Media Case Study

Sales Compensation Plan Analysis Leads to Accountability

Introduction

Outdated Sales Plans Won’t Support Growth Objectives

As a global entertainment company, our client provides unforgettable experiences for consumers. However, the company relied upon an outdated sales compensation plan that required a refresh. In addition, the company deprioritized individual plan components during the pandemic but needed to increase individual performance accountability for many sales positions.

As an entertainment leader, the company plans new offerings in the coming years and needs to position its sales compensation plans to drive growth. In addition, there was a push to drive consistency across business units (BUs) while still allowing BUs to have specific variances to drive specific behaviors.

The client is well positioned for growth, having had their highest adjusted EBITDA performance on record. This client recognized their lack of knowledge in sales incentive design and reached out to Alexander Group for assistance because of our extensive compensation experience and expertise in the media and entertainment sector.

Approach

Analyze Today, Employ Best Practices for Tomorrow

Preparing for the future begins with analyzing the current compensation design and effectiveness. Alexander Group first conducted a comprehensive review of existing sales compensation plans using high-level data analysis. Next, we compared their pay mix and plan components to Alexander Group’s industry-proven best practices. In addition, we conducted extensive interviews to ensure an understanding of the benefits and pain points of existing sales compensation plans.

Key Findings

Disincentives and Delayed Planning

Alexander Group validated this entertainment leader’s reason for refreshing their sales compensation plans through two key findings. First, their entire sales team had not received any sales incentive payouts for several years, primarily due to goal setting and plan mechanics. Secondly, the sales team receives their annual targets 4-6 months into the current year, severely restricting their ability to meet existing goals and incentives.

Based on these key findings, we were able to design recommendations that focused on motivating sales reps to achieve the level of sales and compensation the company would need to drive upcoming revenue projections.

Alexander Group created plan designs that are scalable and growth-oriented in preparation for the upcoming launch of a significant new offering and planned increase in seller headcount.

Recommendations: Accountability, Motivation and Timely Payouts

From the key findings, Alexander Group’s recommendations centered around three key goals.
Specific recommendations included:

Eligibility:
For the long term, evaluate a coordinator role across each channel and distinguish the administrative channels from those channels with higher sales influence. Rename the roles to reflect the distinct difference in responsibilities and role expectations. Implement an add-on bonus for the coordinators with high sales influence.

Pay Mix:
For the near term, shift roles with greater influence over sales to a more aggressive pay mix (ex: 85/15 to 80/20). Shift roles with less influence over sales to a less aggressive pay mix (ex: 85/15 to 90/10).

Corporate Performance Measures:
Remove corporate performance measures from sales compensation plans due to their lack of visibility into goal performance.

Pay Curve:
Flatten the pay curve and remove the many tiers in the current step bonus. As a result, sellers will maintain motivation based on the tiered performance levels.

Pay Periods:
Move pay periods from annual to semi-annual to increase available cash flow.

Performance Periods:
Revise performance periods from annual to semi-annual in all channels unaffected by significant seasonality spikes.

Long-term Revenue Recognition:
Shift from recognized revenue to bookings due to the current long lag from the point of influence over the sale to when a seller is credited. Depending on the region, the current plan can take over a year before sellers receive payment.

Alexander Group partnered with the client to define a detailed sales compensation roll-out process. This outline included clear expectations for all relevant stakeholders and defined milestones to ensure plans launch on time. With this new process, the client was able to launch their plans in month one of the new fiscal year for the first time in over five years, resolving the #1 complaint from the sales organization.

Expertise in Entertainment Compensation

Growth requires alignment between strategic objectives and sales compensation plans. With the right incentives, it will be easier for sellers to achieve prescribed goals. For expertise in designing media and entertainment plans that drive growth, Alexander Group has the industry experience and knowledge leaders turn to for assistance.

About Alexander Group

Alexander Group understands your revenue growth challenges. Since 1985, we’ve served more than 3,000 companies across the globe. This experience gives us not only a highly sophisticated set of best practices to grow revenue—we also have a rich repository of unique industry data that informs all our recommendations. Aligning product, marketing, operations and finance efforts behind a successful sales organization takes insight and hard work. We help the world’s leading organizations build the right revenue vision, transform their organizations and deliver results.

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