ClearEdge has discovered that networking giant Cisco Systems will soon alter its sales compensation structure from using annual sales quotas to using semi-annual quotas, in an effort to stimulate revenue over the course of the year. The news follows five consecutive quarters of decreased or flat earnings in all Cisco product categories.
The change to the compensation plan can be good for customers because starting in 2022, they’ll have two significant dates to leverage against their sales rep instead of one. We know that sales reps are financially motivated to meet quotas, and when fighting the clock, they are extra willing to grant better terms and pricing to secure a deal. Besides the existing Cisco FYE date of July 31, Cisco buyers can now use January 31 as a tactical lever in their negotiations.
Cisco deals are often large and complex, and preparation takes a minimum of three to six months. For big, strategic deals such as Enterprise Agreements, we recommend up a one year to allow time to build leverage. Therefore, we urge clients with upcoming Cisco engagements to immediately start considering how to best leverage the new quota deadline.
The most effective strategy is to use either of these key dates to either accelerate or decelerate your deal timeline.
For example, say you have a planned Cisco purchase to be executed in February of 2022. You’ve been in contact with your rep, who believes you have no plans to buy any earlier. Knowing that the rep’s new quota ends in January, you could present an alternative deal: you might convince your organization to buy early and accelerate the deal to January if certain requests are granted by Cisco, such as lower pricing, contract redlines, etc. The rep will be receptive to this tactic because (1) they did not forecast your deal for a January close, and (2) it will provide net new revenue to count towards their new quota.
Conversely, imagine you have a planned Cisco purchase for June of 2021, though there is no urgency to execute this deal. You could tell your rep that at the current pricing, the deal exceeds your budget, and you need to postpone it. This deceleration tactic will motivate the sales rep because the deal was already in their forecast and would assure meeting their upcoming July 2021 FYE quota, and you’re ripping it away. To make quota, the sales rep must now either (1) quickly rustle up new business from other customers to meet quota, or (2) improve the offer to re-capture your deal. Most often, the latter option is easier, and why deceleration works effectively when you can delay a purchase.
To learn more about building leverage with your strategic suppliers, read Leverage: The Key to Every Deal from our website or contact your ClearEdge representative.
- Brianna Foley is an Analyst at ClearEdge Partners.