Four steps toward a better ad sales commission plan
Developing an effective commission plan requires media companies to take their eyes off their spreadsheets and think about how the business has changed. Every CFO wants a commission structure that motivates sales reps toward accomplishing the company's goals while maintaining financial discipline, but finding that balance isn't so easy.
Here are four factors to consider when building commission plans for next year:
1. Keep it simple
Every sales rep should be able to know how much money they have on the line when they are trying to close a deal. It's instant motivation for them when they want to throw in the towel with a difficult customer (who has those?). Furthermore, when comp plans are so complex that reps are unable to quickly calculate earnings, they feel the company is trying to take advantage of them.
2. Online sales are more work than print
Online sales require the salesperson to learn far more about the product before they begin selling, and then the real work begins after they get a signed IO. Commission plans should pay more for every dollar sold online than they do for print because it's more work. If you fail to recognize this discrepancy in workload and compensate them equally, reps will get the easy online dollars but forego the challenging deals.
3. Budget extra dollars for special initiatives / SPIFFs
SPIFFs are an incredibly valuable tool for media companies in a recession / recovery. They allow you to generate excitement around a specific product or service internally and externally. They can move the needle quickly and demonstrate to your sales team that you recognize their hard work in hard times with a reward that is mutually beneficial.
4. Over-communicate plan changes
Every salesperson thinks they are getting screwed when you change commission plans. Be prepared by planning for push-back. In fact, let your salespeople know that you embrace the feedback. Push out an almost-final draft of the plan and create a structured means of getting plan feedback for two weeks.
Draft a note detailing the major themes in the feedback, and communicate exactly why changes were or were not made based on the feedback. Never let the inmates run the asylum, but don't make them feel so undervalued that they jump ship the second the job market comes back.
I learned the power of commission plans while at Primedia Business from 2001 to 2005. At the time, our reps were on a quarterly goal-based plan (at 70% of goal, commissions kick in, the commission percentage got much higher over 100% of goal). Because online was such a miniscule amount of revenue at the time, we decided that the most effective and straightforward way to get people to sell online was to have it count 1.5x towards their goal. You sell a $1,500 newsletter sponsorship, it counted as $2,250. Here are some of the key impacts of that plan:
- Each quarter, about halfway through, reps knew where they were to goal for that quarter (last print issue had closed). They instantly focused on remnant online inventory for the remainder of the quarter and sold it out.
- Our online revenues grew anywhere between 50% YOY to 70% YOY. While I'd love to say it was smart leadership (I was running New Media at the time for Primedia Business), the attitude from the sales reps clearly showed that commissions had a lot to do with it.
- When our online business grew past 10% of business, the 1.5x model became too expensive to support. When we changed comp plans and the 1.5x wasn't in there, we sure got it. So, think about how sustainable your model is.
It's been a tough year, and next year is not going to be a picnic. Show your sales team that you can be creative this year with their compensation.
If anyone has any other examples of comp plan successes, please leave us a comment below detailing your experience.