Benchmarks - Sales Incentives

Goals

To find benchmarks for sales incentives rewarded to sales representatives team in a B2B manufacturing company. To identify the predominant models, along with cash and non-cash options to choose from.

Early Findings

Cash Incentives

Option #1: Base Rate + Commission
  • The 'Base Rate + Commission' structure is the most common option, where the company "invests in the rep with a monetary reward, regardless of their performance, in addition to compensation for whatever they sell. In exchange, the sales rep fully invests their skills and time to earn both parts of their compensation."
  • With this structure, sales reps will get a commission as well as their fixed yearly base salary, which will offer them a steady income and the incentive to sell.
  • On the other side, the plan is beneficial for most businesses because it offers "the opportunity to hire highly-motivated, competitive salespeople." Moreover, since sales reps are getting a base salary, they are obligated to "fulfill some non-selling tasks, such as training new team members."
Option #2: Tiered Commission
  • To motivate their sales reps, specifically the top-performing ones, companies are also applying the tiered commission structure. "After closing a certain number of deals or reaching certain revenue benchmarks, the salesperson’s commission rate increases."
  • These plans directly affect reps' salaries. Companies don't have to set a quota to reward a tiered commission. Instead, they can set recommendations or benchmarks.
Option #3: Gross Margin Commission Model
  • The gross margin commission takes into account the expenses associated with the products the company sells. It is not a percentage of the revenue; it is a percentage of the company's profit.
  • "Profit margin plans are most often used by startups that have a lack of liquidity."
  • This model supports the company's bottom line by ensuring that sales reps are not relying on discounting to close their deals, which prevents the company's profit margins from eroding.
  • "Tying commission to the product's final cost encourages reps to give fewer and smaller discounts. Additionally, gross margin commission plans promote the sales of specific product lines." In other words, the profit margin plan motivates sales reps to sell more of the company's most profitable products.

Summary of Our Early Findings Relevant to The Goals

  • Our preliminary research highlighted three cash-related sales incentives.
  • We were unable to find the predominant models for the B2B and manufacturing industries.
  • The initial hour of the research didn't cover every part of the requested information, so we haven't confirmed yet if we can find all the requested and suggested data.
  • Our recommendations are based on our findings in early research.
  • Please select one or more of the options provided in the proposed scoping section below.

Proposed next steps:

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