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Which payment schemes are best for rewarding success in the field sales force? This topic is as relevant today as it was in the past and usually puzzles those responsible for deciding on such a payment scheme. In this article sales management training specialist [url=http://www.maximoupgrade.com/hot.php]hollister[/url] Paul Green compares the classical and modern payment schemes in a critical analysis.
1. Turnover commission. The oldest and still most widespread payment scheme is turnover commission. With this system, sales people get a fixed percentage of the turnover they achieve on top of their fixed salary as a performance incentive.
The biggest shortcoming of this payment scheme lies in the "pure turnover thinking". The salespeople do not need to concern themselves with whether they are selling a profitable or unprofitable product. In addition, this payment scheme does not have a great [url=http://www.thehygienerevolution.com/barbour.php]barbour paris[/url] motivational effect. Since the commission follows from the first turnover achieved, salespeople will have secured 80 to 85% of their commission without straining themselves.
One method to overcome these problems is to make the commission area begin once the 85% turnover threshold has been reached. Obviously, the percentage of the commission would have to be increased accordingly.
2. Cover contribution commission. Cover contribution commission is a far more modern and promising payment scheme. It is similar to the turnover commission, but the cover contribution forms the basis of the commission the salespeople receive.
Cover contribution is determined on the basis of the following example:
Turnover = £1M Turnover dependent variable costs = £500,000M
Cover contribution £500,000M Less directly attributable fixed costs (salaries, communications costs, etc.) £75,000 Cover contribution = £425,000
When changing from turnover commission to cover contribution commission, however, you would need to take existing business into consideration, in order to avoid any employee resistance and injustices. If a salesperson earned £40,000 in the previous year, for example, it is possible to calculate their cover contribution commission as follows:
Basic salary £30,000 Variable salary based on secured existing business £10,000 Commission based on secured existing business: £10,000 /£425,000 x 100 = 2.35%
3. Cover contribution bonus
Instead of paying a percentage commission when certain goals have been achieved, the [url=http://www.mnfruit.com/airjordan.php]jordan pas cher[/url] sales department pays out bonuses. The underlying principle of this payment scheme is that the corganisation's goals are in harmony with the bonus system. The alignment of reward with company goals is recognised as good practice on most management training courses
For example, a company is pursuing certain cover contribution goals in [url=http://www.gotprintsigns.com/abercrombiepascher/‎]abercrombie pas cher[/url] the different areas in which its salespeople work, such as a cost reduction goal and a turnover goal for its new product group. The bonus for fulfilling every goal 100% is set at £10,000. The allocation of this sum is based on the [url=http://www.sandvikfw.net/shopuk.php]hollister outlet sale[/url] importance of individual goals to the company: particular importance is attached [url=http://www.1855sacramento.com/peuterey.php]peuterey outlet[/url] to the cost reduction goal, which has a bonus value of 35%, i.e £3,500, whereas a cover contribution goal is allocated a value of 15%, i.e £1,500.
There are relatively high "penalties" for the non-fulfillment of goals: if the salesperson only attains 90%, their bonus goes down to 25% of the original sum and if they attain 95%, the bonus they receive goes down to 55% of the original sum.
If the salesperson exceeds the set goals by [url=http://www.rtnagel.com/louboutin.php]louboutin[/url] 5%, on the other hand, their bonus goes up by 10% and if they [url=http://www.mnfruit.com/louboutinpascher.php]louboutin[/url] exceed the goals by [url=http://www.mnfruit.com/abercrombie.php]abercrombie[/url] 10%, the bonus increases by 25%.
The advantage of a cover contribution bonus is that it is possible to pursue several different goals at once and sales management can monitor the income development of the sales department. If a salesperson is dealing with an expanding area, for example, this can be "incorporated" into [url=http://www.achbanker.com/homes.php]hollister[/url] their set of goals.
4. The goal-adoption bonus Within this kind of payment scheme, the company gives its salespeople the choice of adopting a variety of goals. Various different options to increase cover contribution are calculated:
If the salesperson decides to take on one of these options, they are then bound to this choice. A cautious salesperson will select "+3%", for example, and go for a safe bet. If the salesperson does do this, however, they can then earn no more than £5,000 if they exceed the goal. Therefore, this particular payment scheme does not reward those who are not willing to take some risks.
If the salesperson chooses the "+7%" option, they can earn four times as much. They do have to put a lot of effort into this option, however: if they fail to attain the goal, they receive no bonus whatsoever.
The goal-adoption [url=http://www.ilyav.com/uggpascher.php]ugg pas cher[/url] bonus therefore primarily takes the differing levels of risk-taking and performance willingness of the salespeople into consideration.
To be effective any [url=http://www.mquin.com/giuseppezanotti.php‎]giuseppe zanotti soldes[/url] incentive scheme selected must, obviously, fit with your business needs and should be easy for the sales manager and sales team to understand. To learn more about managing sales people and their motivations we recommend you attend a sales management training course.
Bonus Schemes For Field Sales People
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