4 Sales Compensation Plans for Better Sales Performance
Organizations spend a large amount of money on wages, benefits, and avoidable turnover. Sales compensation can be the most expensive, complex, and comprehensive of all compensation programmes when variable pay is included.
Developing a robust sales compensation plan allows the firm to prepare for and execute a successful sales strategy as well as recruit and retain motivated sales personnel who contribute directly to the company's profitability.
What is Sales Compensation?
The remuneration a sales person receives for their efforts is referred to as sales compensation. A salesperson is usually encouraged by a basic wage, commission, and other monetary incentives.
When it comes to attracting and keeping sales talent, sales compensation is critical — exactly why getting your sales pay right is critical to your company's success. You want to offer the top personnel a reason to join your sales team and remain for the long haul.
A sales compensation plan's goal is to foster positive behaviors throughout your team, establish compensation expectations and standards for all salespeople, and drive performance to meet the overall team and corporate objectives.
Why are Sales Compensation Plans Important?
Competitive and effective sales commission and incentive schemes are essential for keeping top sales personnel. Employees who feel appreciated are further inclined to work more and stay longer, saving your company time and money on turnover. Sales commissions assure your salespeople that they will be paid for their efforts and valued for the time they devote to their jobs.
Competitive pay schemes for your salespeople that include sales commissions are a terrific way to demonstrate your appreciation. As a sales firm owner, creating a pay plan that rewards hard work and account development has been shown to effectively inspire sales personnel, and it should be at the top of your priority list.
How to Develop Sales Compensation Plans
The structure, funding, and goals of your sales staff will all influence your pay plan. When creating a payment system for your team, there are various aspects to consider. When creating a sales commission scheme, examine the following questions:
- What are your objectives for your sales team?
- What are the long-term objectives of your company?
- How much money do your salesmen make?
- What percentage of your budget can you devote to compensation packages?
- How much do your biggest rivals pay their salespeople and are you willing to outbid them?
- What is the cost of living where your firm is situated if your salespeople work in-house?
Understanding expectations makes it simpler to create appealing compensation packages that will appeal to both high-quality recruits and your current top performers.
4 Innovative Sales Compensation Plans
You may pick from a variety of sales compensation schemes for your company. It is possible that you will have to try out a few different strategies before settling on the finest one for your organization.
Here are 4 innovative sales compensation programmes to consider for your organization.
1. Base salary + sales commission-based pay
If you choose this option, you will pay your salespeople a combination of base income and performance-based bonuses. To encourage selling, the base income should be lower than a straight wage and the commission should be unlimited.
This arrangement is commonly used by businesses that seek a simple pay structure with the extra incentive of earning a sales commission.
2. Draw-against plan
Reps can take a loan against their future commission earnings and have it paid out early under this scheme.
This plan functions as an 'IOU' from your sales representative. The 'draw' is a predefined amount of money that must be returned to the corporation under certain conditions. If a rep's commission is less than the amount drawn, the difference is deducted from the draw.
3. Tiered commissions
One of the greatest ways to motivate top-performing salespeople to keep selling is to use a tiered incentive structure.
It encourages salespeople to go above and beyond their quotas. A sales rep gets promoted to a higher commission rate whenever they reach a particular amount of deals or income. They will make more money if they close more transactions. This strategy can encourage sales staff to use upsells and cross-sells to increase sales.
4. Straight-line commissions
Straight-line plans pay a commission based on how much of a salesperson's quota they sell. For example, if a sales rep has a monthly quota of £10,000 and only sells £5,000, they have met half of their quota. As a result, they will only be paid 50% of their commissions.
This strategy is complicated and it only works if your salespeople are desperate to meet their quota. If a salesperson consistently achieves a 65% closing rate, it is possible that they are happy with it. They may not be motivated to sell more and pushing them without using an accelerator will be difficult.
Designing compensation plans for your sales staff to genuinely drive performance and meet your sales objectives is a crucial component of reward management and HR. Rather than making modifications, HR and incentive experts try to fit their salespeople's ever-changing demands into a system that has not been examined in years.
Are you a C&B specialist or a Sales manager who needs to know more about sales compensation? Keynotive has just the session for you:
Sales Compensation and Sales Incentive Plans (SIPs) is a live virtual masterclass by Keynotive. This engaging two-day session will be conducted by Robert Mosley, Global Remuneration Expert and Compensation Guru.