Sales Forecasting is an essential tool to create compensation programs in accordance with the organization objectives and generate the sales desired behavior. Once you know the market, customer needs, and revenue potential, companies can establish compensation models that inspire sales teams to do what has the most business value.
Forecasting-Informed Incentive Design
Sales forecasts give you an idea of what your sales should focus on. For instance, if market estimates indicate that demand for a new product is growing, companies can develop compensation packages that reward higher commissions or bonuses for bringing the product to market and selling it. This matches sales team activity with business needs.
Example 1:
One software company who sees a spike in market for enterprise software announces an accelerator programme. For every sale that exceeds the goal in that line, sales reps receive 20% bonus. This not only fuels high margin products but also boosts revenue.
Addressing Regional and Seasonal Variances
Sales can be regionally or seasonalized and Sales forecasting should allow organization to adjust incentives accordingly. For example, in traditionally low times of the year, special perks can keep people motivated and engaged.
Example 2:
An electronics retailer is expecting less traffic in Q1. As a fix for this, they double commission on accessories purchases in that quarter. This not only helps to recover revenue losses but also helps in clearing the inventory.
Benefits of a Forecast-Driven Approach
By using sales forecasting in compensation planning, organizations:
1.Concentrate on profitable product categories or customer groups.
2.Encourage sagaciousness towards the market.
3.Establish a data-driven sales culture where the work is in step with the vision.
By adding sales forecasts to compensation plans, organizations can align individual and team performance to business goals, increasing revenue and maintaining market dominance.
