Most businesses pay their marketers a sales commission. This fee is computed in relation to the sales person’s performance. Also called pay-for-performance, sales compensation or variable pay, sales commissions are different than hourly rates. One company may decide to pay its workers a base salary and a commission while another may pay just for the sales generated. In either case, a company should be smart when determining its sales compensation structure. The commission rate should be fair to itself and its sales team or reps.
A variable pay is not governed by several rules and regulations as does a salary based program. Instead, it entails variations like frequency of computing payments (monthly, quarterly or semi-annually), performance benchmark (revenues or gross profit?), and levels of staff being compensated. In a situation where a staff is paid a higher sa
lary than a commission, he or she receives a list of customers to persuade. The method works for sales reps that can make cold calls and convince customers to buy something.
Individual sales commissions are paid to those who can directly approach a potential customer and close a sale. They are paid a commission for each individual sale they make. There is also a payment for territory volume that is paid when a sales person manages to create a network of people who participates in a sales campaign. The sales commission in this case is usually as big as the number of customers within a territory. When a share of a profit margin is paid, the sales representative is usually asked to sell a service. The reps are promised a bigger commission if they could get a better margin out of a given deal.
Commissions can vary as widely as a company wants. For instance, a company could pay a residue commission for every customer who shops consistently. In such a case, it would expect a sales person to maintain every customer contact they have made. On the other hand, a company could pay an attractive commission to reps who bring in new clients or those who open new territories. If you run a retail business or a wholesale shop, you could offer a lower percentage commission on retail sales or bigger percentage commissions on wholesale sales. Still, you could design your pay-for-performance based on your net profits.
Furthermore, you can offer a commission based on the rep’s gross value or pay a cash bonus to a marketing team that has strived to attain particular goals. It is really upon you to know the most appropriate commission-based structure to use in your business. If you want to set sales targets and pay more commission if they are met, it is up to you. Just make sure your business is financially sound and can sustain itself even when the sales cycle is longer than the commission cycle. Still, you could set a total sales goal and base your sales compensation on how close your sales reps come to that amount. Whatever method works for you is the best pick.
Locating a suitable commission based structure is not all you should do. In addition to this, make sure you create a productive and effective sales team that would be worthy of the commission structure you have set. Keep in mind these points:
To learn more about Anaplan software, and how it can assist you model your commission structures, visit us online.