What's Driving Distributors to Update Sales Compensation Plans? - Modern Distribution Management

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What’s Driving Distributors to Update Sales Compensation Plans?

About a third of distributors plan to make changes to sales compensation in the next year.

More than half of all respondents to the second-quarter MDM-Baird Distribution Survey have plans to make changes or have recently made changes to their sales compensation plans. About 27 percent are in that planning phase, while 26 percent are in the process or have completed changes. The remaining respondents said they had no plans to make changes. Whats driving the changes?

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About 36 percent of respondents to the recent quarterly MDM-Baird Distribution Survey said the need to accelerate growth in a stagnant economy was the key driver behind plans to change their sales compensation plans.

A little under 30 percent named margin or cost pressures as the driver of changes.

Other drivers include: new channels, including e-commerce; restructuring or M&A; and better alignment with strategic initiatives. With the latter, many distributors named a desire to add to their product mix or reach new customer segments.

In the same survey, we asked readers how satisfied they are that their compensation plans supported their business objectives. More than 60 percent responded that they were very or pretty satisfied (ranking of 6-10 on a scale of 10). About a third responded with a rank of 5 or below, implying that they were somewhat or very unsatisfied.

I recently spoke with Mike Emerson of Indian River Consulting Group about these sales compensation survey results and his new book from the National Association of Wholesaler-Distributors, Effective Sales Incentive Design for Distributors: What’s the Right Plan? 

He said that he’s seen an increase in interest from distributors wanting to revamp their sales compensation plans in light of the tough economy over the past few years. Distributors are looking for new paths to growth, and one way to do that is to align sales compensation plans with strategic objectives.

Read my interview with Emerson here: MDM Interview – Get Strategic Clarity Before a Sales Compensation Change

Emerson and his colleagues Mike Marks and Steve Deist will be featured in a two-part MDM Webcast on sales compensation plan design Oct. 2 and 4. Learn more about those programs.

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