Companies often struggle to create incentive programs that focus sales teams on producing top results, without putting them in financial trouble. It is difficult to create sales commissions and bonuses, or other recognition programs. Often, the terms under which they were initially set change over time.
If you are going to create an incentive program for salespeople, it is important to make it changeable on a regular basis. The reason behind this is that business conditions can change, and incentives for your employees will also change.
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Salespeople should not view sales commissions, bonuses, and other forms of incentive compensation as entitlements. You haven't maintained the program in a way that aligns with your sales territory goals. It is important that you review and renew them or make changes on an annual basis with your employees.
The most popular type of commission is sales commissions. These are typically based on the idea that your sales representative will be paid a percentage of any revenue or gross margin from each sale. Sales commission programs differ from sales bonuses, which are based on reaching a specific revenue target or meeting other milestones.
It is important to distinguish between an absolute and a percentage sales commission. This distinction can be dangerous because it could lead to salespeople making more than they originally intended.
Many companies have reps who make too much money relative to the actual value they bring to their company. This can lead to complacency and an entitlement mentality. In conjunction with financial year planning, it is important that sales incentive programs are regularly reset.