CRM applications have been a godsend to businesses of all sizes, putting all the sales compensation management information needed to help clinch a sale right at the fingertips of the sales force, thereby enabling it to compete more efficiently.
Recently, the benefits of CRM have become especially attractive with the advent of on-demand sales compensation management solutions. These sales compensation management solutions can leverage the same enterprise-class CRM functionality enjoyed by large organizations but without the major hardware and software investment that on-site enterprise software entails.
As the on-demand sales compensation management delivery model continues to widen the circle of CRM users, the opportunity exists to greatly extend the ROI of CRM by linking with other on-demand applications in the greater sales performance-management space — starting with sales compensation management.
If CRM is about leveraging presales data to make the sale, sales compensation management solutions are all about leveraging postsales data to ensure reps are paid accurately and have the incentive to make the most profitable deals. There's a neat symmetry here with powerful synergies for CRM customers to realize. Today's sales compensation management applications can bring automation and end-to-end visibility to the incentive-compensation process — which in most companies is still managed via burdensome spreadsheet-driven manual sales compensation management processes that breed errors and disputes, don't scale cost-effectively, don't easily accommodate sales compensation management plan changes or additions and waste enormous amounts of administrative and sales-rep time.
Even worse, the inflexibility of these sales compensation management processes leads to dumbed-down compensation plans, because it's next to impossible to implement a truly strategic and dynamic plan that aligns sales behaviors with corporate goals when you're tied to sheaves of spreadsheets. Sales compensation management applications solve these issues in much the same way that CRM applications have brought automation, visibility, and efficiency to presales processes.
To be effective, sales compensation management applications must consolidate postsales data from all relevant enterprise systems where it may reside — including ERP (enterprise resource planning), payroll, order management, pricing, inventory, product, accounts receivable, and HR systems.
This sales compensation management data becomes fodder for the business rules and algorithms that accurately calculate each sales rep's commissions on each sales transaction for sales compensation management. Once captured, the data is centralized in a sales compensation management repository, so it is available to drive modeling activities for determining the impact of new sales compensation management plans, organizational changes, commission expenses, and plan changes prior to their sales compensation management deployment.
Beyond that, sales compensation management can drive analyses that help companies refine their sales processes and sales compensation management plans, understand their commission exposures, optimize the structure of their sales organizations, and much more. In short, through this strategic sales compensation management data, customers gain a scrubbed, comprehensive, detailed, and extremely leverageable view of field activities at any point in time and over extended periods of time.
Two enormous benefits result if forward-looking CRM customers take advantage of this postsales sales compensation management gold mine:
- The postsales data in sales compensation management repositories can be linked with presales data in CRM applications to drive new value for the sales and finance organizations and the business as a whole.
- The same postsales data can be leveraged by the other sales performance management applications currently coming together around sales compensation management — and the functionality resident in these applications can, in turn, be leveraged by CRM customers to drive even more new value.
Synergy Between CRM and Sales Compensation Management
If you are a sales rep evaluating live sales opportunities in Salesforce CRM, Oracle CRM On Demand, or other CRM applications, you likely have great and immediate visibility of contacts, contact history, influencers, and the like. What you likely don't have is immediate visibility into precisely how much money you stand to make in commissions, bonuses, and other incentives for each opportunity. Hence, you may not really know which opportunities will be the most profitable for you without sales compensation management input.
You can try to figure it out using a spreadsheet, calculator, or the back of a napkin, but that takes a lot of time and there's no guarantee you're going to get it right. To even start, you must have a thorough knowledge of the ins and outs of your individual sales compensation management plan as it stands at the moment. If it's complex or subject to change — SPIFs (special performance incentive funds), for example — that can take some time and effort. In addition, each potential deal can likely be structured in certain ways to maximize your personal return, and that takes time to figure out as well. But what if you could do it all almost instantly with ensured accuracy within your CRM application, so you could get on with selling instead of running sales compensation management numbers?
By the same token, if you head up sales and have devised a sophisticated and detailed set of sales compensation management plans to align your reps with corporate objectives — such as selling high-margin intellectual products before trying to move low-margin OEM (original equipment manufacturer) products — wouldn't it be valuable if reps could see at a glance the return they'll get on their efforts, opportunity by opportunity? That kind of sales compensation management visibility, or lack of it, can help make or break a plan, a fiscal quarter, or a career.
This is where the synergies between presales and post-sales sales compensation management data start to come in. One of the most useful features a sales compensation management application can offer is the ability to run "what if" scenarios to project earnings using sales compensation management plan data. Among the most useful features of a CRM application are comprehensive views of live sales opportunities.
By integrating these two applications, you provide reps with the ability to run "what if" scenarios on live sales opportunities in order to see accurately — and in real-time — how much they can potentially make on each deal per their sales compensation management plans, as well as how to structure a deal for a maximum sales compensation management payout. Consequently, reps can easily see where to most profitably put their sales efforts, and they can do so within their CRM application by transparently leveraging this "new" value-added sales compensation management functionality.
While the previous example illustrates a tangible operational synergy, many other synergies exist behind the scenes. Like CRM, sales compensation management is transaction-centric — transactions are captured and archived, metrics are leveraged to measure progress, analytics are applied to spot trends, audit trails are created for accountability and compliance, and so on. With CRM and sales compensation management solutions in place, companies have the start of presales and postsales data environment that addresses the operational and analytic needs of sales compensation management and finance management tasked with driving sales performance and maximizing profits.
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Total Sales Performance Management
We've discussed how sales compensation management applications cleanse and consolidate strategic postsales data from a wide range of disparate systems — the kind of data necessary for sales-compensation analysis, product-profitability analysis, channel sell-through analysis, customer-profitability analysis, and so on. This critical data can be leveraged to automate and bring visibility to business processes that are highly complementary to both sales compensation management and CRM, and it can drive improvements in sales performance management.
These processes include quota and territory management, modeling, analytics, and price management, as well as sales forecasting and planning. Following the lead of CRM and sales compensation management applications that are increasingly going on-demand, on-demand solutions to address the aforementioned business processes are emerging.
Further, they are coming together under the sales performance management umbrella, where they can leverage the same postsales data that enables incentive compensation effectiveness. For example, analytics applications provide insight into who are the most profitable reps by revenue, margin, discount percent, and region; what are the most profitable products; who are the most productive reps per month, quarter, and year; the cost of sales in a given region in a time period; how this group compares with those in other regions; and more.
Quota management applications automate quota allocation and provide analytic capabilities to optimize quota distribution. Territory-management applications help define accounts, territories, and hierarchies that best drive revenues and profits. Price-management applications analyze which products should be sold to which customers at what price points and they help manage pricing strategy and execution. And forecasting/planning applications help drive optimal product planning, sales forecasting, and inventory levels.
Critically, all of this postsales sales compensation management functionality loops back to enhance the presales processes that are the domain of CRM solutions, impacting these sales compensation management processes positively and substantially through:
- Improved planning for addressing sales targets.
- Optimal tuning of sales organizations.
- More competitive price structures.
- More meaningful sales expectations.
- Incentives are closely tied to strategic objectives.
Maximizing Your Return on CRM
CRM need not, indeed it should not, exist in a silo, even though this has traditionally been the case. Starting with sales compensation management — and piggybacking on it — a set of new on-demand sales performance-management applications now exists to feed value back into presales CRM processes and thereby help to maximize the return on customers' CRM investments.
CRM users now must think seriously about how they can leverage the power of postsales data the same way they are leveraging presales data, and bring presales and postsales processes together in a total sales compensation management and sales performance-management environment. The new sales imperative is fast becoming as essential as CRM itself.
