Compensation plans for salespeople come in all shapes and sizes, with the general rule that the more complex and difficult the sale, the more you will need to pay salespeople to sell it. That is true across all industries, from hard goods to cloud based software. What is also true is generally plans will have different degrees of “leverage” or variable compensation based on the amount of the influence the salesperson has on the process.
Inside salespeople who may be managing more administrative functions of the customer relationship vs. the outside rep who is tasked with customer acquisition, and truly owning the customer may vary from 80/20 fixed vs. variable for the inside rep to a typical 50/50 plan for the outside rep. Sometimes companies will provide no variable for the inside team, wrongly assuming that they have little to no influence over the sale.
In the successful companies I have worked with, managers understand the benefits of the “extra motivation” even a small bonus can provide those inside teams, and yes it will make a difference.
Great compensation plans generally have three major components:
• Base pay/salary/benefits
• Commission
• Bonus based on KPIs (formerly MBOs)
The combined total is referred to as OTE (On Target Earnings) and is often used as the benchmark of what a rep will make on average if hitting their plan or quota. More in part III of this series on the details of building winning compensation plans…