OVERVIEW
       The objectives of this session are to learn more 
       about:- 
       •   Design of total remuneration strategy for sales force 
           employees 
       •   Types of sales force remuneration plans
       •   Advantages and disadvantages of sales bonus or 
           commission schemes  
       •   The use of decelerators 
       •   Study the elements of a sales remuneration plan
       •   Cross-selling incentives
       •   Sales manager incentives
       •   Incentives for relationship management
    KEY SALES REMUNERATION 
    DEFINITIONS
    MIX
    Relationship between the base salary and incentive-opportunity component. 
    Mix is  expressed  as  a  %  of  target  total  remuneration,  which  is  the  pay  level  for 
    achieving expected performance. 
    E.g. 90/10 plan reflects a mix of 90% base salary and 10% incentive opportunity. 
    LEVERAGE
    Represents the upside earning opportunity. 
    Common leverage for sales positions is a “double” or “triple” – meaning, two or three 
    times the at-risk portion of the mix equals the upper earning opportunity for the top 
    10% of all performers.
    Example: A sales job with a target total remuneration of $100,000, an 80/20 mix and 
    triple  leverage  would  have  a  base  salary  of  $80,000;  target  incentive  earnings  of 
    $20,000; and a target upside leverage of $140,000  = [($20,000 x 3) + base salary]
    KEY SALES REMUNERATION 
    DEFINITIONS
    COMMISSION
    A commission is a type of incentive. 
    Can be expressed as a % of sales, a % of gross margins (profit), or an amount per unit sold. 
    A  commission-only  remuneration  pay  is  sometimes  referred  to  as  full  commission  or 
    straight commission. 
    BONUS
    A bonus is also a type of incentive.
    Bonus payment is tied to actual performance compared to a goal (e.g. sales quota).  
    Expressed as a % of salary, a % of defined target incentive award, or a flat amount. A 
    bonus is also a type of incentive.
    E.g. A bonus of 25% of base salary may be paid if 100% of the sales quota is achieved. 
           INCENTIVE FORMULA
          An  incentive  formula  relates  the  pay  opportunity  to  performance 
          achievement.  
                                                              Unlinked Incentive Formula
          •  Each performance measure is its own incentive plan. 
          •  Bonus/commission earned for accomplishments against one measure, regardless of the other measures. 
          •  Too many unlinked measures may motivate sales reps to to maximise earnings by doing what is easiest 
             to accomplish. 
                                                       Adjusted-value Incentive Formula 
          •  Value of performance measures vary to reflect their relative importance. 
          •  Example: Product A may be worth more for each sale than Product B. In such a case, point value for 
             Product A sales may be worth 10 points, and Product B sales may be worth only 5 points.
                                                                Linked Incentive Formula
           •  Linking 2 or more measures can ensure that objectives are achieved in order of priority. 
           •  4 types of linked formula design – hurdles, multipliers, modifiers and matrices. 
         KEY DESIGN FACTORS
         •    The first step in designing a sales commission plan is to define its purpose. 
         •    A strategy statement should define how the remuneration plan is to be utilised to 
              help the organisation achieve its business goals.
               Organisation mission and vision 
                                statements
              Organisation business plans and 
                         strategic objectives
                       Organisation life cycle                                                           Total 
                                                                                                Remuneration 
                            Internal factors                                                         Strategy 
                            External factors
                 Organisation philosophy and 
                                   culture