The Question of Marketing Compensation
Should you tie a marketer’s compensation directly to sales? Or, should it be based on some other sort of performance metric?
I’m of the belief that marketers, especially those who are charged with delivering qualified leads to sales, need to have some skin in the game. That said, I think revenue goals are a little too removed for them to connect with.
I’ve seen plenty of marketing teams that had nice big chunks of incentive pay waiting for them if sales reached its quota. There was no doubt that these marketers could influence revenues by driving opportunities to sales. Unfortunately, in almost all cases, the incentive payments were not a motivator for these marketers. Two main reasons were:
Time - There was too much of a time lapse between generating the opportunities and the closing of the deals. This is probably an unflattering analogy, but for those of you who have ever trained an animal you know that there has to be very little time between the behavior you want and the reward. Of course most marketers are smarter than the family dog, but if you delay their reward by a period of months or even years, the motivation is going to be diminished.
Control – There’s a feeling of lack of control as well. After all, once the marketer generates the leads there is no guarantee that the sales team will actually follow up. And, if they do, how does the marketer know they can actually sell?
This lack of control also points out one of the big challenges that arise from tying a marketer’s compensation to sales. If they generate the required number of qualified leads and sales still doesn’t make its goal, a resentment can start to build.
I would recommend putting all marketers on an incentive pay plan. In fact, I’d probably make incentives a larger part of the plan than most marketers are traditionally comfortable with.
I would tie this incentive pay to the metrics that lead to sales and that marketing has some control over.
The % of qualified leads generated is the most directly linked to sales but one in which marketing has control over. This metric requires that you have defined what a qualified lead is and have worked with sales leadership to determine the number of qualified leads required. For more on this see The Heart of a Ferengi.
If you based marketing’s incentive plan on nothing more than this metric, I think you’d be doing well.
To keep your marketing team from overspending, you might also consider incenting them on reaching a cost per qualified lead benchmark. This goal will keep them focused on one of the key principles of creating a successful marketing plan – stop doing what doesn’t work.
Unfortunately, this metric loses its meaning if your marketing team is also responsible for awareness marketing like trade publication advertising. Or, if for political reasons, marketing is forced to continue investing in campaigns such as a major trade show that has abysmal returns but that the company feels “we need to be at.”
This issue of incenting marketing can bring out opinions in even the most reserved of people. There are plenty of people whom I respect and admire who completely disagree with me. Usually, they want sales to be the one and only metric.
Then again, there are marketers who abhor the idea of being on any sort of incentive plan. Even great marketers who almost always reach their goals sometimes balk at an incentive plan because it’s not the way they were designed. They will do the best they can regardless of how you pay them. (I have to admit that I don’t completely understand this line of thinking. Some of us are just fundamentally “coin operated.”)
So what’s your opinion? Should marketing be on incentive comp plans the same way that sales is? If so, what would you base them on?