Do incentive schemes work?
A majority of participants in an eyeforpharma panel of directors and sales analysts found that incentive schemes did not have a positive impact on sales-force retention or loyalty.
By on Nov 30, 2009A majority of participants in an eyeforpharma panel of directors and sales analysts found that incentive schemes did not have a positive impact on sales-force retention or loyalty.
Close to 100 sales directors, managers, and analysts from 29 companies attended the eyeforpharma session in Sydney, Australia, in September to explore how incentive schemes perform. The results of this discussion have been collected by the Vedere Group and synthesized into an eyeforpharma incentive scheme survey.
One central finding is that, while nearly all respondents have an incentive scheme in place, a majority of those programs are not having a positive impact on sales-force retention or loyalty to their organizations. Respondents signaled particular concern at the difficulty of establishing challenging but fair targets, of gauging if a program is working, and of motivating middle performers. Other key findings reveal that most pharma incentive schemes distribute financial rewards on a quarterly basis, are based on sales-related parameters, and stay relatively consistent from year-to-year.
The respondents consisted of 82 managing directors, business unit directors, sales directors, sales managers, and business analyst and intelligence managers. Ninety-two percent of these respondents stated that they had an additional reward or retention scheme in place for their sales force beyond financial remuneration. A majority of these programs are based on sales-related parameters. Forty-five percent of overall respondents stated that only sales-related parametersincluding sales vs. targets, market share, market share growth, and sales growthdetermine incentive payments. Incentive schemes that use sales and non-sales parameters (48 percent) often look at volume-based activity, such as total calls made, the percentage of customers seen and frequency, and manager feedback.
Directors set a mix of territory, state, and national sales targets for their sales reps to meet or exceed; 45 percent of incentive schemes set exclusive territory level targets, while 22 percent set targets for all three. Generally, rewards are distributed quarterly (indicated by 37 percent of sales managers), every six months (32 percent), or annually (21 percent). The lag time between determining incentive results and paying incentives is generally one to two months.
Eighty-nine percent of sales directors stated that incentive schemes were reviewed annually, though 56 percent said that changes to the programs were generally minor. Twenty-five percent of total respondents said that sales targets never change during the year, and 48 percent said that sales targets change only in the event of extenuating circumstances. Eighty-nine percent of respondents said that no parts of their incentive schemes are outsourced.
A majority of respondents stated that their programs are not having a positive impact on sales-force retention or loyalty to their organizations. Sales directors had a slightly more positive outlook (22 percent believed their reps were very satisfied and 78 percent somewhat satisfied), but sales managers and analysts said the majority of their sales forces were neutral or unsatisfied.
When asked to identify hot topics, respondents most frequently selected: setting challenging but fair targets; determining whether a program is working; engaging the middle performers; establishing which parameters should and can be used; getting rep buy-in and achieving high familiarity with the incentive scheme.
For more information or to obtain a copy of the full survey, please visit http://www.eyeforpharma.com/au/incentives.shtml.