Variable sales and marketing spend quickly adds up and often generate excellent returns. However, like all investments, it is subject to inefficiencies and long overdue updates to match the changing business. For example, HP had $1.2bn sales incentives and $4bn channel incentives. Cisco had $1.2bn sales incentives. Microsoft had $800m sales incentives and $5bn channel incentives. Even a small percentage of inefficient spending is a significant opportunity to reallocate money into people, tools or other priorities.

Spend optimisation focus

What are the problem areas?

Typical problem areas with spend optimisation are:

• Failure to drive desired sales-force [direct and channel partner] behaviours to achieve corporate objectives
• Low ROI, and/or limited ability to measure ROI, on annual sales incentive spend
• Manual, complex administration (e.g. multiple processes and platforms) leads to high operational costs and overpayments
• Inflexible capability limits inhibits strategic change and timeliness at great opportunity cost to sales

Broadly there are two incentive spend areas that can be optimised regularly for quicker ROI improvements: Channel and Sales incentives.

What benefits are there for addressing spend optimisation?

The good news is that there are only 5 key levers to work through to optimise spend:

Spend optimisation benefits

Seems simple enough?

But it's not as easy as that….to do the above spend optimisation you need to make sure the following blockers are resolved (or discussed/understood with stakeholders) before starting a spend optimisation activity:

1. Ad-hoc sales plan design
   1. Not in sync with organisation goals
   2. Process and systems limitations
   3. Overpayment on purpose
2. Manual administration
   1. Changes in HR or sales coverage not recorded across systems
   2. Variances across different periods