Incentivizing Sales to Align with Marketing

Sales and Marketing, two departments which should be closely aligned but are often at odds.  So where does this lack of cohesion come from?  It can be traced to incentives and Luke Neely, an SEO and Content Strategist, suggests “The leading cause of misaligned sales and marketing teams is misaligned incentives.” Marketing departments work hard to come up with great branding, design elements and ad campaigns to make their companies profitable and successful.  However, when it comes time to sell these products, salespeople are frequently incentivized through commission off of volume of sales.

 

Let’s say a company sells wine.  In order to move their product in greater volume, they offer discounts to consumers based upon the number of bottles purchased.  One bottle of wine retails for $50.  Buy 10 bottles and it costs $40 per bottle.  Buy 50 bottles and it’s only $30 per bottle. And finally, buy 100 bottles and it will only cost $20 per bottle.  Each bottle of wine costs said company $10 to produce, package and pack.  The sales team receives 20% commission off of every sale.  It stands to reason then that the Salesperson will want to sell 100 bottles at $2,000 to receive the greatest commission possible.

 

But this is actually doing a disservice to both the Marketing Department and the company as a whole.  The Marketing Department is disadvantaged because their product, which they have worked hard to promote and brand, has now been devalued.  The customer will now think that bottle is worth $20, not $50.  The company has also hurt themselves because their margins have shrunk to only $10 per bottle, and even less after the commission is paid.

 

What then is the solution?  Companies must incentivize their sales force by offering margin-based rewards programs. This means that the sales team will want to create the greatest profit to increase their own paycheck.  It will then also create increased value for the product as it is now being sold at a higher price point to increase margins. An emphasis on increased value will please the marketing department that has worked to generate consumer interest.  When departments are aligned, particularly sales and marketing, it not only creates more internal cohesion within the company but also yields better profits.  And what’s not to like about that?

 

For more information regarding marketing or creating a strategic marketing plan, free consultations with Oster and Associates are available here.