5 steps to establish a successful sales compensation strategy

Sue SundstromSales Commission ManagementLeave a Comment

The sales compensation plan is one of the most effective recruitment tools in the sales industry. When establishing your strategy, you need to ensure that it offers measurable benefits to your sales team, but you also need to ensure that it isn’t costing your business huge sums of cash every month. It needs to be fair, but appealing, and sustainable

Avoid full commission

There are some circumstances where this type of structure works but, for the most part, full commission is typically only beneficial to sales staff that can’t get other sales jobs or someone that doesn’t require a full time income. Do you really want to entrust your sales to these types of salespeople?

Reward positive behaviour

Some compensation packages fail because employees that miss targets, and don’t meet their employment requirements, continue to receive commission for their sales. This basically means that they are being rewarded for failing.

Offer incentivised rewards for behaviour that you want to see repeated. This also means targeting the goals that are important to your business – if you want to attract more long-term business, offer additional compensation for customers that sign up and stay with the business for the next 6 months.

Choose the right commission level

Commission rates can vary from 1% to 10%, as a typical rule. Use existing sales figures and bear in mind that a good rule is that your top salespeople should be earning as much from their commission as they do from their basic salary. Use this guideline to determine the amount of commission that you pay. 

Pay quickly

Paying commissions quickly will feel like an additional bonus to your salesforce. The perception of reward is greater when the reward comes hot on the heels of the success. The brain recognises that it is being rewarded for the recent action it performed, so people will be more inclined to make additional sales and reach additional goals, if you pay quickly and reliably.

Be transparent with your team

Whatever commission rate, payment terms, and other commission structure you decide on, ensure that you communicate the details with your team. You can also use your sales compensation software to provide individual reports to every one of your sales team. Regular reports enable your salespeople to identify their strong and weak points, so that they can make improvements, or continue to provide the best results for their efforts.

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