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Should Marketing Compensation Be Tied to Sales or Revenue?

Posted by Mike Volpe

6/8/11 1:49 PM

describe the imageI've been asked this marketing compensation question a few times recently.  There are two reasons why I think having more than a small amount of marketing compensation tied to sales is a bad idea:

  1. Scientific research says it is wrong.  There are two types of jobs - those that require mechanical / process skill (like sales) and those that require creativity and more cognitive skill (like marketing).  For the more creative jobs, offering a bonus incentive actually decreases performance (proven by a study from my friends at MIT).  On the other hand, for the more mechanical jobs, offering a bonus for each piece of work (each sale) can increase performance.  If you read anything by Daniel Pink, you'll get this point.  If you do not know him or his books, you must watch the video below.  (Anyone who watches that video and still wants to compensate marketing based on sales is a little nutty if you ask me.)
  2. It promotes the wrong behavior in marketing.  Marketing and sales should work together, marketing should generate a lot of great leads, build thought leadership and brand preference.  A lot of what you need to do in marketing is long term focused - the results come in months or years.  Having a lot of marketing's compensation tied to sales will lead to marketing being short term focused (how do I close deals this month and get my money?) and not building anything for the long term (how do I increase the SEO authority of our website?, how do I build our inbound marketing reach?).  If they are compensated on sales, your marketing team will start to act like a sales team.  They will help on demos, help close deals, promote more discounting, etc.  It might help you this quarter, but it will not promote the development of anything long term (brand, thought leadership) which is what you want marketing to do.

 

What do you think?  Should marketing compensation be tied to sales?

Topics: marketing, startup marketing, compensation

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