Insider received many insightful responses to yesterday’s Sales Commissions post. Here are some emails we’ve receive. There are also great responses from people worth listening to (e.g. Jim Moravec and Billy Duke) in the comments section at the end of this article.
An Out of Home Manager suggests commissions should take into account terms and cost of service:
There are two schools of though on this topic that have been an ongoing debate for years.
- Offering a flat commission scale (say 6% on collections) an account executive can chart their own future. Want to make more money? Sell more.
- A tiered commission where identified benchmarks are rewarded at a higher percentage. Length of contract, increases in renewals, selling space or production at rate card, shorter payment terms on invoices or other items that a particular company wants to put emphasis on can all be emphasized through high commissions to sales people. The longer I spend in this business the more I tend to shift to the second option. It keeps A players motivated to keep operating at an A level and, perhaps more importantly, it can be just the motivation needed to get the B player thinking about what it takes to get themselves into A status and the difference it can make to their W2. The commission line item on your P&L will rise, yes, but if it rises based on increased revenue it might very well be worth the extra points.
Definitely worth pondering.
An out of home sales executive:
The integrity of the agreement should be the main consideration -factors include maintaining high rates, larger buys, cross-sale of multiple products, long term, brand new business- incentivize & reward based on sales executives, solving needs. Not order taking- It’s not a one-size-fits-all medium- There are many variables for each campaign and also should be for commissions –
An out of home executive at a large company:
On the local level generally straight commission. If we hired a promising new account exec might give them a 3 – 6 month guarantee or draw but after that commission only; depending on the market and account load 8-10%. The most important thing however is commission is NOT paid until receivable collected or clawed back if paid and not collected. The national folks tend to be salary plus incentive/bonus.
Another senior Out of Home Exec:
I believe a commission plan should drive the company’s goals & initiatives but still benefit the customer. It needs to be a plan that keeps the sales team excited and aggressive. Most of my career has been spent with long-term bulletin plants. Speaking only to companies in that space, I am personally not a fan of fixed percentage commission plans. I think the higher the quality of the contract, the higher the commission should be. A new contract with a new advertiser, at rate, for multiple locations, no out clauses, 1st month and production paid up front shows more effort and provides the company more value than a renewal contract that was mailed in with a 3% increase.
[wpforms id=”9787″]
Paid Advertisement
While I understand the need to constantly be hunting for that next big new customer, I don’t understand the attitude and lower commission structure for the “lowly” renewal customer. A client that perhaps has been in billing for years or “ low hanging fruit” as renewal customers have been referred to, is perhaps more important than the new customer. Renewal customers provide a solid foundation of billing to the sales executive, management and their companies.
Ask any sales person. They will tell you nothing stings more painfully than a renewal customer that declines to renew their contract.
Renewal customers are “golden” providing a base of billing for all concerned and should be highly prized and valued by sales, management and their companies. That’s the way I feel and treat my long term renewal clients!
Commissions on renewals should reflect that value!
Good selling to all!
Great article on commission programs.
Another thing worth touching base on would be buying agencies and AE’s competition.
As an AE I am losing business to buying agencies far too often. Even the agencies I am dealing with on a regular basis are finding it easier to reach out to a buying agency and let them place the buy. When that happens “House” takes the sale from me, even if the advertiser has been mine. I am told my company is not paying these agencies a commission, they mark it up from our cost. If that’s the case this is a great benefit to the “house”, not paying an AE a commission.
We have also seen Sales Managers writing more and more business, another competitor for the AE’s. What do people think the role of a Sales Manager should be, manage their sales people and help grow the business or sell against the AE’s and take orders?
Keep up the great articles, enjoy them every day!!
Interesting topic. Couple of thoughts……….
1) over the years I have discovered that the best commission plans are the simplest. The motivated sales reps should be able to make a sale and know they just made X amount of money. I recall this thought being confirmed by Wally Kelly a number of years ago. When he was rolling up lots of independent companies he found a correlation between high performing sales orgs and simplicity of commission schedule.
2) best to pay at the time the advertising is invoiced. Bad pays are eliminated through the contract acceptance process or a pre pay is required. We want sales staff to be selling not collecting. Hector the Collector can take care of the collecting.