Effective Plan
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Do I have the right individual’s in the job What is the relationship between sales and marketing What is the right value proposition between the compensation paid to sales professionals and the revenue they generate for the organization What are the right competitive benchmarks for the sales force How do I establish attainable goals How do I balance plan simplicity with plan sophistication What elements of plan design impact attraction, retention and motivation more effectively than others Each of these questions is challenging and must be addressed in evaluating the effectiveness of existing sales compensation and sales incentive plans, as well as in redesign efforts.. Figure 2 – Sales Incentive Plan Effectiveness Checklist (1=Best, 4=Worst) Strategic Financial Tactical Effectiveness Measure Achieves marketing goals Fits marketing life cycle Externally competitive Internally equitable Balance between sales incentive ROI Reflects Individual effort Meets career income needs Simple and action-oriented Seen as fair Balances sales rep risk and reward Provides for territory variances Provides for territory management 1 2 3 4 This check list can also help identify issues and problems with the existing sales compensation plan.. Sales Incentive “Testing” Model Quarterly Rate of Change Previous Year End Budget Q1 67,084 Budget Q2 67,419 Budget Q3 67,756 Budget Q4 68,095 Totals 1 Unit Sales 0.50 267,000 2 Price Per Unit 0.50 10.00 10.11 10.10 10.15 10.20 3 Total Revenue 2,670,000 677,881 680,934 687,726 694,569 2,741,110 4 CGS (50 of Rev) 1,335,000 340,635 342,169 345,582 349,021 1,377,408 5 Gross Profit 1,335,000 337,246 338,764 342,144 345,548 1,363,702 6 Commission 46,725 11,804 11,857 11,975 12,094 47,730 7 Base Salary 47,500 12,500 12,500 12,500 12,500 50,000 8 Projected Total Compensation 94,225 24,304 24,357 24,475 24,594 97,730 9 Target Total Compensation 95,000 24,500 24,500 24,500 24,500 98,000 (1x2) 0.50 (3-4) 3.50 270,354 Note: Commission is a percentage of gross
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