Commission Management in Life Sciences – 3 Strategies To Help You Mitigate The Challenges Ahead in 2020

Sales Operations and Sales Enablement Directors across the Life Sciences sector are faced with the challenge of designing viable incentive plans to motivate their sales teams. The goal is always to produce greater results, create administrative efficiencies and lower costs.

Today, regulatory issues, access constraints and the increased influence from other marketing channels has led to leaders questioning the value proposition of sales executives. Compensation planning must now be much more flexible to accommodate future fundamental changes, whilst remaining balanced and incentivizing to all involved in revenue-generating teams.

Physician access remains an issue in many global markets, limiting the number of visits their sales representatives can make. In addition, more physicians are opting to block access to their prescription-writing data, eliminating a source of sales intelligence.

Marketing mix channels like direct-to-consumers, speakers at professional conferences, opinion subject leaders and medical journal spend are clearly influencing sales in certain therapeutic areas, and these channels are finding increased adoption among physicians. This trend calls into question how much influence individual sales representatives have over prescriptions, medical device sales, and how to separate their influence from that of the other channels in the promotion mix. Such factors are leading to a perceptible decline in the return on investment of representative selling.

The fact that the traditional, yet necessary sales representative model is arguably less effective today, makes compensation design increasingly challenging in devising the most fitting base pay to incentive ratios. Increased legal and regulatory compliance requirements are also expected to eventually suppress a Life Science business’s ability to create innovative compensation incentives.

Life Science companies typically manage between 5-8 sales incentive plans at any one time, however, there are some organisations administering as many as 40 different plans simultaneously. This trend demonstrates that Life Science companies are faced with having to modify their plans much more often and in-line with changing market conditions.

Incentive compensation plans in Life Sciences tend to be diverse and extraordinarily complex, particularly with regards to the number of variables considered. With Sales Operations and Compensation Directors attempting to incorporate as many performance metrics as possible, firms may often compromise the extent to which sales representatives truly understand the criteria on which their incentive payouts are based, leading to increased disputes and perhaps somewhat demotivating their sales force.

With all this in mind, here are 3 strategies which may help mitigate these challenges in 2020:-

1. 1. Connect Your Life Sciences Sales Teams to Value-Based Outcomes.
   The days of paying out all commissions upfront for a new deal are fading. You need to see that your Sales Teams are driving real value to their customers and are staying connected post-deal to ensure there are tangible results being achieved. Leverage Staged Commission Models [pay x% at closed-won; y% at contract signed and z% at contract renewal, for example] or Trailing Commission Models [with first order from a customer, pay x% of commission for 12 months on new orders from that date].
2. 2. Include Demand Generation Targets in the mix
   ‘Just go out and build the pipeline’ isn’t enough. Demand Generation needs to be more focused. Within the confines of regulation, set agreeable and measurable metrics for your sales teams to create valid demand generation, detailing ‘how’ you want them to generate the demand. Add these as a target to their overall Compensation Plan and implement appropriate tracking mechanisms.
3. 3. Leverage Sales Incentives - Mid-Plan
   By introducing sales incentives mid-plan, you are demonstrating the ability to flex and meet market demands, support new products introduced, double-down on strategies that are working etc. Some organisations avoid this due to the volume of change required and tend to wait until the start of their next financial year [Online commission management systems can help in this regard].

Establishing 100% trust in the accuracy of sales data presented at the various incentive pay stages is vital, preventing costly and timely disputes in the long run. This will also help drive buy-in from the sales team, with all ultimately aiming for a win-win always. To quote Albert Einstein:

“Everything should be made as simple as possible, but no simpler”

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