Table of Contents
Understanding Hybrid Sales Models:
Strategies for Designing Flexible Compensation Plans:
Incentivizing Cross-Channel Collaboration:
Q1: How can organizations ensure fairness and transparency in hybrid compensation plans?
Q2: How do organizations mitigate potential conflicts between direct and indirect sales channels?
Q3: What role does leadership play in incentivizing cross-channel collaboration?
As hybrid sales models become more commonplace, businesses need to figure out how to compensate for direct and indirect sales channels, and finally figure out how to favourably incentivise collaboration across these hybrid channels so both routes can be utilised. We have to focus on direct sales compensation and indirect channel compensation in order to position our organisations for revenue growth. We’ll look at how to design compensation plans that can work for hybrid sales models and figure out how to incentivise cross-channel collaboration.
Understanding Hybrid Sales Models:
Hybrid sales models make use of the best of both these sales channels: direct sales involve selling goods and services directly to customers via the company’s own salespeople or via a company-owned online channel, giving the company greater control over sales methods and the customer relationship; and indirect sales take place when the company leverages third-party networks of distributors, resellers and independent agents to sell goods and services to customers indirectly.
And motivating them to do so isn’t without its thorns, most notably in the design of incentive structures that work with the differences inherent in each channel while also fostering connectivity and alignment to company goals.
Strategies for Designing Flexible Compensation Plans:
1.Tailor Incentives to Channel Dynamics:
Recognize the unique attributes and goals of each sales channel when designing compensation plans.
Direct sales teams may be rewarded (eg, with a sales bonus above their commission) according to individual sales targets, while indirect channels may be preferentially rewarded in units of revenue generated (eg by rewarding on attainment of group targets) or by rewarding on market-share (in which case a different yardstick, such as margin rather than revenue, may be used since, although revenue alone reflects size, it does not reflect the profitability of that size).
Example: Rather than offering a plan that incentivises all of its sales channels the same way, as in the extreme case above, a software company could incentivise a direct sales team on a commission, while offering discounts on volume to channel partners. This encourages both sales channels to achieve their strategic goals; it supports the incentive and activity mix that makes direct sales productive while also leveraging discounts to stimulate the price elasticity of volume-driven channel sales. The result is an overall growth in revenue for the company.
2.Foster Cross-Channel Collaboration:
Promote close cooperation and collaboration between the direct and indirect channels wherever possible, so as to maximise synergies and leave no room for sales opportunities to slip through the cracks.
Incentivise cross-channel referrals and co-selling; create a culture of ‘mutual admiration’.
Example: The cross-channel collaboration between a consumer goods manufacturer and its channel partners is encouraged via bonuses to cross-sales from direct sales reps to channel partners, and close bonuses for channel partners who close deals which originate from direct sales reps.
3.Define Clear Performance Metrics:
Set clear performance indicators and key performance indicators (KPIs) that track sales channels’ performance.
Keep tabs on key performance data, and tweak compensation plans when there is room for improvement.
Example: A retail chain tracks conversion rates, average transaction value and customer satisfaction scores for both direct and indirect sales channels, and uses these metrics as opportunities to optimise sales performance and to adjust compensation plans to increase the production of sales and service outcomes with which they are pleased. 1
4.Provide Training and Support:
Finally, be sure to invest in training programmes and other resources that help your sales team learn the skills they need to be comfortable in the new hybrid sales environment.
Provide constant support and advice to channel partners in order to keep them in line with company sales objectives and strategies.
E.g.: A telco holding regular training workshops for its direct selling staff and also its channel partners in product knowledge, sales skills, market trends, and then also staffing dedicated account managers to assist channel partners with their challenges.
Incentivizing Cross-Channel Collaboration:
1.Align Incentives with Shared Goals:
Establish common objectives and KPIs that reflect the collective goals of all sales channels.
Build compensation plans that reward team play, in addition to units, territories or other groupings, for the sales success of the company as a whole.
Example: A car manufacturer aligns incentives by giving bonuses to both the sales and delivery teams to reach sales targets, allowing for more collaboration as they strive to reach the synchronized milestones together.
2.Foster a Culture of Partnership:
Promote unified wellbeing and collaboration among your sales channels by focusing on what you have in common, versus what sets you apart.
Allow for regular communication and information sharing to create a closer relationship and strengthen trust throughout sales teams.
Example: On a quarterly basis, this technology company hosts workshops for its direct sales representatives and its channel partners. These workshops focus on exchanging information about the market, targets and strategies, and creating synergy and cooperation.
3.Leverage Technology for Collaboration:
Implement collaboration tools and platforms that facilitate communication and information sharing across sales channels.
Use CRM systems that track which sales team speaks to whom and how often, so that collaborations can be better coordinated and aligned.
For example, a hotel group uses a CRM system across its whole enterprise to aggregate its customer info and align its direct sales team and its channel partners on their collective sales efforts, enhancing enterprise-wide sales efficiency.
FAQs on Hybrid Sales Models and Cross-Channel Collaboration:
Q1: How can organizations ensure fairness and transparency in hybrid compensation plans?
A1: Give it transparency. Communicating the design of a hybrid compensation plan, the eligibility rules and the performance metrics are vital components so that everybody understands what’s at stake and starts pounding the pavement to make sure they earn their commission.
Q2: How do organizations mitigate potential conflicts between direct and indirect sales channels?
A2: Having transparent flows of information, explicit rules of engagement between different sales channels and effective mechanisms for conflict resolution between different sales channels helps to avoid unnecessary conflicts between them.Sharing common goals aligns different sales teams, and designing reward systems that encourage the teams to work together activates cooperation.
Q3: What role does leadership play in incentivizing cross-channel collaboration?
A3:Leadership must create the culture that encourages multi-channel collaboration, provides context and support, and also structures incentives for goals common to both multi-channel and multi-unit. By opening lines of communication within multiple levels of reporting and having the courage to listen, leaders can then foster collaboration, increase engagement and drive ongoing tailored development – leading to improved sales performance. 3. Leadership must create the culture that encourages multi-channel collaboration, provides context and support, and also structures incentives for goals common to multi-channel and multi-unit.4. By opening lines of communication between multiple levels of reporting as well as having the faith to listen, leaders can encourage collaboration and increase engagement – resulting in ongoing tailored development and, subsequently, improved sales performance. And as hybrid sales models proliferate, compensation programmes must be modified to address the uncertainties and complexities of both direct and indirect channels. Incentives that match channel dynamics, incentives that promote coopetition across channels and incentives delivered using technology to coordinate action within and across channels are key to achieving a sustainable sales advantage across distribution channels. Incentivising cross-channel collaboration is not a nice-to-have – it is essential for achieving more effective selling, especially in a marketplace where customers increasingly expect channels to collaborate to deliver superior value.
