The Worst and Most Common Incentive Compensation Plan Designs
#3 - The PODS
Throughout The Marketing Advantage’s (TMA) 35 years of developing, evaluating, and innovating sales incentive compensation plans for pharmaceutical, biotech, and medical device companies, TMA has encountered many poorly designed compensation plans. Here we will discuss one of four plan designs that fail to motivate the sales force and ultimately lead to declined sales—The PODS.
PODS
This scheme involves unaligned and overlapped territories called PODs, each with different goals for various products. The rationale behind this sales compensation design is that the areas most crucial to a product will receive the most attention and focus. However, this approach can often lead to confusion and lack of clarity, as teams may become uncertain about which goals to prioritize, ultimately hindering overall performance and alignment.
For example, in the graphic below, the area or POD covered by all three territories would theoretically see the greatest effort in promoting Product A—since the combined effort would be 45% from Territory 1, 40% from Territory 2, and 40% from Territory 3. However, this is often not the case. Not only is this idea extremely confusing to implement, but it also leads to poor sales results. As the saying goes, "When everyone is responsible, no one is responsible." What most frequently occurs is that none of the three sales reps put the required effort into the overlapping area, each hoping that the other reps will take care of it for them. On a cold winter day, you can bet each rep is hoping the others are out selling while they stay home. This situation leads to significant financial losses that could have been avoided with a more thoughtfully designed compensation plan.
Conclusion
Ultimately, the PODS plan design fails to deliver the needed alignment and motivation among sales teams, leading to subpar performance and diminished sales. A more strategically developed compensation plan is essential for driving sales success and ensuring financial stability.
