Phone Works

Phone Works Inside Sales Compensation Report – Q1 2004

Along with software companies reporting good fourth quarter results and M&A and IPO activity heating up, we are seeing a renewed interest this first quarter of 2004 in re-evaluating business models. Inside Sales is once again figuring prominently in the re-engineering of sales strategies to achieve efficient, cost-effective and rapid growth in both start-ups and multi-million dollar enterprises. With more companies recruiting for newly-created inside sales positions, compensation plays a key role in attracting the best-qualified professionals.

Our 2004 Inside Sales Compensation Report shows how our survey respondents are responding to increasing competition for the best candidates. Many companies reported using recruiters again for these positions.

Summary of Differences from Last Year’s Survey

Responding companies reported compensation plans remained consistent or increased especially in the lead qualification area.
The trend in Telesales is to assign individual quotas rather than a team quota. A majority of companies assigned both individual and team quotas to Telesales in 2002.
Club eligibility has become the norm for Telesales reps. A minority of companies included quota-achieving inside reps at club recognition events in 2002. This year, the majority includes Quota Club as a key incentive for Telesales.

Survey Background

Each year, in order to stay on top of the latest trends, Phone Works collects and compiles data from SF Bay Area technology firms. Representatives of those firms are invited to participate either through an online survey or by filling out a written form. Over 40% of respondents are members of the Telebusiness Alliance, an organization of inside sales professionals representing leading technology companies in the SF Bay Area. The following describes the companies that participated in the survey:

Products sold are complex, Business to Business enterprise solutions, application software, networking products, development tools, and security products.
Companies represented are both privately held and public.
Products sell for an average of $115,000 and range from $800 to $500,000
Number of employees ranges from under fifty to over one thousand.
The majority of inside sales groups report to Sales, while the remainder report to Marketing.

Phone Works Guide to Titles

Every year we struggle with the industry’s lack of standardization when it comes to inside sales titles. Even the term “telebusiness” has fallen out of use and seems to have been replaced by “Inside Sales” as a catch-all for all functions. Thus, we have renamed our survey to keep up with the times.

Because titles can vary greatly from company to company, comparisons can be challenging. Our classifications fundamentally distinguish between those groups that generate leads and those that generate revenue. Our guide to titles will not only help you understand our survey and its conclusions but also give you a heads up on what’s “in” and what’s “out”.

Sales Development

These groups and representatives contribute to sales by generating and/or qualifying leads (or appointments) to keep the pipeline full. They do not close deals.
Our respondents’ other names for this function include: Corporate Sales, Lead Development, Inside Sales, Inside Territory Sales, and Strategic Accounts. Not one of our respondents calls this group “Telemarketing”, which traditionally was the prevailing label for this group.

Telesales

These groups and representatives carry sales quotas and close deals without traveling. Instead, they use the telephone and online tools such as email, the web, and internet-based technologies.
Other names for this function include: Inside Sales, Account Management, Direct Sales and Corporate Sales.

Sales Development Results
Title	Base Salary	Total Package	Total Package % Change from 2002
Sales Development Representative	Average: $50K Range: $35-75K	Average: $84K Range: $60-100K	Up 10%
Senior Sales Development Representative	Average: $70K Range: $65-85k	Average: $100K Range: $90-125K	Up 10%
Sales Development Manager	Average: $75k Range: $45-103k	Average: $138k Range: $90-160k	0% Change
Directors	Average: $102k Range: $53-140k	Average: $167k Range: $100-180k

The survey data showed us some key Sales Development compensation trends. They include:

Senior Sales Development Representatives have 5 or more years of experience.
The majority of companies linked Sales Development compensation to the number of leads or appointments generated, strategic accounts profiled and productivity metrics (e.g., target number of outbound calls and emails per day) achieved; less than half included a revenue component.
Seventy-seven percent (77%) of companies included stock options as part of their Sales Development representative compensation packages.
The majority of groups were both outbound and inbound or outbound only.
Twenty-seven percent (27%) included Club eligibility as a perk for the Sales Development representatives.
Group size ranged from 2 to 12 representatives with an average ratio of 1 sales development rep to 3 field reps.
The Directors typically managed both lead qualification and telesales functions.

Top Challenges Reported – Sales Development Compensation

The majority of frustrations cited were related to the elements of the compensation plan that are tied to actions that the group does not control. Given the nature of the group, they are beholden to the Field or Telesales to “take a lead and run with it” once it is passed. Most common challenges reported were:

Alignment with Field Sales and dependence on the Field to close deals.
Lack of control over what leads are added to the pipeline and measuring these leads as “qualified”.
No or unachievable accelerators for achieving lead goals.
Difficulty in obtaining feedback from the field on the quality and status of leads passed.

Telesales Results
Title	Base Salary	Total Package	Total Package % Change from 2002
Telesales Representative	Average: $53K Range: $45-60K	Average: $105K Range: $72-150K	Up 1%
Senior Telesales Representative	Average: $55K Range: $50-75K	Average: $117K Range: $76-130K	Up 3%
Telesales Manager	Average: $88k Range: $51-110k	Average: $154k Range: $76-200k	Down 7%
Directors	Average: 102k Range: $53-140k	Average: $167k Range: $100-180k

While compiling the survey data for telesales departments, we spotted the following trends:

Senior Telesales Representatives have 5 or more years of selling experience.
The majority of Telesales representatives are responsible for an individual quota rather than a team quota.
A few companies double compensate Field Sales in some way for deals closed by Telesales.
The average order size for telesales teams is $17,500 with the lowest at $800 and the highest at $45,000.
Telesales and Senior Telesales representatives averaged quotas of $1.7 million with the lowest at $525K and the highest at $3.3 million.
The average staff/manager ratio is eight Telesales reps to one manager.
Ninety-five percent (95%) included stock options as part of their Telesales compensation packages.
Sixty-seven percent (67%) included Club eligibility as a perk for Telesales representatives.
This year we separated out Directors from Managers compensation, which may have caused the slight drop in Telesales Managers compensation. Most Directors managed both lead qualification and telesales functions.

Top Challenges Reported – Telesales Compensation

As with challenges reported with Sales Development compensation management, most frustrations in Telesales have to do with the parts of the plan that are out of a rep’s individual control. If a Telesales rep’s quota is dependent on other Telesales or Field reps performing, it is possible for that rep to have outstanding performance and still not make her or his quota. Another issue that was raised repeatedly was the timing of the commission payout. Sales reps’ motivation can lag if a commission is delayed due to a late-paying customer. In summary, the challenges most often reported are:

Reps have a team or total territory quota, so all members must perform in order to exceed the number.
Commissions are not paid until money is collected from the customer.

You can reach Phone Works at 510.749.9073.