Designing salesforce compensation programs to improve pricing execution

• Published in: Journal of revenue and pricing management 2018-02, Vol.17 (1), p.11-19
• Main Author: Liozu, Stephan M.
• Format: Article
• Language: English
• Subjects: Business and Management; Compensation plans; Pricing policies; Research Article; Salespeople
• ISSN: 1476-6930; 1477-657X
• DOI: 10.1057/s41272-017-0131-z

Despite progress over the past few years, the pricing function has far to go to reach the maturity of other business disciplines. In the area of pricing execution, also known as price getting, many firms do not fully realize the potential of their pricing strategies and are instead stuck in a zone of good intentions. Often, this lack of strategy-execution results is due to issues with salesforce compensation plans and how they might be encouraging the wrong behaviors. As the pricing and sales literature remains silent on the connection between pricing execution and salesforce compensation, we conducted qualitative interviews with 12 pricing executives to inform the relationship between the two constructs and to identify best practices in the design of salesforce compensation plans to improve pricing execution. Our results highlight the sensitivity of the topic of changing salesforce compensation and the need to add pricing as part of a basket of variables, to consider a 2- to 3-year transition period, and to embrace critical change-management considerations. Finally, the need for accurate and transparent pricing information is essential to the design of these profit-driven salesforce compensation plans.