There’s no doubt that you want a top-performing, motivated, and effective sales team selling your products or services. What you may not realize, though, is that the type of sales compensation you offer might play a big factor in the performance and motivation level of your reps. Show
All sales compensation plans should push sales reps to find and pursue opportunities, whether individually or as part of a team, in order to increase revenue. But sales compensation plans vary widely in structure, and you need to ensure that you implement the right plan for your business goals and your team. Otherwise, your plan could end up hurting your efforts. To get you on the right path, here are the pros and cons of different sales compensation plans. Straight SalaryStraight salary is just what you’d expect: you offer your reps a yearly salary, and that’s it. No commission or any other type of compensation on top. Pros:
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Salary plus CommissionSalary plus commission is one of the most common sales compensation plans used in sales organizations. It combines a lower base salary with commission, typically on a percentage of sales, to arrive at total compensation. Pros:
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Commission OnlyCommission only compensation plans offer remuneration only on sales made. There is no guarantee of income if revenue isn’t generated. Pros:
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Profit Margin/RevenueRewarding your sales people based largely on how your company is performing is known as profit margin or revenue-based sales compensation plans. Pros:
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As you can see, all sales compensation plans have their pros and cons. Not every plan will be right for your type of organization. The size of your workforce, the products or services you sell, the age and stability of your company, the goals you have, and the type of sales people you want to attract will all need to be factored into your decision when designing a compensation plan. Rhys MetlerRhys is a tenacious, top performing Senior Sales Recruiter with 15+ years of focused experience in the Digital Media, Mobile, Software, Technology and B2B verticals. He has a successful track record of headhunting top performing sales candidates for some of the most exciting brands in North America. He is a Certified Recruitment Specialist (CRS) and has expert experience in prospecting new business, client retention/renewals and managing top performing sales and recruitment teams. Rhys enjoys spending quality time with his wife, son, and daughters, BBQing on a hot summer day and tropical vacations. What is the primary disadvantage of using the straight salary approach to pay salespeople?The primary disadvantage with straight salary is that it removes the incentive to work longer hours or to put in extra effort to close sales that would come naturally to a commissioned sales rep.
Which of the following is a disadvantage of a straight salary?Disadvantages of Straight Salary Method
It does not provide any incentive for hard work. So, it does not encourage salesmen to do hard work.
What is a disadvantage of straight commission plans quizlet?Straight salary plans often do not provide strong incentive for extra effort. Under a straight commission plan, sales managers usually have less control over their reps.
What is the disadvantage of a pay for performance plan?The downside is that as salaries are usually only reviewed once a year, a high-performing employee might be tempted by a higher salary elsewhere before you have the chance to reward them for performing consistently well.
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