Defining Sales Targets

[944fan]

Any got any experience of setting sales targets?

Bit of a funny one this. Basically our services and software are given to our users for free. We get paid when they make a "click" through our system. The cost of a click is about a fiver. We want the sales person to bring more users to our company and "click" through us.

Often someone wont know how many clicks they are going to make in a period of time so its hard to target any sales because there is no known quantity or upfront cost.

What would be the best way to target this? We know accurately how many clicks are made nationally so we know exactly what our market share is. Would this be away of setting targets? Increase MS by x% and each % above you get a bonus?

Any ideas?

[pmanson]

Do you know what you conversion typically is? From there work out an average so that they know if they bring in say 100 new prospects on average 10 will click and there is the target.

[pmanson]

Do you know what you conversion typically is? From there work out an average so that they know if they bring in say 100 new prospects on average 10 will click and there is the target.

[Sogra]

Typically sales targets are set using history, say last year plus 10% minus any lost accounts (due to closure etc.) but adding in any business that was a free win, say a new business start-up that contacted you. Depending on the product / market there are often lots of market data that you would use to assist with the process.
I am guessing you want the targets so that you can pay a bonus or commission? How about agreeing a guaranteed payment for 3 – 6 months so long as there is a minimum of say 10% (or whatever you feel is okay) growth each month. Then when you have your history you can compare that with market potential and agree a sales target.
In truth sales targets are just a guess but the more science and information you can use the more relevant the targets are likely to be

[T1547]

Do the sales people account manage the clients once on board or just sign them up?

If yes and they can influence the click through rate post-sale then there could be justification for a click related target (ie Sales person account manages successfully and shows clients added value by increasing usage/dependence of software/services therefore resulting in increasing the amount of clicks per client).

If not then the target can only really be based on amount of new users signed up.

Either way - historic data and user trends should be the basis for any future targets together with the business's aspirations/financial requirements.

[944fan]

Thanks for the suggestions.

The targets will be for commission but also to ensure that the role (which is new) can pay for itself. They will be expected to maintain the customer base after winning them as well as preventing existing customers from leaving.

I think structuring a target of x number of clicks above last year or x% increase in MS will work. Market Share is important because there are only 8 competitors and they have to use one of them.

There will still be some unknowns for the sales person as they wont know how much commission they will get from each customer until they start making clicks. I don't think we can commission based on number of new customers as one customer might make 10 clicks a quarter and another many hundreds, or thousands.

[Sogra]

Consider using a new customer bonus of £xxxxx per new account and then how about a percenatge of revenue rather than clicks so if you pay 5% of total sales to a customer that will be relevant to the amount of clicks. i would consider paying less for a retained customer - say £100 for new account, 10% of 1st year business (this will be the hardest but with most growth) and then say 5% for 2nd year onwards ( assumes business would level off but still an incentive to maintain contact etc) also this would ensure continued growth, as sales people get close to a level of comfort there productivity will fall off ie a guy earning 10k will be working hard to earn a living wage of say £30k but a guy earning £40k moght not be trying that hard to earn £50k if £40k gives him a nice life style.

Also consider stages eg 20% for hitting target ( this could be a level that ensures it is profitable for you ) and then a lesser percentage for over target and possibly with a maximum cap.

[schmalex]

Sogra said:

Also consider stages eg 20% for hitting target ( this could be a level that ensures it is profitable for you ) and then a lesser percentage for over target and possibly with a maximum cap.

One of THE best ways to completely demotivate a sales person and severely the growth potential of your business.

Look at it another way. Set a target that is demanding but achievable with some effort and then incentivise for over-achievement. Something like 1.50x commission for 100 - 150%, 2.00x commission for 150%+. Up to you whether you cap it at a level. Some say it's a good idea, others argue that why not share in the success. After all, if your sales person is busting their number (through hard work / talent, rather than incorrect target setting), why not share the rewards...

[Sogra]

schmalex said:

One of THE best ways to completely demotivate a sales person and severely the growth potential of your business.

Look at it another way. Set a target that is demanding but achievable with some effort and then incentivise for over-achievement. Something like 1.50x commission for 100 - 150%, 2.00x commission for 150%+. Up to you whether you cap it at a level. Some say it's a good idea, others argue that why not share in the success. After all, if your sales person is busting their number (through hard work / talent, rather than incorrect target setting), why not share the rewards...

Not sure why it would demotivate if the rewards were good for hitting target and the scheme is explained correctly?, you may not want to massively over acheive depending on resource in the business, working capital to meet the pay roll bill etc, surely you would want a target to be accurate so that a fair reward is paid for the results, the alternatve could be as you suggest but this has an unknown or possibly to large a gap to predict the cost. I am sure you have read the original post that indicates the OP doesnt know what level of business will be acheived.

Share in success or well rewarded for doing a good job and the business owner who takes all the risk and investment? 2.00 x commision for 50% more than target doubles costs for 50% improvement may give the salesman the view that he could have one great month and then hold back on orders for a month then have another great month.

Been paid on results all my working life ( at least 50% of my salary is due to annual bonus) and if there is a way of maxing the paypacket a sales person will find it.