Tag: Sales Compensation Plan – Design

Total cash payout (TCP) alternatively called TCC (Target Cash Compensation) is the cash amount sales persons receive for achieving their sales targets. It consists of fixed pay (base salary) and variable compensation, which is the incentives payment for 100% target realization and any other bonuses rewarded. It excludes benefits but includes any direct allowances (business vehicle allowance) paid to the salesperson. 

The following factors should be taken into account by the company while determining the TCP level

• Industry: When designing the compensation plan, it always should match the standard industry practice. The companies should get periodical survey reports to understand how the industry and the competitors are paying both the basic salary and the variable part. For instance, the retail industry has more of a commissions based plan as the salesperson has an immediate impact on the shopper’s purchase behaviors. Then the company needs to decide if they want to be aligned with the average the industry offers, the 75% or any other percentile

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Have you ever felt you’ve been pressured into buying a different product from the one you were originally looking at because the salesperson was so eager and convincing? 

And then you get back to your office or home, feeling disappointed, almost cheated and too upset to follow up the situation with the company?

Or the sales person traps you in a moment of weakness, promising the earth, and then lets you down with no after sales service? 

And when you do eventually get through to a sales manager or senior customer service manager, you discover you’ve been sold a product that greatly benefits the salesperson’s bank account, but has in your opinion now damaged the reputation of the company.

It’s a situation that can easily arise when a motivation scheme is designed to serve the company’s interests above all. Or where the rewards deployed in sales organizations to incentivize sales people for certain sales behaviors and activities, are not in total alignment with the company’s objectives and plans.

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Can the positive reputation of a company, brand, or product have an affect on the structure of their compensation plan? Let’s take a look below at some common compensation plans and how they’re influenced by the company’s market positioning. 

• Set Pay– Commonly companies pay employees a set amount for their services, which typically include customer service, sales, and general payment processing tasks. End of the year or monthly incentives for sales targets met, are often used as a tool to motivate staff to retain and close more clients or customers. 
• 100% Commission Based– A 100% commission based structure consists of salespeople who conduct the full sales cycle. From prospecting through to ensuring buyers satisfaction after the purchase. The typical commission based salesperson is there start to finish. The compensation received is based on a percentage of the sales price. In some structures an incentive is also utilized for those whom hit or exceed the sales quotas. 
• Commission & Base Pay– Another common practice is the mixture of a base pay as well as commission. Similar to the set pay salespeople receive a guaranteed base pay in conjunction with commission, typically a much lower amount than the full commission salesperson would receive. 

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Introduction

When is a sale deemed to be finalised, and at what stage of completion of the sale does the sales agent get paid their commission?

Not every sales transaction is a simple process of handing over money in exchange for the supply of goods or services such as would be found at a car boot sale. Take, for instance, real estate or other negotiations where the final transaction follows a series of successful stages, that could take months, or even years, to finalise.

 

For example, a member of the sales team, whom we will call Kyle, works for  many months in negotiating an intricate contract, resolving a number of factors, to arrive at a complex solution that:

• costs a couple of millions of dollars to the client,
• includes licenses for 5 years,
• requires various phases of development and implementation,
• has a service agreement where the customer pays for annual support and maintenance costs
• the product/service may take up to 1 year to install
• requires a team of 3 people to work on the implementation
• is paid for with split invoices
  • to different locations
  • in different periods and
  • according to usage of the solution and
  • the number of users.

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Introduction

When hiring a sales person, it is essential to take into cognizance, not only the basic salary, but also any other incentives specified in the company’s policy. Incentives could take the form of reloadable gift cards, free vacations, keeping employees healthy, taking care of the staff’s family, money gifts and even saying thank you amongst others. Incentives could also take the form of extra pay for meeting organizational target excellently.

It is also vital for any organization to understand that keeping employees happy in the office can make the firm resolute and unfaltering within the industry. Obviously the only way to keep the employees happy and motivated is to pay salaries promptly and give incentives regularly.

Further to consider when giving incentives and paying staffs basic salary are the hierarchical & organizational structure, seniority and the level of job responsibilities. A staff with more responsibilities should receive better incentives than those with fewer responsibilities.

Another crucial and vital thing to consider in this write up is salary and incentive negotiations. Everything is negotiable in this world. It is even possible for you to negotiate when you are going to negotiate. Negotiating the salary and incentives terms of employment can help to drastically cut down company’s expenses sometimes, while maintaining staff’s satisfaction. When a staff is satisfied with his or her earning, he or she tends to be highly motivated to deliver beyond the employer’s expectations.

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