Sales performance management explained: A primer for 2024

For the past three years, sales quota attainment has declined annually.  Across the board, it's proving more difficult to acquire new customers.

In fact, in 2023, only 33% of reps reported attaining quotas.

There are many factors driving this decline, but the question remains: how can you stay ahead with strategies to actively—and more predictably—grow?

As it turns out, effective sales performance management (SPM) can be the difference between a thriving sales team with strong operations and results and a team struggling to meet targets.  

Below, we'll cover the details of SPM, with the info you need to optimize sales processes, motivate your team, and drive revenue growth.

To start, let's define SPM generally.

What exactly is Sales Performance Management (SPM)?

Sales Performance Management (SPM) encompasses a wide range of processes and technologies-–but essentially refers to the discipline and data-driven work done in the service of improving the efficiency and effectiveness of a sales organization.  

At its core, SPM is about strategically aligning sales strategies with business objectives, ensuring that sales teams are adequately motivated, well-compensated, and equipped with the right tools and data to achieve their targets.  

As a holistic, data-driven approach to guide sales professionals to achieve objectives, SPM integrates planning, execution, and analysis, for a comprehensive approach to managing and improving sales performance.  

Aa solid approach to SPM not only boosts individual performance but also drives overall business growth, enabling companies to remain competitive as markets evolve.

So why is sales performance management so important?

SPM is critical because, when done well, it can transform your sales operations and results (getting everyone in go-to-market teams rowing in the same direction).  

When you have clear and achievable goals--helping salespeople understand exactly what they need to accomplish, balanced opportunities, and fair compensation, your sales teams directly benefit as employees too.

Some major SPM advantages include:  

1. Strong SPM makes pipeline and revenue more predictable

With more accurate forecasting and pipeline management data, organizations with effective SPM can better plan finances and allocate resources.

Specifically, by leveraging complete, connected, and structured data related to your sales force (modelling data-driven decisions related to SPM), you can better anticipate market trends and adjust strategies accordingly. This vs. flying blind or having fractured data across tools for your sales planning.

When you can forecast and build a quality pipeline with stronger visual overviews of how close opportunities are to closing, you can see which sales activities yield the best results and where deals are stalling. Further, you can better account for your sales teams' variable compensation (continually optimizing this considerable investment).

2. SPM insights improve employee training and development
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When you have accurate sales performance data and dashboards to see how far a rep is from quota attainment, you can intervene early, course correct or provide encouragement on selling momentum.

Continuous monitoring and feedback help in identifying skill gaps and help you know when more targeted sales enablement could be advantageous.

A sales performance management system can often facilitate more personalized, active coaching and development plans from sales managers, thanks to personalized dashboards for sellers, indicating where to place further efforts.  

3. Sales teams benefit from optimized sales territory assignments

As one of pillars of SPM, organizations establish fair and efficient distribution of opportunities among sales reps, maximizing market coverage and minimizing conflicts.

When territories are balanced, sales team members feel motivated and valued, as they are not competing under unfair conditions. This fairness ensures commissions and bonuses are awarded based on the actual potential and opportunities of each territory, leading to more just and motivating compensation.

4. Your organization can attract and retain top sales talent with fair, motivating compensation structures

Related to the point above, between accurate historical metrics and predictive analytics, you can design, execute, and optimize the best variable compensation plans possible.  

Well-designed, transparent, equitable compensation plans boost morale and drive high performance. Further, well-considered incentive compensation management reduces sales turnover; the correct strategy aligned with the right variable incentive opportunities will better engage your sales team and increase retention.  

SPM software allows you to gauge rep performance, provide better incentives, and reward reps appropriately. Providing teams with a robust sales compensation plan and real-time transparency motivates them to go above and beyond their quotas.

To reap all the benefits of SPM, you need to consider various components involved in SPM.

The pillars of sales performance management in practice

There are several components that factor into sales performance management. How you approach each will define your plan for success.

Rigorous sales planning

Sales planning (or the process of determining exactly how you'll meet your targets) is the foundation of any effective SPM approach. It involves a few key components, including market segmentation, team alignment, territory allocation, account segmentation, capacity planning, and quota setting.  

Effective sales planning requires a solid understanding of historical sales data and is all about ensuring your sales efforts match 1:1 with broader business objectives and market opportunities. Here's a few key aspects in more detail:

Market segmentation

To help sales teams prioritize and tailor go-to-market efforts to resonate with different customer segments, the first part of sales planning is isolating the most promising prospects via market segmentation.  

You might segment based on: demographics, geographic location, psychographics, and behavioral factors.  

For example, a tech company often segments based on industry verticals, like healthcare, finance, and education, to tailor relevant sales outreach to the specific challenges and requirements of each sector. By doing so, the company can position its capabilities specific to a given vertical's needs, enhancing a competitive edge.

Next up is even more slicing and dicing, in the form of...

Territory management
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Territory planning and management refers to the division of sales regions to maximize sales coverage and minimize overlaps. This strategic process ensures sales reps are deployed optimally.  

Effective territory management requires careful analysis of market potential, customer density, and the skillsets of your sales team. By aligning territories with these factors, organizations can balance workloads, reduce travel time, and increase the productivity of their salesforce.  

A well-defined territory management plan ultimately fosters accountability and performance tracking. Sales managers can set clear expectations for each territory, monitor progress, and adjust as needed.

Quota setting
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Finally, quota setting establishes sales targets, both for individuals or teams. As you set quotas, you're in a constant balance between ambitious targets with the reality of market conditions and individual capabilities.

The process typically involves analyzing historical sales data, market trends, and the potential for growth in each territory. By setting especially data-driven quotas, your organization can ensure that targets are fair and aligned with overall business objectives.

Properly set quotas ultimately provide clearer benchmarks for success. They also serve as a basis for performance evaluations and incentive programs, ensuring top performing sales representatives are recognized and rewarded.

Strategic, well-communicated sales incentives

The integration of incentives into sales compensation plans is a vital aspect of SPM. Well-considered incentive programs motivate sales teams and drive desired behaviors. In fact, 90% of the top-performing companies globally use incentive programs to reward their sales associates.

Incentive compensation management typically includes commission structures designed to align the interests of salespeople with the company at large. Effective sales incentives not only maximize the earnings of sales reps but also advance the company’s strategic goals.  

Both commission structures and bonus systems play a significant role in sales incentives, offering clear financial rewards based on performance metrics. These types of incentives ensure that sales teams remain motivated and focused on achieving targets (especially considering long enterprise sales cycles). This is why top-performing companies globally use incentive programs to reward sales associates.

Proactive, data-driven sales insights

Sales insights, or sales performance intelligence, leverage data and trends within the sales cycle for optimization or expansion. By analyzing pipeline management, sales forecasting, and KPIs, Sales Ops and Revenue Ops leaders provide a more comprehensive view of sales performance.  

Advances in software have significantly enhanced this area of SPM, allowing sales leaders to gather and analyze data in greater detail. To fully leverage your sales intelligence, enterprises invest in SPM software with advanced analytics for more precise insights and data-driven decision-making.

The evolving role of technology in sales performance management

In the last two decades, Sales Performance Management has evolved to become more complex via various SPM platforms and strategies.  

There are many vendors in the space, and while Gartner notes, incentive compensation management is still by far the primary purchase reason for SPM solutions, there are more sophisticated capabilities emerging that enterprise companies should be aware and mindful of to future-proof tech stacks and reduce overall cost of ownership in the long run.

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An overview of Sales Performance Management Software

Sales Performance Management (SPM) software is designed to automate and optimize incentive compensation, enhance sales forecasting, and streamline sales operations. It serves as a single source of truth for managing sales territories, setting data-driven quotas, and tracking sales performance through real-time dashboards. Key benefits include improved resource allocation, enhanced sales productivity, and motivated sales teams through clear and fair compensation plans. SPM solutions integrate with various business tools, ensuring accurate and efficient management of sales activities and compliance with regulations.

Key considerations as you evaluate SPM vendors

When evaluating Sales Performance Management (SPM) software, several key features are essential to include as you narrow down your shortlist:

• Incentive compensation management: The software should automate complex compensation plans, ensuring accuracy and transparency in payouts. Look for capabilities to handle various commission structures, bonuses, and incentives.

• Territory and quota management: Effective SPM software should enable dynamic territory planning and quota setting, helping optimize sales coverage and align targets with market potential and individual performance.

• Sales analytics and reporting: Robust analytics tools are vital for tracking performance metrics, identifying trends, and making data-driven decisions. Real-time dashboards and customizable reports enhance visibility into sales activities and outcomes.

• Integrations: Ensure the software integrates seamlessly with existing CRM, ERP, and other business systems. This integration is crucial for maintaining data consistency and streamlining workflows.

• Forecasting and planning: Advanced forecasting tools help predict future sales and plan resources accordingly. This feature supports strategic decision-making and aligns sales goals with overall business objectives.

• A user-friendly interface: A user-friendly interface is essential for adoption and usability. The software should be intuitive for sales teams and administrators, reducing the learning curve and increasing efficiency.

• Scalability and Customization: The software should be scalable to grow with your business and customizable to fit specific industry needs and unique business processes.

• Compliance and Security: Last but not least, make sure the software complies with data protection regulations and has security measures that safeguard sensitive sales data.  

By keeping these key features in mind, you’re on your way to selecting an SPM solution that not only ramps up your sales performance but also aligns perfectly with your long-term business objectives, paving the way for a smooth and successful sales operation.

For more information, visit our full article here.

Industry-specific considerations for sales performance management

When referencing SPM, we're most commonly talking about B2B applications where sales teams are selling into organizations.  

In the realm of B2B sales, sales performance management (SPM) is essential for optimizing the sales teams' effectiveness engaging with organizational buyers. Unlike B2C, B2B sales typically involve longer sales cycles, multiple stakeholders, and complex decision-making processes. These factors necessitate a robust SPM strategy that leverages various tools and techniques to drive sales effectiveness.

• Sales forecasting is a critical aspect of B2B sales, enabling businesses to predict sales accurately. By setting realistic targets, companies can better manage their sales pipeline, resources, and ensure their teams are focused on the most promising opportunities.

• Territory management is another vital aspect, where optimizing sales territories helps maximize market coverage while minimizing overlaps. Effective territory management ensures that sales representatives are strategically positioned to capitalize on regional opportunities and respond swiftly to customer needs.

• Quota management involves setting and adjusting sales quotas based on market trends and individual performance. This helps maintain a motivated sales force by ensuring that targets are achievable yet challenging, driving sustained performance.

• Sales compensation and incentive design is tailored to motivate sales teams through well-structured incentive programs. By aligning compensation with performance, businesses can encourage behaviors that lead to higher sales and better customer relationships.

• Channel management is crucial for managing relationships with distributors and retailers. In B2B, this involves optimizing product reach and ensuring that channel partners are equipped and motivated to sell effectively.

B2C sales performance management differences

While B2C sales also benefit from SPM, the strategies are adapted to meet the demands of consumer-focused sales environments. Industries like retail, insurance, banking, and door-to-door sales often have heavy reliance on sales representatives to engage and educate potential customers, so the dynamics necessitate slightly different approaches compared to B2B.

• B2C sales cycles are typically shorter, with fewer stakeholders involved in the decision-making process. This requires swift, efficient sales tactics to quickly capture consumer interest and close deals.  

• Further, emotional factors often drive B2C buying decisions, in contrast to the ROI-focused rationale in B2B sales. So sales strategies in this sphere need to resonate on a personal level.

• Additionally, B2C sales environments often experience faster speeds of adoption and market changes. Sales teams here must be especially agile to stay ahead of consumer trends and preferences.  

• Lastly, lower levels of "stickiness" in B2C markets mean that customer loyalty can be more fleeting, requiring continuous engagement and relationship-building efforts along the buying journey.

Despite the differences (primarily in sales cycle length, fewer stakeholders in a deal, and emotional factors behind a sale), the same SPM levers used in B2B—sales forecasting, territory management, quota management, sales compensation, and channel management—are still applicable in B2C. These levers are simply tailored to address the specific challenges and opportunities within consumer markets.

Optimize your sales strategy

Overall, to round out this SPM explainer, keep in mind that mastering SPM is a gradual process and any SPM strategy must be constantly refined. It's all about fostering a culture where your sales team feels motivated and valued, and you see a real impact on your sales figures. Creating an environment where growth and success are part of the daily rhythm is the entire goal.

Frequently asked questions

What's the difference between incentive compensation management (ICM) vs. sales performance management (SPM)?

Incentive compensation management (ICM) and sales performance management (SPM) are often used interchangeably since both are concerned with aligning sales rep behavior with business goals. But, there is a significant difference between the two.

Sales performance management is an umbrella term for any management of the sales process and team. This encompasses day-to-day hiring, training, and development of the sales team, sales ops, sales performance intelligence and analytics, and sales comp planning and management. Several SPM software solutions have tacked-on functionality that allows for calculating and communicating ICM.

Incentive compensation is a subset of SPM focused on the reporting and administration of incentive compensation, which usually focuses on sales compensation, but can also include compensation for other teams like Customer Success. ICM solutions primarily deal with the operational aspects of calculating sales representatives’ pay, including commission calculations and crediting rules. These solutions occasionally include quota setting and territory planning functionality as well.

All ICM solutions are a specific type of SPM solution. But not all SPM software can do incentive compensation management.