Show me the money? The truth behind effective sales commission plans

by Jeff Tanner – July 2013

Are salespeople motivated just by the $ sign?

Show Me the Money

Perhaps the greatest myth in sales is that salespeople are only in it for the money, especially when it comes to sponsorships and premium sales in sports.

Our research regarding salesperson motivation showed money as the primary motivator for no more than 15% of all salespeople. What about the rest?

Since money should follow performance, the majority are motivated more by:

Independence, Challenge, anGenuinely serving customers

So, that’s what motivates salespeople. What’s the number one way de-motivate salespeople? 

Let’s talk about the role of incentives and commissions and then we’ll get to how to lose your best salespeople.

The Value of Incentives & Commissions

[dropshadowbox align=”right” effect=”lifted-both” width=”250px” height=”” background_color=”#ffffff” border_width=”1″ border_color=”#dddddd” ]

george killebrewA commission plan must be consistent year to year and fairly simple to understand. We have made only minor adjustments over the last 12 years.

Salespeople do their best when consistency exists and they aren’t thrown a bunch of curve balls.

Money is not the only motivating factor. In fact I think it isn’t even the most important. The ability to have a sense of autonomy, to feel like you are an important team member, to feel like you work for a company that values you, are all important factors to sales success.

mavs logo~ George Killebrew, SVP Business Operations, Dallas Mavericks

[/dropshadowbox]What compensation structure works best to direct salespeople’s activity?

Short term sales incentives are effective motivation when sales tasks are (a) repetitive and (b) don’t require a great deal of creativity. The intrinsic nature of the job just isn’t enough; it takes creative incentives, including well-designed contests to focus salespeople on the right activities. Dangle a carrot in front of a ticket rep and get out of the way. 

Incentives don’t work as well for sales positions like sponsorships that require a lot of (a) creativity, (b) customer care, and have (c) long-term sales cycles.

How to demotivate your sales force

Commissions are excellent motivation to sell and service key accounts in sponsorships or premium ticket sales. You know you’ve succeeded at demotivating your sales force if any one of them begins saying things like, “They cut my commission!” “They keep changing the plan.” Or the worst one, “They owe me…”

In spite of the motivating power of incentives and commissions, organizations can also find ways to break the trust with their salespeople:

  1. Delaying an announcement of compensation plan details: salespeople don’t know what to sell, 
  2. Lowering commission rates in the middle of the selling season in order to boost profits by lowering pay, and
  3. Delay payment while quibbling over minor points in the plan.

Yes, you can just get more salespeople to replace the ones who leave. But when you finally get some good ones back on the team, how many sales were lost?

Solutions

Spend the time to run the compensation plan through tests before launching it. What’s the worst case scenario? The best case?

Think like a rep and figure out what the best sales strategy is to maximize compensation. Can you live with that result?

And plan for a surprise – like adding a bonus mid-selling season. While nothing demotivates like cutting commission after the fact, nothing has more motivating power than a seemingly-random occasional extra reward.

Greg Grissom
Greg Grissom

As Greg Grissom, Vice President of Corporate Development at the Houston Texans, concludes, ”The right compensation plan is a key tool in sales leaders tool kit to ensure you clearly communicate where success lies both individually and as a team.  By incenting the behaviors and outcomes, salespeople clearly understand where they need to spend their time and effort.”

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