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.
Certain reputable companies have a brand or product that may be able to sell themselves. Would there or should there be a necessity in paying out commissions to sales staff? On the other hand, new upcoming companies looking to make a mark on their niche, or companies launching a new product may be open to offering a gracious compensation plan. Competition, maintaining reputability and client retainment are huge factors in the success of all companies. Incentivised sales staff can help companies continue or start to build a steady successful growth. The following considerations can help in structuring a motivating, mutually beneficial plan, for both the company as well as sales staff.
- Competition– Competition in the marketplace is fierce. With clientele selecting the purchase with a higher benefit, motivated sales staff can help push the sale in their company’s favor.
- Reliability– Large well-known brands have come out with new products that have required a recall due to a malfunction or other unfortunate circumstances. In situations like these the public may be weary to purchase future products. Sales staff offered an incentive will have a vested interest in educating and updating potential clients about the status of the products, while rebuilding trust back into the brand.
- Loyalty– Incentivised staff are motivated to take the time to learn the ins and outs, the what ifs and how to’s of what their selling. Charisma coupled with the knowledge of sales staff can build a loyalty between the salesperson and the customer. This can result in the customer heading back with preference to the salesperson for additional products, based simply on the trust built through a personal connection. Sales staff will have an incentive to keep up with these customers, as well as offer them a heads up for future sales, new products or other great promotions.
Tiered incentive plans can help your staff stay motivated far after they have reached their sales targets. First deciding how large or how important the incentives plans are to your company can be determined by answering a few simple points.
- Need or Want– Is the product or service a necessary need of the customer or a luxury want? If the answer can easily vary for your service or product a motivated salesperson can take the time to evaluate the customer’s situation and interest; which in return can provide them with the right strategies for a successful sale.
- Sales Cycle– How long is the sales cycle? Longer sales cycles run the risk of the interest of a buyer falling off, unexpected delays, mind changes, or even your competition swooping in. Keeping your staff highly motivated to keep a client’s interest through the entire process can be crucial in retaining and turning prospects into customers.
- Education– Do you have a new concept? Nowadays with so many new advances it could be hard to keep up. Does your product or service require a deeper understanding before the sale can be made? Hard to use or new products can be intimidating and turn off a prospective client. Knowledgeable motivated sales people can take the time to simplify your product.
- Effort– How much effort does it take for a successful sale? Companies with a strong marketing plan may have quicker sales and require less effort from sales staff, as the prospects already have a familiarity and interest in the product or service. With the same token businesses just starting out, promoting a new or special product, may require more of an effort from their skilled sales professionals. The value of the effort required can be depicted in higher or lower compensation plans.
- Industry Standards – Are common industry standards with a typical structure already in place for incentives? If so offering the same incentives can help keep sales staff motivated. Companies opting out of regular industry incentives may have staff questioning the effort they put in vs the competing incentivised companies staff.
One of the largest factors that can change or determine the compensation plan is the reputation of the company or product.
In general reputable companies or products would require less effort from a sales person than a start-up. The value of a new client to a start-up with no clientele or reputation, may result in higher incentives than a retained client to an established company.
Referral programs that benefit the client, salesperson, and start-up can help start-ups quickly garner new prospects and spread the word about their company.
Companies or products without a reputation can provide the following-
- Commissions from the first dollar of sales
- Yearly team achievement incentives.
- Bonuses for new clients.
- Disregard penalizing sales commissions for customer turnover.
Companies or products with a reputation can do the following-
- Focus on overall performance rather than just sales
- Offer incentives only after reaching 60% or more of the sales target.
- Provide flat bonuses instead of commissions.
- Incentives client retention and cross selling.
- Penalize for unretained clients.
Utilizing the simple tactics above can help in tailoring a compensation plan best suited to either a reputable and non reputable company.