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Diana Ceballos 12.30.2020 7 min read

The Correct Sales Commission Plan for each Profile

Team members can be classified under different profiles; based on performance, position or employment. Having the right compensation plan for each category is essential in motivating and retaining employees. Every salesperson needs to feel adequately compensated so that they are encouraged to work more. This promotes a positive working culture and improves the attainment of the overall company objectives.

It is, therefore, critical to design an efficient sales commission structure. For more details, let's take an in-depth look at how commission trackers can help you set up and manage such activities.

Setup adequate commission plans for your sales team in a commission tracker

There is a myriad of profiles that can be derived in multiple sales companies depending on the structure of the firm. Designing a commission plan can be based on factors such as sales volume, salary, target achievement, profit margins, etc.

Once you develop the program, you can use sales commission tracking software to keep track of the compensation scheme. Below are some of the basics involved in designing a sales commission plan.

Aligning the compensation plan with the sale roles

this means rewarding people with high positions higher bonuses or salaries, for instance, a manager being paid more than a sales rep.

Reflection of the company’s culture in the compensation

Your incentives need to be competitive if you want to retire competent employees. And it’s not just about rewarding those who make big sales scores only; you also need to recognize the people who deliver stable and consistent results.

Aligning the compensation plans with the firm’s objectives

Factor in the business’ broader targets and develop a commission plan optimized to propel your team towards the intended direction.

Ideas on how to structure your commission plan

Every sales team profile can have a perfect fit within the sales commission plan. There are several ways through which you can structure compensation plans for all these categories. Among them include the following:

Individual sales

This gets paid out to sales rep who have direct contact and relationships with customers; hence, most transactions are own sales. There should be a low base compensation and the highest possible payout set in place for this kind of structure.

Team sales

These are sales made through competitive groups of employees. Teams are great for morale and boosting the performance of everyone in them. Members may put in more effort so that they get higher commissions as a team and thus higher payouts per person when shared.

A share of profit margin

This involves paying the employee a share of the profits they make after a sale. The upside to this tactic is that if a sales rep makes a sale of a higher profit margin, they get a higher commission as compensation. However, if they are forced to sell it at a discounted price because of competition, then the amount gets cut from their pay.

Territory volume

If your firm is all about creating and developing networks where others are encouraged to take part in the activities, then your personnel will appreciate compensation based on territory-wide sales instead of individual commissions.

For territory sales, there is a need to understand who your target clients are and develop strategies on how you will appeal to them and win them over. Customer loyalty ensures that other companies do not get the opportunity to poach your market share. The drawback is that sometimes it can be a hindrance to going after customers who migrate from your territory.

New client vs. old

There are companies that pay their sales rep a commission for bringing in new customers or winning over a new territory. For people in such a company, they may find themselves focusing too much on getting new clients and ignore the old ones.

The key is finding the balance between the two. It’s also important to note that if, in any case, you depart from the firm you are working for, you may end up leaving behind any unpaid or outstanding residuals.

Hitting targets

There are firms that raise your commission if you keep on making higher sales. This is a great technique to motivate employees who are up for a challenge. However, it can be demoralizing if the set goals are too extreme, the product pricing is too expensive, among other factors.

To reduce the risks of such a plan backfiring, some companies use a different method where they put in place a total sales target. This target can be based on previous sales, say those of the past year. The design of the compensation program is such that if you come close but don’t reach the target, you’ll still get compensation.

In conclusion

Selecting the right commission plans depends on how your company performs its activities. Some can encompass different profiles and thus require the adoption of varying strategies.

Whatever the case, you’ll need a reliable commission tracking software that will monitor all the commission plans and keep you updated on their progress, and Blitz offers some of the best tools in the market for performing such tasks with ease, thus making the administration of your company a simplified endeavor.

One of the managing partners of the Compensation Master LLC located in Charlotte, North Carolina, David Cocks, said, “You have to think about what position you are in.” With Blitz´s sales commission tracking software, we have embedded all these different sales commission plans.

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