Sales Management Compensating Salespeople Topic 18

Should be Driven by Marketing Goals

Compensation Overview Review at least annually Consider Different Aspects of Selling Job How Difficult is it to attract & retain talent How important are the best 10%?

Straight Salary How It Works Fixed Cost = Risky Lower Total Pay Overpay Weakest & Underpay Best Weak Incentives Good Control

100% Commission Less Risky due to Variable Cost Tied to Collection, not Order Taking Best Incentive Attracts Best Applicants

How a Commission / Draw Works

Types of Commission Straight Commission Progressive Commission Regressive Commission Commission Caps Notes Example

Other Commission Issues Vary to Push Specific Brands or Situations Lower Salesperson Control Territory Changes are Rough Business Conditions can Wreak Havoc Boom vs. Bust Times Hard to Attract Managers & Rookies

Combination Plans Salary & Commission Salary & Bonus –Often acts as a wage cap –Is Bonus Known in Advance? –What Happens When You Hit Bonus Triggers? Salary + Commission + Bonus

Gross Margin Commissions How They Work When They Work Best GM Brand Grouping Necessary When There is Price Setting Authority for Salespeople Review Note Example Carefully

Customer Satisfaction & Teams Customer Satisfaction Bonus –Rationale –Problems Team Selling Compensation

Expense Accounts Flexibility Equity is Hard Expense Control vs. Sales

Types of Expense Accounts Unlimited Per Diem Limited Repayment

Pay Levels Hard to Determine with Incentive Pay When positive contribution not as critical Are all sales forces better than average? Attracting & Retaining Talent Review Annually

Detailed Notes Example Combines Pay & Different Sales Forecasts Common What / If Analysis See Excel Spreadsheet & Notes Background

Final Thoughts Attracting & Keeping Sales Superstars Commission Keep Giving Incentives when Other Methods Don’t Capping Pay (including Salary & Bonus) may be a bad idea

Final Thoughts #2 Simple is Best – but new business exception Be Happy When Writing Commission Checks