As organizations compete in hyper-competitive markets, a static sales crediting model no longer cuts it. Sales teams work across geographies, products, and customer segments. How do you create crediting rules that are flexible enough to recognize and incentivize the right behaviors and drive toward revenue goals?

A New Approach to Sales Crediting Models

A sales crediting model is a framework that determines which rep(s) or partner(s) get credit for a sale. Traditional models are linear and rigid: One salesperson is credited for one transaction. This model works for simple scenarios but fails to capture the complex multi-player sales deals that are the new norm. Dynamic sales crediting hierarchies are an emerging solution. They can align behavior with revenue goals while ensuring accuracy, fairness, and efficiency.

Defining Sales Crediting Models

Before discussing the new trends in sales crediting, let’s define a sales crediting model. In its simplest form, it is a set of rules that determines who gets credit for a sale. The model can be as simple as one salesperson per one transaction. But in complex sales organizations where many players can contribute to a deal (account executive, solution engineer, channel partner, customer success teams, etc.), the traditional linear model fails to incentivize the entire sales ecosystem effectively.

Example:
Consider a software company that sells products and solutions. The following sales process may lead to a deal:

a. Sales Executive (SE) that initiated and closed the deal
b. Solution Engineer who demonstrated the product to the customer
c. Channel Partner who introduced the customer to the SE

Under a traditional crediting model, only the SE would be assigned credit for the transaction. The dynamic crediting model will allocate a part of the credit to the other players based on a preconfigured rule or a set of rules.

Why Evolve to Dynamic Sales Crediting Hierarchies

Dynamic sales crediting hierarchies are an evolution over the static models. They are rules-based, flexible crediting frameworks that assign credit based on specific conditions such as product line, deal size, territory, or role.

Some of the benefits of dynamic hierarchies are:

a. Behavioural Alignment: With dynamic crediting, organizations can ensure that their sales team’s day-to-day activities are in line with business objectives. They can drive the sales reps to perform actions that they want to incentivize such as upsells, cross-sells, or new market expansion.

b. Operational Efficiency: Automated calculation of credit based on rules rather than manual adjustments reduce errors.

c. Fairness and Transparency: Rules-based crediting can help create clarity of the credit assignment among sales teams and reduce disputes.

d. Scalability: Manual assignment of credit in complex multi-tiered sales orgs and partner networks can become administrative roadblocks. With a dynamic hierarchy, organizations can scale flexibly.

How to Design Dynamic Credit Rules

Before designing dynamic hierarchies, organizations must define their crediting rules. Crediting rules are configurations that dictate how much credit each contributor, level of management, or partner in a deal is assigned.

Sales organizations use the following types of crediting rules:

a. Role-Based: Credit is assigned based on the role a person plays in the sales process.

b. Transaction-Based: Credit is assigned based on the characteristics of the deal such as product line or deal size.

c. Team-Based: Credit can be split among a team based on each member’s contribution.

d. Tiered Management: Credit is assigned to different management levels as an override by managers for planning, tracking, and incentive purposes.

Example:
The same SaaS company mentioned above may have a crediting rule such that the AE gets 60% of the credit, the SE gets 20% of the credit, and the channel partner gets 20% of the credit if the deal value is over $250,000. If the deal value is less than $250,000, the credit defaults to 100% to the AE.

Technology Enablers for Evolving Sales Crediting Models

Manual calculation of credit across different contributors to a deal is a huge error-prone exercise and it does not scale. As sales organizations look to dynamically define their credit hierarchies, they need a technology enabler. Advanced sales compensation platforms such as Versio allow organizations to:

a. Automate credit calculations: Automate the credit calculation once the rules are set

b. Model different scenarios: Sales ops teams can model what-if situations before committing to hierarchy and rule changes.

c. Real-time visibility: Managers and sales reps can see how credit is being allocated in real-time

d. Integration with CRM: Integrate with CRM such that opportunities, pipeline updates, and closed deals get automatically imported to the compensation system

Example:
A global manufacturing firm used Versio to implement dynamic sales crediting for all 12 of their regions worldwide. The system automatically apportioned credit when deals were composed of multiple products and geographies and involved multiple sales teams. The automation improved credit dispute management by 35% and accelerated the payout cycle.

Aligning Credit Models with Revenue Goals

The point of a dynamic crediting model is not to be a fair game of pass the parcel—it should drive the organization toward revenue goals. This is why companies need to align credit models to the business’s revenue and strategic goals.

Best practices:

Map revenue goals to strategic objectives: Prioritize revenue goals. Is the focus to go after new markets, drive retention, upsell, or churn?

a. Define behaviors that are desired: What activities or actions should be driving toward the strategic objectives? What are the behaviors you need to incentivize? Selling particular product bundles, is an example.

b. Weight credit to incentive desired behaviors: Apply the right weight to the right actions to drive the behavior you want to see. Balance this weighting to not overcomplicate the model.

c. Monitor and iterate: Keep a close watch on credit assignments and sales behaviors and make corrections where necessary

Example:
A telecom firm wanted to aggressively sell enterprise accounts. The market was competitive, and company-wide quotas were hard to hit. The organization decided to increase credit assigned to both the reps and the SEs when they had multi-product deals and within a six-month time frame, cross-sell revenue increased by 22%.

Company: Global SaaS Provider

Challenge: Multiple contributors (sales, SEs, customer success teams) worked on deals but not all of them were recognized. The opportunity was being missed for upsells.

Solution: Implemented a dynamic hierarchy with Versio that allocated credit across SEs, Solution Engineers, and Customer Success Managers. Rules were put in place that defined the nature and complexity of the deal and split the credit based on it.

Outcome: In a year, upsell revenue increased by 28%. Collaboration between sales and customer success improved, and employee satisfaction scores increased.

Future Trends in Sales Crediting Models

The future of sales crediting models will involve some of the following trends.

a. AI-Driven Credit Allocation: Machine learning algorithms will be able to predict and weight contributions and dynamically adjust the credits in near real-time.

b. Gamification of Sales Credit: Sales gamification programs such as use of points and other virtual rewards can be tied to monetary incentives and drive high engagement.

c. Cross-Functional Incentives: Credit that the sales team earns is linked to the marketing, support, or product teams in order to drive overall growth.

d. Scenario Planning: Advanced compensation tools will have robust scenario planning that will let users see the impact of a different hierarchy or rules and see its impact.

Conclusion

Dynamic sales crediting hierarchies are the future of sales compensation. Dynamic crediting models that are rules-based and reflect the complex nature of sales deals help organizations achieve behavioral alignment with revenue goals, enhance transparency, and drive operational efficiency. Those that invest in building a fair and flexible crediting structure while also using technology platforms to enable it will not only improve sales performance, but they will also build a culture of fairness and collaboration and drive sustainable revenue growth.