstrably superior to competitors in terms of reusability, positioning it on sustainable and environmental-related attributes did not resonate with the potential buyers.  The company’s customer surveys showed that respondents consistently stressed reusability as an important value because it lowered their total costs.  But in this case, the company mistakenly interpreted the feedback as related to sustainability and positioned the product accordingly. That positioning created a block to understanding the much simpler value – reusability and lower cost. Potential buyers were significantly undervaluing the product’s benefits.

 The risk of misunderstanding market signals creates two demands for organizations: 1) the need to increase the openness and scrutiny of the ways managers understand market feedback and 2) getting parties not involved in the business day-to-day sales function to help interpret information from customers and other market participants.

Much of the work we do at Blue Ridge Partners is to reduce that risk and respond to the demands by providing objective, third-party analysis and interpretation of market information.  However, internal resources can provide similar benefits, especially as an ongoing component of VOC or VOM.  Groups such as Strategic Planning, Market Research and even Operations can be effective at challenging conventional wisdom and seeing different or additional meaning in feedback from the market.  For some firms, getting peers from other business units involved is an effective alternative. 

A key to understanding what the customer or market is saying is to continually challenge common or long-held beliefs and interpretations about customer and market values.

In our series on lead generation and lead management, I have written about how fundamental world class lead generation is to successful revenue growth.  I have also discussed how improving lead generation is largely the only near-term lever management can “pull” that will have a rapid impact on sales productivity and top line growth.

We recommend that senior management teams regularly assess their companies’ lead generation performance and dig deep into the obstacles that keep the organization from achieving world class lead generation performance.  Frequently management’s challenge is navigating the many lead generation activities and getting to the root cause of the issues.  If not careful, management can easily be inundated with the complexity of the processes, multiple systems, conflicting measurements, misaligned definitions, arcane digital activities, and metrics that never tie together or link with the actual economics of the businesses.

To address these very issues, we have developed a lead generation assessment tool – 100 Behaviors of High Performing Lead Generation Engines ^TM – that we use to quickly assess a company’s fundamental lead generation and lead management capability.  We find that this diagnostic approach is the best way to get started on a meaningful lead generation improvement program.  Our proprietary 100 Behaviors diagnostic tool objectively evaluates critical lead generation and lead management behaviors in 13 categories with each category having eight to ten discrete behaviors that are critical to successful performance in that area.  By scoring each individual behavior on a 1-5 scale (1 = low to 5 = high), assigning an appropriate weight to each, we are quickly able to identify key gaps in performance.  In addition, we also compare our client’s score with those of direct competitors. Taken together, we are able to quickly hone in on the specific activities that are the key to significant improvement.

At the end of a typical 4 to 6 week 100 Behaviors Lead Generation Assessment clients have a clear understanding of the gaps and a high-level roadmap for significantly improving lead generation and management.  We also provide an initial perspective on in sourcing lead generation relative to the potential value of an out sourced solution.

To better understand how your company’s lead generation engine is performing, consider giving it a diagnostic test and tune up with the 100 Behaviors tool.  For more information on building world class lead generations and management capabilities, just give us a call.

As senior executives begin to evaluate their company’s lead generation and lead management systems, they often find that this activity has grown up on its own.  This is particularly true of mid-market companies that grew up rapidly in a sales environment that may have been less challenging than today’s marketplace.  In this type of situation, we frequently find that companies have let lead generation activities take root in different parts of the organization where they have developed internal capabilities or used outsourced lead generation providers.  While this “let the flowers bloom” approach works for a time, eventually these overlapping efforts become counterproductive, confuse the prospects being targeted, drive up the cost of leads through inefficiencies, and become very difficult to manage.

This situation is often characterized by conflicts.  One lead generation function or channel, such as outbound email/thought leadership, may count leads one way, while another channel, lead nurturing for example, will count them another way.  All the while the sales reps may be claiming that they generated the leads and should have the credit.  In reality, seldom is any one lead generation effort the sole source of a truly valuable lead, as multiple touches have most likely contributed to the awareness and consideration that resulted in a lead that converted.  But without an integrated approach, understanding of how the multiple touches mutually support each other in generating a meaningful lead becomes impossible to understand. 

In a recent client situation, we discovered that lead generation responsibilities were spread across the call center, sales support, marketing, and field sales organizations piecemeal, with few consistent metrics or integration.  By taking this disaggregated approach, our client had hundreds of staff creating and scrubbing their own prospect files, keeping all information on their PC rather than in a CRM system so it can be tracked, unsuccessfully attempting to use marketing automation tools, spamming the market with large quantities of poorly crafted messages, and disregarding the contacts that they did generate that weren’t ready to buy right now. 

The solution is to rationalize the lead generation activities by streamlining and integrating the functions within the company’s organization.  This includes clearer definition lead generation strategies, definitions, key metrics, standards and expectations, processes, use of tools, organizational hand offs, etc.  The lead generation function can logically reside in any one of several parts of a company’s organization – sales, marketing, or a dedicated lead generation function reporting.  Or it can be logically split across these different organizations, but that structure has to be carefully defined along with the right processes and metrics.

If you think your organization may be underperforms in generating high quality and high volume leads for your sales team, give us a call as we extensive experience in helping companies significantly improve lead generation performance.

All too often companies find there is limited opportunity for driving significant top-line revenue growth from their current customer base.  While this might be true, looking below the surface may yield opportunities to expand margins from that same customer base. To uncover such opportunities, ask the following questions:

• Is there an effective pricing strategy in place today?
• Have we properly segmented our customer base to differentiate pricing based on buying behaviors?
• Are customers that destroy margin effectively managed?
• Is the sales team allocating resources to the highest value customers?
• Does our sales team have the right process and structure in place to capture pricing opportunities?
• Are pricing controls in place to monitor pricing and provide the appropriate oversight?
• Are the right metrics tracked aggressively to objectively determine performance in the market against competitors and resulting margins?

In our recent work with several clients, these questions helped us identify four specific opportunities to increase pricing and margins:

1. Understanding Buyer Values to Drive Value-Based Pricing - Understanding buyer values is not easy but we found that effective segmentation on buyer values can add up to 10 or more points of incremental margin.  Effective segmentation allows companies to implement differential pricing and extract premiums from less price sensitive segments while also contending better in more competitive markets.
2. Optimizing the Pricing Process - We frequently discovered that our clients’ sales reps do not have adequate processes, tools or controls to effectively price goods and services.  This results in significant variability for nearly identical products and volumes.  Whether the variability is from unplanned/unearned discounts, unintentional give-aways or other sources of margin leakage, plugging these holes through formal pricing processes, supporting tools and tighter controls can often improve margin by 2-4 points.
3.  Eliminate the Margin Destroyers -  We typically find that a large portion of our clients’ customer base contributes minimally to overall sales and margins.  Though many accounts may be marginally profitable, they often consume a disproportionate amount of sales resources and mindshare.  And, quite often, they become even less attractive when considering the cost to serve these customers.  By critically evaluating the customer portfolio, companies can reallocate their scarce sales resources to higher value customers – those with significant growth potential and the ability to provide attractive margins.
4. Measure Pricing Performance and Optimize - Management tends to rely on anecdotes and past experience to evaluate pricing performance rather than objective measures and facts.  The key to identifying and capturing these hidden opportunities is to develop pricing performance metrics and to measure the sales teams’ in-market results regularly.

 For more information on how to discover hidden margin opportunities please click on the following link, Growing Margins-Pricing Strategies to Improve Revenue Growth and Profitability.

In recent posts we have talked about how high performing lead generation can directly impact revenue growth.  One of the frequently overlooked channels to effective lead generation is what we call “Research-Based Lead Gen”. 

It’s often very difficult to reach the right buyers through conventional lead generation efforts such as out bound telephone calls, email, events, etc.  In our work with many clients, one of the channels we leverage is research-based lead generation.  It’s not the right approach for every company as it is not cheap, but for the right products with a large price tag, long sales lead time or for products that generate a high life-time customer value, it can be the best way to effectively break through the barriers and get your message in front of the buyer.

Our research-based lead generation services grew out of our Nine Voices of the Market ^TM tool that we use to assess markets for our clients.  As part of this process we reach out to a client’s prospects to interview them about our client’s product/service, marketplace dynamics, competitors, pricing, etc.   Frequently the buyers, after hearing  about our client’s products and services, want to learn more about what our client has to offer.  We immediately pass these “hot leads” directly to our clients for their follow-up.  The high close rate on these leads proved that this channel can generate meaningful high quality lead at a very attractive ROI.

This has led to a service for our clients that leverages a research driven approach to generate high value leads.  Our approach can vary significantly by client depending on the scale of the project; the value of the potential leads generated, product sales price, customer life time value, etc.  The cost of providing this lead generation service also varies depending on the number call attempts required, the length of the typical interview, and percent of interviewees interested in “learning more” and becoming a lead. 

In working with a new client, we almost always start with a pilot to test out the approach and messaging, fine tune the process, confirm costs per lead estimates, determine the close rates of these leads, and hone in on the ROI projections.  After the pilot we can lock down a specific approach and cost per lead (CPL) numbers.  The CPL rate for this type of lead generation can typically range from $600 to $1200 depending on the factors mentioned above.  While this cost may seem high at first glance, combining these leads with effective closing rates often result in the lowest cost per sale (CPS) for any lead generation channel used by a client.

To learn more about Research-Based Lead Generation and how Blue Ridge Partners can help your company use high performing lead generation to drive top line growth, just give us a call.

As part of our lead generation practice, we often get asked by clients whether or not they should outsource lead generation (e.g., is it better to build the capability in-house or contract out to “specialists”).  This is one of the questions we always address when helping clients embark on the task of creating world class lead generation and lead management function.  There are a number of approaches to evaluating the make or buy question, but the first questions, and the ones addressed in this post, are the most basic —-

• “How should I categorize and think about outsourcing lead generation services?”  
• “What services do outsourced lead generators provide and where do they focus?’
• “How do third-party lead generators work with companies?” 
• “How stable are these companies and what scale do they have?”
• “What are the various pricing models?”

When helping companies evaluate possible outsourced lead generation we start by categorizing providers in 5 ways — by channel, services provided, industry focus, scale/stability of the provider, and pricing model.  I’ll discuss each of these briefly below.

Channel

Lead generation providers can be separated into two major groups: telephone/email and digital. 

• Traditional telephone/email based lead generation 

Out-bound cold calling and email outreach and engagement

Activities include all the key steps of the lead generation and lead management value chain —- development of a tailored prospect database from scratch, mining of the outsourced provider’s prospect data files, messaging development, cold calling/email and follow-ups, prospect information gathering, qualification of prospects, appointment setting, and lead management systems support, tools and automation

• Digital lead generation (digital demand gen)

Search, pay per click (PPC), pay per lead (PPL) and online advertising (OLA) for lead generation

Usually integrated with marketing automation tools and systems with associated clearly defined processes

Digital demand generation is a specialized set of activities and will be covered in a future post.

 Services

When looking at outsourced providers of telephone/email based lead generation, we find that each provider offers slightly different “slices” of the lead generation value chain.  For example, many providers specialize in leveraging their proprietary prospect data files to develop a customized prospect list, or using their research and telephone staff to develop or augment a tailored prospect list for a client.  A few outsourcing companies may specialize in the actual appointment setting activity with an interested prospect – a real lead in other words – while still others provide the full outsourced lead generation solution or anything in between. 

As we help clients evaluate the alternatives, we push very hard to be as clear as possible with regard to the specific services needed from an outsourced provider.  Equally important, given the slice of the value chain the outsourced company is expected to provide, clients must clearly define how their internal lead generation and lead management systems will smoothly integrate with those of the outsourced lead generation provider.

Industry Focus

Given the tailored approach and experience base needed, third party lead gen companies tend to specialize in serving key industry sectors where the economic value of the sale (one time transaction, or more frequently lifetime value) justifies the fees.  These industries are typically high technology, financial services, healthcare, and less often manufacturing.  This specialization is particularly important where the outsourced provider is offering a prospect database, messaging services and industry experienced telephone reps.  Companies evaluating outsourced lead generation must push very hard to understand exactly the vertical experience the provider will bring to the lead generation program, including close scrutiny of narrow sub-vertical areas of expertise, and quality of their proprietary databases.

Scale/Stability

The size of lead generation outsourced providers can range from thousands of employees in multiple centers around the globe to smaller on-shore companies that focus on a narrow part of the value chain and a few select verticals.  The pros and cons of scale really depend on what the outsourcing company is being asked to do.  If the work is very focused and project related, frequently we find that smaller companies are much more nimble and reasonably priced.

Pricing models

Pricing varies significantly depending on the specific services provided, the level/title of the prospects targeted, size of the relationship, and the use of on or off-shore resources.  There is no right or wrong pricing structure since, again, it depends on the services requested, length and size of the arrangement, and performance expectations.  We usually see variations of three pricing models preferred by outsourced lead generators. 

• Cost per activity / performance

Prospect profiling and qualification – estimated at $175 to $200+ per account

Appointment setting (e.g., getting a seriously interested buyer) – ranges from $600+ for introductory appointments (calls/in person) to $1,700+ for qualified leads

• Projects or scale relationships

Project work – from $20k for small projects to $100ks for major initiatives

Ongoing monthly retainer for a specified set of lead gen activities – approximately $10k to $100k and up

• Outsourced staffing of telephone lead generation activities

FTE pricing based on specified amount of time

Estimated at $6k to $10k depending on complexity of work, talent/experience of staff, and on-shore/off-shore location

Every company looking to improve lead generation and management performance should actively evaluate the “make or buy” decision.  While it can be complex, this will ensure that you get the most out of your lead generation investment.  To learn more about how to evaluate third party lead generation providers, just give us a call.

In today’s difficult economy executives at almost all companies are constantly searching for ways to improve revenue growth.  We frequently get asked, “What is the one most important thing we can do to jump-start growth?”  In our work with over 200 clients, the most impactful step for many was accelerating the generation of qualified new leads for their sales force. 

Because revenue growth from current customers isn’t significant for many of our clients, top-line revenue growth depends on finding new customers. Companies need to focus on capturing market share from competitors.  One of the most powerful ways is to be more effective than competitors in generating high quality leads for the sales team.  As the CEO of a client said this year, “our sales team is highly effective at convincing prospects to buy our products……the problem is they just aren’t getting in front of enough of them”.

In our experience, we found that high performing revenue growth companies often share seven behaviors not consistently found in other companies:

1. They know their sweet spot in the market and they are highly disciplined in focusing their lead generation efforts on prospects in this sweet spot.
2. They ensure the messages are relevant and “call to action” is clear
3. They use a wide range of techniques to ensure that they generate a large volume of new high-quality leads to fuel the selling activities of the sales force.  They ask highly satisfied current customers for referrals, conduct market research interviews to identify high potential prospects, create opportunity maps to understand all the attractive prospects within a geography or industry vertical, employ “pay-per-lead” approaches, and use Search Engine Optimization and social media to generate leads as well as other techniques.
4. They use an automated customer relationship management (CRM) tool; “hot leads” are distributed to sales reps through that tool—as a result, sales reps see “what’s in it for me” from CRM tools
5. They nurture leads that aren’t ready to buy immediately.  All companies have high quality prospects that aren’t in a position to consider a new supplier for 6 months or maybe even a year.  These are valuable assets that are often lost.  Not only is a tickler system required but these leads need some interim communication that keeps your brand and value proposition fresh in the prospect’s mind.  
6. They track lead volumes and outcomes, both in aggregate and by source and sales rep.  These metrics are essential to understanding what works and what doesn’t so real time adjustments can be made.
7. Finally, while leads can come from numerous sources, the sales force itself can often become the best source of leads.  But the sales force must be armed with the information that makes them more productive such as a knowledge map of the highest potential prospects in their territory or the share of spend from current customers so they know where to focus their efforts for further penetration.  The best performing sales organizations have established efficient sales administration and maintenance processes that free up sales force personnel to focus their time on generating new customer leads or targeting additional volumes from existing customers.

In our work we found that most companies remain only marginally effective in lead generation and this area is ripe with growth opportunities.  In particular, lead generation is one of the few levers that senior executives can pull to drive near term growth in 2011.  Fortunately, building a great lead generation engine is not complex, but it does take a focused plan and execution discipline. 

To better assess a company’s performance, we have developed a diagnostic tool, The 100 Behaviors of High Performing Lead Generation Engines ^TM that we use to quickly (over 4 weeks) evaluate every aspect of your lead generation and lead management engine.  Subsequent blog posts will share more about this 100 Behaviors tool, but in the meantime, if you would like more information on how lead generation can help you grow the top line, please give us a call or email us.

Customer research investigating buyer values, the needs and attitudes that drive purchase decisions, is a standard item in the marketer’s tool kit.  After all, understanding the relative importance of different decision factors is essential to effectively segmenting the market and positioning the business to win against the competition.

Price needs to be one of the factors tested as sensitivity to price will typically vary considerably among buyers and across different situations and applications for a product or service.  However, the obvious approach of asking a buyer “how important is price . . .” and ranking it against or rating it along with other factors such as quality or service will often generate erroneous results.

Experienced marketers are aware that buyers may not be completely honest when answering questions about price, and a common belief is that respondents rate price highly regardless of its actual importance because they are trying to drive price down through the research process.  “Everyone says price is most important,” many conclude.  The temptation is to toss out price and focus on the second- or third-most-important factors to differentiate among buyers.

In our experience, the difference between a buyer’s answers and reality can be even more misleading.  Often buyers who rely almost exclusively on price when making purchase decisions will downplay the importance of price in the research process because they don’t want to appear cheap (this is true even in a business-to-business context) or seem unsophisticated because they don’t factor in less quantitative factors such as total cost of ownership or supplier responsiveness.  Conversely, buyers who don’t focus on price feel they should and give it more importance than they do in actual practice.

How, then, to understand the role of price and construct research to accurately reveal its influence on the purchase process?  When Blue Ridge conducts research using our Nine Voices of the Market methodology, we believe the answer is often to investigate behavior rather than inquire about attitudes or needs.

All buyers want a good price, but what will they do to get a low, or the lowest, price?  Apart from those few for whom price doesn’t rate at all, buyers fall on a spectrum of behaviors ranging along categories we’ve labeled Best-Price Certain and Good-Price Confident.

Best-Price Certain buyers want the lowest price and will invest time and effort to ensure that’s what they are getting.  They may be willing to pay a premium for specific features or benefits that are of value to them, but the Best-Price Certain buyer will be very hard-nosed about the price-value tradeoffs.  Professional procurement buyers will typically fall into the Best-Price Certain category.

Good-Price Confident buyers, on the other hand, know price is important, but would prefer to limit the effort they invest to pay less.  In many cases these buyers will have developed a preference for a supplier and will take occasional action to keep prices competitive such as obtaining quotes from other vendors to keep the preferred supplier “honest” or negotiating for discounts that help the buyer feel he or she is getting a deal.  These buyers may also select brands or businesses that have built a reputation for offering low prices because they want a good price without going through the effort of comparison shopping.

Behavior is the critical differentiator along the spectrum of Best-Price Certain and Good-Price Confident buyers.  The available actions a buyer can take to increase confidence in the competitiveness of a price will vary by the product or service and the purchase situation, and so research needs to be tailored to these price-related behaviors.  Below is an example from a common business-to-business purchasing context.

While obtaining solid intelligence regarding the role of price in the purchase decision process is inevitably tricky, the behavior-based approach is a reliable method for differentiating among buyers when price is at some level important to all.  In a twist on the old adage, far better to ask what they do, not what they value.

As Jerry mentioned in his earlier post, Wall Street has great interest in learning which companies have pricing power and which ones don’t.  We hear analysts asking pointed questions:  “Can you raise prices?”  “How much pricing power do you have?”  “How effective are you in making price increases stick?”  “What are you going to do to improve pricing next year?”

Those companies that have pricing power clearly command premium valuations in the public and private markets.  While pricing power is viewed as the Holy Grail, pricing power by itself is not enough.

Companies frequently have more of an ability to set prices than they realize, but they often fail when it comes to implementing the pricing strategy.  Successful companies focus on both Pricing Power and Pricing Capabilities to maximize Pricing Effectiveness – the development of pricing power and the ability to exercise that power in the market.

While almost all senior executives understand the idea of pricing effectiveness, the challenge is to clearly understand the levers that could lead to better pricing.  And there many levers that could be pulled such as price increases, new product development, better pricing tools, improved pricing intelligence, stronger branding, etc.  The key questions revolve around identifying the levers that will lead to the greatest impact and higher revenue growth.

To help answer these questions, we developed a Pricing Effectiveness Diagnostic^TM tool to identify the magnitude of the pricing opportunity and the specific actions that will allow the company to capture that value.  Designed for use in short four week client projects, the tool delivers: 1) a clear understanding of those areas that limit more effective pricing, and 2) a high level road map to overcome these obstacles.

The Pricing Effectiveness Diagnostic^TM focuses on the interplay of Pricing Power and Pricing Capabilities recognizing that both are critical to achieving your pricing objectives.  On the left side of the equation shown below, Pricing Power is often viewed by many executives in one dimension, largely focused on market dynamics.  This frequently leads to a view that Pricing Power is a given as opposed to a factor that companies can control and manage.  This view can lead to underweighting the Value Drivers as key levers that provide an ability to control product and service pricing.  With our approach, we believe in focusing equally on both factors.  Shifting the Value Drivers (e.g., product differentiation, brand strength, and the ease of acquisition) upward takes time and effort, but these are some of the most enduring sources of Pricing Power.

A company’s Pricing Capabilities are almost as important as raw Pricing Power.  Frequently, in our research we find that many companies do have inherent Pricing Power. For example, they may have a very strong brand and differentiated products.  But when they try to exercise that power, they often lack the core capabilities that should go hand-in-hand with Pricing Power, such as segmentation of customers by core buyer values, market intelligence on competitor pricing, the right organizational structure and leadership, or the processes to actually execute price changes in the marketplace.  Without the organizational ability to execute strategic pricing, companies leave significant revenue growth on the table.

The Pricing Effectiveness Diagnostic^TM examines over 50 discrete factors that go into the pricing effectiveness equation and generates numerical scores for each of the key inputs.  Together the scores generate an overall grade for Pricing Effectiveness.  The tool allows senior executives to objectively compare the company’s performance with industry benchmarks and quickly identify the key levers that will lead to improved pricing.

For more information please click on the following link, Maximizing Pricing Effectiveness, for a short white paper that describes the appraoch in greater detail.

One of the toughest tests of a sales compensation plan is how well it motivates the field to fully execute price increases. The return of surging commodity prices and input costs makes this an urgent issue for many businesses. Many incentive plans simply do not address the risk-reward tradeoff confronting the typical sales rep in these situations.

Even with tiers and accelerators, incentive plans based on a commission against sales do not motivate sales reps to aggressively push through price increases. Price increase discussions are difficult and uncomfortable especially when a professional buyer is on the other side of the table. Many customers will threaten to move some or all of their business. The rep sees the frightening possibility of a big hole in his or her book – and commission statement. Backing off of the target increase into a negotiated compromise may be the rational choice for the income-maximizing sales rep. It will certainly be the easier path.

In their book Freakonomics, Levitt and Dubner illustrated a very similar problem with real estate agents. They noted that agents incented on a straight percentage of transaction value typically leave money on the table for their clients. The problem, they speculate, is that the additional incentive to hold out for a higher price is very small compared to the time, effort, and risk involved. Research confirmed the effect, which they describe in the video clip, below.

Most sales reps have a deeper commitment to their company’s success than the typical real estate agent to a client. We see many who work heroically to execute price increases because they believe it is the right thing to do. However, good sales reps are substantially driven by compensation. A plan that doesn’t motivate when price increases need to happen is a weakness that cannot be tolerated.

When price increases need to be executed, the best compensation plans tie commissions to actual profit margins, not revenues, or are based on target prices or standard margins that change when costs increase. However, significant changes to compensation plans mid-year or in haste are typically not feasible or wise. Fortunately, there are options to shore up an un-motivating plan when there isn’t an opportunity to revamp the entire compensation structure.

We have found that overlay incentives can work well in conjunction with price increases to boost the effectiveness of traditional plans without disrupting the underlying plan structure. These incentives require additional investment, but are typically tied to upside results achieved by the sales reps. Good options include:

1. Share the benefits of the price increase. Give sales reps the opportunity to share in a meaningful percentage of the actual price increase for some period of time, e.g. 10% to 30% of incremental revenues for three or six months. This will often kick in only if certain thresholds are achieved, such as the increase being successfully implemented against a minimum target percentage of customer revenues. In some cases the short-term investment by the business may be significant, but the substantial margin benefits from a successfully executed price increase will quickly accrue.

2. Award a bonus tied to a threshold price increase success rate. For many reps, a simple fixed dollar bonus can be more motivating than equivalent amounts based on percentages and formulas. Good qualifications for earning the bonus include: average increase attained, percentage of customers or revenues subject to a threshold increase level, timeframe for full implementation of the increase. The benefit of the bonus approach is its simplicity and the ability to cap total additional compensation costs for the business.

3. Sales contests based on price increase success. Stoking the competitive fires with a sales contest at the sales rep or team level can be very effective and maximize the power of the investment by the business in the contest awards. Sales contests are typically most effective when outsized rewards are earned by the very top performers, which for price increases can be simply measured as the total revenue-weighted price increase achieved. Contests are particularly useful when sales teams have some flexibility to innovate and experiment with different approaches. However, contests focused on the same goal, such as price increases, quickly lose effectiveness and need to be replaced with systems in which all reps and teams that meet their objectives will be rewarded.

Many pieces must come together for a well-executed price increase such as setting price targets, arming field sales with up-to-date customer and market data, communicating with customers and the market, and providing alternative means for customers to keep costs low. However, the linchpin is a capable and well-motivated sales force. When improving execution of price increases becomes a priority, look early and closely at incentive plans to ensure sales teams will be fully committed to the hard work ahead.