Click the image above for details Digitalization has been a frequent topic between manufacturers and distributors in recent years, and the pandemic this year has made brand owners and distributors realize that in 2020, digitalization must be the top priority. What does digitalization mean for distributors? In my understanding, a digitalized distributor has standardized operational processes and automated data management across all core departments. Scientific processes can reduce costs, increase efficiency, and minimize internal friction; data-driven management provides better decision-making for the enterprise. Here, I want to elaborate on how to integrate digitalization into the management of FMCG distributor salespeople, maximizing employee activation. To activate salespeople, you must first design a proper compensation mechanism. As a distributor, are you still paying your salespeople a "dead salary"? The "dead salary" here does not mean a fixed salary, but rather a situation where regardless of whether the salesperson works hard or has ability, they only receive the local average wage (e.g., 3000-4000 yuan per month). Meanwhile, senior employees, due to their close relationship with the boss, get a few hundred yuan more per month than new employees. This kind of favoritism-based "dead salary" cannot motivate salespeople to work hard. Over time, salespeople will perform mediocrely; ambitious salespeople will leave (because no matter how hard they try, they cannot earn high wages); the remaining salespeople are those with average ability and insufficient effort, who stay long-term, hoping to become senior employees with good personal relationships with the boss after a few years, earning a few hundred yuan more each month. With such a salary structure, how can the company's sales and net profit improve? How can the distributor boss make money? The "dead salary" mechanism is unscientific. A scientific compensation and performance assessment system can motivate salespeople to work wholeheartedly toward the results the boss wants. If distributors do not design a proper compensation mechanism and KPI assessment system for salespeople, it will lead to a lack of enthusiasm among salespeople, failure to implement marketing strategies, no profit from high-priced products, no sales for core products, and no movement for new products. This is also the reason why in recent years, distributors have found it difficult to increase sales while costs keep rising, leaving them overwhelmed. Here, I will use real cases to explain how to design KPI assessments for trading companies. -01- Compensation Mechanism for Trading Companies Before explaining how to design KPIs, we should first understand the scientific compensation structure for trading companies. Remember, the more the boss values employee compensation, the more employees value their work. To avoid paying "dead salaries," it is necessary to reform the compensation structure for salespeople. Salesperson's compensation = Base salary + Commission (or bonus) + KPI assessment + Other allowances In my personal understanding, compensation = salary + reward. For a distributor, salary = base salary + commission, which can be understood as the living security provided to the salesperson after they work according to rules and regulations. The base salary can be set based on two approaches. 1. Set the base salary according to the local cost of living, not linked to task completion rate. For example: 4000-5000 yuan/month in first-tier cities, 2000 yuan/month in third-tier cities. 2. If your sales team is very stable, you can also design the base salary to be linked to important indicators. Indicators that can be linked to the base salary include: overall product sales completion rate, sales completion rate for a specific brand, sales completion rate for a specific product line, sales completion rate for a specific best-selling product, etc. For a simple example, a trading company that distributes beverages, grain and oil, and condiments wants to set a base salary of around 3000 yuan based on local consumption levels. Then, the base salary is linked to the sales completion rates of different categories: 1000 yuan * beverage sales completion rate + 1000 yuan * grain and oil sales completion rate + 1000 yuan * condiment sales completion rate. It should be noted that if the base salary is linked to sales completion rate, it is necessary to set upper and lower limits to avoid excessively high or low basic wages; excessively high basic wages may make salespeople satisfied with the status quo and not work hard in the market; excessively low basic wages make it difficult to recruit excellent salespeople. For example, set the upper and lower limits at 80%-120%. When the salesperson's completion rate is 70%, the employee's base salary = 3000 yuan * 80%; when the completion rate is 130%, the base salary = 3000 yuan * 120%. Commission is easy to understand; most distributors design commission standards based on quantity or sales amount achieved, so I will not elaborate here. Reward = KPI assessment, which can be understood as the additional reward given to salespeople for completing the boss's requirements. These assessment rewards should be process indicators that drive salespeople to visit more, improve customer relationships, secure more orders, and ultimately achieve the company's dual goals of sales volume and profit. Simply put, KPI assessment means that the distributor boss assesses what they want, and assesses what problems the company currently has. Allowances refer to benefits such as phone subsidies, fuel subsidies, and high-temperature subsidies. -02- Nine Elements for Designing KPI Assessments Every distributor has conducted KPI assessments for salespeople. Sometimes, the results do not meet the boss's expectations, but rewards must still be given; other times, a bunch of assessments are designed but none can be implemented, salespeople ignore them, and they do not strive for the assessment rewards. However, once the assessment involves fines, salespeople collectively negotiate with the boss, and eventually, the assessment is dropped. Many peers I have communicated with have the above problems. Such KPI assessments that cannot be implemented went off track from the initial design. Based on assessments designed by other distributors, I have summarized nine elements that distributors should consider when designing KPI assessments: 1. KPI assessments should focus on rewards, with penalties as a supplement The original intention of KPI assessment is to motivate employees to work for extra rewards, so the boss takes out a portion of the additional net profit (e.g., 30%-50%) to reward sales personnel. If in some assessments, 80% of employees cannot complete them even with effort and are penalized, it only indicates that the KPI assessment is problematic. The boss has not improved the company's sales and profit through KPI assessment; this is a lose-lose situation for both the boss and employees. 2. KPI assessment indicators should convince employees and not cause resistance When an assessment is announced and all salespeople resist, it is often because the assessment goals are unreasonable. For example: a trading company's average market coverage rate for a certain product is 15%, and a certain area has achieved the highest coverage rate of 29%. The boss sets a goal for employees to reach 34% coverage, otherwise they will be fined. Such an assessment will be resisted as soon as it is announced because the boss did not consider the product's market share and the company's actual data. If the boss uses the company's highest coverage rate of 29% as the goal, and rewards are given for achieving it, salespeople will likely accept it and work wholeheartedly. 3. The design of assessments should fully consider the special conditions of different regions A "one-size-fits-all" completely identical assessment standard is not fair and just. For example: when designing sales growth rate assessments, the per capita contribution of salespeople responsible for supermarkets is as high as 10 million yuan, while the per capita contribution of salespeople responsible for a certain county is 1 million yuan; obviously, it is relatively easier for salespeople in the county with low per capita contribution to increase sales, so for them, it is not appropriate to design a 10% sales growth target assessment. Different trading companies have different situations. When designing any KPI assessment, the boss should fully consider the conditions of different product lines, regions, and channels, ensuring fairness and transparency. 4. The focus of KPI assessments should be on process indicators Most distributors like to assess results, but in fact, assessing process indicators and specific market actions is the key to ensuring results are achieved. For example, to help everyone understand: a trading company boss wants to increase sales of product A, so he designs an assessment: increasing sales of product A by 10% yields 500 yuan. This assessment itself is not wrong, but the boss can change his approach and do a cut-case display reward. For example: if a customer orders 5 cases and does a cut-case display, they can get 10 yuan. This not only increases the customer's order quantity but also ensures display, and good display can accelerate sell-through, creating a virtuous cycle. This kind of assessment focusing on process indicators is more conducive to achieving results. 5. KPI assessments should have priorities and not assess too many items at once As mentioned earlier, KPI assessment means assessing what the boss wants, but the distributor boss also needs to grasp the core, considering the salesperson's energy and ability, and not assessing too many items at the same time; too many assessments equal no assessment. 6. KPI assessments that consider market trends can achieve twice the result with half the effort Sales should also follow the trend. For example: during the spring plowing season, KPI assessments can lean towards the activity of township customers and the development of new township customers; before summer arrives, a KPI assessment for noodle market coverage should be done so that before the peak season for noodles, our noodles are placed in every terminal, seizing market opportunities. 7. Tiered assessments can better stimulate employee potential KPI assessments can be presented in a tiered manner, allowing salespeople to receive certain rewards each time they complete a level. Tiered assessments can take into account salespeople with different abilities, allowing weaker salespeople to get rewards with effort, and stronger salespeople to strive for better rewards, which is more likely to stimulate employee potential. See the example table below for details: 8. Use quantified data as the basis for assessment No matter what is assessed, there must be open and transparent data, and a simple and easy-to-calculate assessment formula, so that employees can know at any time the achievement status of the assessment items and the rewards they can get for completing that level. This is like putting a big cake in front of employees, letting them see it when they look up, and maintaining the motivation to sprint. 9. The time to cash in KPI assessments should not be too long Many distributors like to give bonuses to salespeople at the end of the year. After so long, many salespeople receive bonuses without understanding why they got them, and even less why their bonuses are less than others. This way of cashing in rewards may turn a good thing into a bad thing. The distributor boss pays out, but employees do not appreciate it, and some employees even complain about the boss because their bonuses are small. This is the disadvantage of a long cashing-in period. Monthly or quarterly cashing-in is the best time. Employees know that as soon as the assessment is over, they can receive the bonus, so they will work harder. For past events, spiritual praise is sufficient. The above text elaborates on the compensation and performance mechanism for sales staff in trading companies, as well as the nine elements to consider when designing KPI assessments. Compensation addresses the achievement of key sales indicators, while KPI assessment addresses the achievement of specific actions during the process of completing indicators. KPI assessment does not require the company to allocate additional funds; the distributor boss only needs to take out a portion of the extra profit for assessment. Scientific KPI assessment can promote the achievement of company business goals, improve employee initiative, and enhance collaboration among departments. Since the KPI assessment for salespeople is very detailed and requires a long article to elaborate, I have divided this content into upper, middle, and lower parts. Afterwards, I will combine 17 real cases to explain how to design KPI assessments for salespeople from the dimensions of customers, products, sales and profit, and management.