In today's hyper-competitive marketplace, all of your management systems need to provide you with a competitive edge.
Business practices and management approaches have changed significantly in during the past 10 years, yet distributor compensation programs remain largely the same as they were in the 1950s.
Distributors are typically rewarded for the volume of goods sold rather than for the functions they perform for manufacturers and customers.
The down side of this approach to distributor compensation is that there is no clear connection between compensation and the performance of the specific activities required to successfully create and satisfy demand for a product. As a result, distributors often focus their efforts on managing compensation programs for maximum pay out, rather than working to improve sales performance.
Our research indicates that volume-based compensation programs often lead to higher costs for manufacturers as a result of deeper discounting and cost-shifting.
The question for manufacturers is, what are you getting in return for your distributor compensation dollars?
Your distributor compensation program is only as good as what it delivers to your organization in terms of performance and competitive advantage.
Moving away from traditional volume-based compensation programs to performance-based or competency-based programs will greatly improve the sales performance and profitability of both the manufacturer and its distributors.
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