Sales Compensation and Commissions: Which Plan to Choose. Part Two


There are no hard and fast rules when it comes to which model of sales compensation is the right for an organisation. The commissions and benefits offered to your sales stars will depend on the products and services you provide, your target market, the length of the sales cycle and the overall sales plan.

By knowing the pros and cons of different sales commission plans, however, you have the best chance of using the best bits, ignoring the wrong models and getting it right. This will then give you the best opportunity to so keep your top sales performers engaged, motivated and making more sales! In part two of this two-part post, we consider 3 more popular approaches to commissions and rewarding salespeople.

1. Share the Profit Margin

Companies that sell services often pay their sales reps a percentage of the profits. The catch? If you have to discount the price due to competitive pressure, the discount comes directly out of your paycheck.

2. Old Business vs. New Business

Like to push through the sale and move on to the next prospect? Look for a company that offers bonuses for bringing in new clients or opening new territories. Enjoy maintaining customer contact? Look for a company offering residual commissions for customers that continue to spend.

3. Hitting Targets

Some companies set sales targets and increase your commission as you sell more and more. This model is good if you’re motivated by a challenge but can backfire if the lowest goal is unreachable because the sales cycle is longer than the commission cycle or the product isn’t priced correctly.

Other companies set a total sales goal and base your commission on how close you come to that total. With this structure, you can usually count on a sales commission even if you don’t reach your total goal.