Sales comp pricing quoting survey results

Survey Results:
Sales Compensation,
Pricing and Quoting

March 18, 2013

© 2013 Vendavo, Inc. PROPRIETARY & CONFIDENTIAL

Objective

Gather input about current pricing approaches from sales
leaders and pricing professionals


Methodology

Started the project in February 2013 using one-on-one
telephone interviews to gather quantitative and qualitative
data
– 5 interviews

Implemented a web-based survey in late February 2013 to
increase the number of participants
– 95 surveys


Executive Summary

The biggest challenges that organizations have are:
– Change management “Gaining support from Sales for
sales system”
– Setting prices/pricing policies

The top goals for the next year include:
– Expanding use of technical tools “Implement a deal publishing
solution that meets business
• New tools requirements”

• Broader use/integration from existing tools “Get Vendavo iPad ready”

– Improve profit margins
– Implement/improve pricing management processes
“Streamline price information
and definitions”


Executive Summary (cont’d)

Pricing is currently being established primarily by sales
reps either based on sales manager input or on their own,
using policies and tools they are given.
– Only 43% of the time does price come from a published price list.
– 73% of the time, quoting tools are used.
• Among those who use quoting tools, home grown tools (65%) and
CRM tools (57%) are the most commonly used quoting tools; only
22% are using 3rd party tools.
– SAP is, by far, the most common CRM tool.



Participants don’t feel as if they have control over deal
profitability and don’t think that teams are very effective at
maximizing profit on deals.

Target prices aren’t being consistently set.
– When established, usually it’s usually done by product managers
or pricing managers.

Discounts are most likely to:
– Require a manager’s approval
– Be based on volume



Variable compensation is most likely to be based on
revenue; 62% say that there are changes being discussed
(moving toward profit and contribution).
– Sales executives are more likely to be compensated based on
profit and margin than sales managers or sales reps are.


Who Participated

48 companies represented
– 47% of respondents from Pricing/Functionality function
• Only 15% have quota carrying sales teams reporting to them
• Difficult to get sales managers to participate
Do you have a quota carrying sales team that
reports to you or to one or more of your managers? Functional Area
100% 60%
80%
40%
60%
40%
20%
20%
0% 0%
Yes No


Who Participated (cont’d)

Primarily mid-sized industrial manufacturing companies
Industry
50%
40%
30%
20%
10%
0% What is the total size of the sales force at
your organization?
50%
40%
30%
20%
10%
0%
10 - 100 100 - 500 500 - 1000 1000 - 5000 5000+ reps
reps reps reps reps


Top Challenges

The top challenges faced by respondents (listed in order of
frequency):
– Change management
– Setting prices/pricing policies
– Data quality/management
– Increasing/managing profitability
– Competitive data


Top Goals

The top goals targeted for the next year (listed in order of
frequency):
– Expand technology tools
– Profit/margin growth
– Implement/improve pricing management processes
– Revenue/market share growth
– Improve analytics


About the Pricing/Quoting Process

Sales reps are most likely to prepare quotes themselves at
most of the organizations surveyed.
Who Prepares & Provides Quotes
(check all that apply)
80%

60%

40%

20%

0%
Sales Reps Sales Operations Deal Desk N/A - We do not Other
prepare quotes provide quotes
themselves


About the Pricing/Quoting Process (cont’d)

69% of participants said that sales managers determine
price. Other people who determine price:
– Sales rep (56%)
– Product manager (53%)
– Pricing manager (43%) or pricing specialist (33%)
When working on a deal or a quote, who determines the price?
80%

60%

40%

20%

0%
Sales Sales Rep Product Pricing Pricing Sales Deal Desk Other
Manager Manager Manager Specialist Operations



There is no consistency around establishment of target
prices for products.
To what degree are target prices known for your products?
30%

20%

10%

0%
1 2 3 4 5 6 7
None All
(no products (every
have target product has
prices) a target
price)



Product managers are most likely to establish target prices
(50%).
– Pricing manager: 39%

Who sets target prices?
60%

40%

20%

0%
Product Pricing Sales Pricing Sales Rep Sales Ops Deal Desk N/A - Other
Manager Manager Manager Specialist Target
prices are
not known
for our
products



Sales is most likely to receive target prices from pricing
managers (39%)
– From product manager: 28%
– From sales manager: 23%
Who communicates target prices to Sales?
40%

30%

20%

10%

0%
Pricing Manager Manager Manager Specialist
Product Sales Pricing Sales Ops Deal Desk
N/A - Target prices are not known for our products
Other



There are a variety of ways by which product pricing is
established:
– Sales rep requests a price below floor: 54%
– Sales manager ensures that price meets margin goals: 46%
– Price comes from a published price list: 43%
Which of the following is true about how product pricing is established?
60%

40%

20%

0%
Sales reps can request Sales mgr responsible Price comes from a Sales rep responsible to Other
a price below floor to ensure the quoted published price list and ensure the quoted
price meets company appears on the quote price meets company
pocket margin goals pocket margin goals



Profit margin is considered most of the time when quoting
below floor.
When quoting below floor, is profit margin
considered?
80%

60%

40%

20%

0%
Yes No N/A - We do not Other
quote below
floor



The most common ways in which sales reps prepare for
customer visits that involve negotiation:
– Review CRM for historic customer data (pricing, order
volume, etc.)
– Prepare an account-specific approach after conferring with
others (Sales manager, product management, etc.)



73% of participants are using quoting tools at their
organizations.

Are quoting tools used by your organization?
80%

60%

40%

20%

0%
Yes No



The most common quoting tools are:
– Homegrown tools (63%)
– CRM (52%)
• Most likely to be SAP

What quoting tools are used by your organization?
(name any and all that apply)
80%

60%

40%

20%

0%
Homegrown CRM Third Party SFA
Quoting Tool Quoting Tool



Sales reps appear to be mostly compliant at using quoting
tools.
How compliant are your reps at using quoting tool?
30%
25%
20%
15%
10%
5%
0%
1 2 3 4 5 6 7
Not Extremely
compliant compliant
at all



Discounts usually:
– Require manager’s authority
– Are based on volume of products sold

Which of the following is true when giving discounts?

80%

60%

40%

20%

0%
Manager's Based on volume Sales rep has There is a pre-set Revenue/units Other
authority is of products sold authority to give discount sold must not be
required the discount eligibility chart less than a set
floor price


Profitability

Very few participants feel as if they have complete control
over deal profitability
To what degree do you feel like you have the ability to impact deal
profitability in the field?
30%

20%

10%

0%
1 2 3 4 5 6 7
I have no I have
control over complete
deal control over
profitability deal
profitability


Profitability (cont’d)

There is a low level of confidence in how effective teams
are at maximizing profit on a deal-by-deal basis.

How confident are you that your team maximizes profit
on a deal-by-deal basis?
40%

30%

20%

10%

0%
1 2 3 4 5 6 7
Not Extremely
confident confident
at all


Compensation

Variable compensation is most likely to be based on
revenue for all Sales personnel.
– Profit is the next most likely driver of variable
compensation, although it is more likely to drive sales executive
compensation than sales managers or sales reps
• Sales reps are equally likely to be compensated based on volume
and profit.
Variable Compensation is Based on:
80% Sales Reps

Sales Mgrs
60%
Sales Execs

40%

20%

0%
Revenue Profit Contribution Volume Value-added Quote to
Margin Target


Compensation (cont’d)

62% of participants said that changes to their variable
compensation have been discussed in their company.
– Profit and contribution margin are the most likely areas of
change.
What, if any, changes to variable compensation have been discussed
in your company?
60%

40%

20%

0%
Profit Contribution Margin
Value-add Quote to Target N/A - No discussions have taken place
Volume Other


Compensation (cont’d)

64% of participants said that their company motivates the
sales force using other tools/programs.
– Leaderboards are the most common form of non-compensation
incentive (25%)

In addition to compensation, how else is your sales force motivated?
40%

30%

20%

10%

0%
Leaderboards Carrot and Missions Social Employee of Games Other N/A - No
Stick Connections the Month other
motivation is
used


Online Resources Used

The most commonly used online resources are (in order of
usage):
– Professional Pricing Society (PricingSociety.com)
– Vendavo.com/Vendavo blog
– Gartner.com
– Google search
– Harvard Business Review (HBR.com)


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