Some reader feedback on Gerry Tabio’s How to Grow Your Out of Home Company.
Randy Jackson of Venture Outdoor Advertising says compensation plans should encourage early account renewals.
I am a big fan of Gerry’s mindset here. To build on your existing business seems obvious, but I have seen many sales compensation programs that put an emphasis on rewarding new business, and even turning large, existing clients into “House Accounts” (I suspect accountants are involved in these decisions). It seems more beneficial to set up a compensation program that incentivizes getting the renewals (ideally with an increase in spend) booked for the upcoming year as soon as possible. This lays the foundation on which to build the growth that benefits the company and the sales team. Maybe something like commission tiers where an AE is paid a commission on the first 70% of their annual budget booked, a larger commission on the next 30% of their budget booked, and an even larger commission for anything booked above 100% of budget through the end of the year. This encourages your sales people to knock out their renewals as soon as possible to help get to the next tier of commissions. There is something to the saying, “It’s not a sale until you get the renewal.”
Trailhead Media’s Jonathan Graviss says sellers need to spend time growing high value accounts.
I love this article. This is the kind of relevant content needed for the subscribers who are SM’s and GM’s. I’ve gone through this exercise at 2 of the companies I have worked with. One of the positive byproducts is that sellers have a keen understanding of where to spend their time – growing high value accounts and spending time with the highest value prospects. If an account can’t spend $x per period is it worth our time to be calling on them?
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My company is installing our very first digital. We are total neophytes in this industry. I’d like to gain some input on typical commission structures. Can i gain some guidance?
Thank you
In response to Randy Jackson’s comment on our recent article: Randy, you are absolutely right that compensation is a crucial piece of the puzzle when you want to focus your sales organization on the accounts that really matter. A couple of thoughts.
Of course, renewing large clients is obviously important. But what may not be obvious is that the Key Accounts (the top 25% of your list) need to be managed in the aggregate, so – as a group – they churn at a maximum of 13%. We recommend to our clients that they keep their total Key Account Portfolio attrition to 10% or less.
Now, every one of your sellers manages a portion of that portfolio of Key Accounts. So, consider creating an incentive that gets paid to the seller once their portion of their Key Account Portfolio exceeds 90% of what they spent last year. We have seen this work very effectively. It teaches them that, while some of their accounts might shrink for one reason or another, they can put extra effort into the Key Accounts that have more potential for growth.
You alluded to the tradition of paying people incentives for bringing in new business. As you will see in Part 3 of our series, which will appear next week, our research shows conclusively that new business efforts create very little growth. This is in large part because we give sellers bulk numbers to hit, so they chase small clients to make the number. We recommend instead that you launch a Target Account effort, which creates New Key Accounts.
Thanks again for the comments!