Commission structure for a product with a low average sale price and limited opportunity for larger leads?

Looking for resources to read more about plans for my business, low ARPU but lots of leads.


Hi - I work in HR and have lots of experience designing and implementing commission schemes for a range of sales roles.

Happy to support with some more information - to determine the best commission structure you need to be clear on what behaviour or result you want to motivate, and also take into account financially how the scheme can 'pay for itself'. For example, by rewarding number (volume) of sales, or total revenue, but ignoring profit, the individual will understandably focus on revenue or volume, and profit may suffer.

Feel free to reach out to me direct if you'd like to explore further to reach the right solution.

You might find resources such as People Management (online) useful for further reading.


Answered 3 years ago

There are many publications, articles, and books on this subject. I feel I would be doing you a disservice recommending any without more detailed knowledge of your business model.

The one thing I can say and its the best advice I ever got when paying commercial folks and I live by it now, "You get what you incentivize." Often in sales we unconsciously incentivize activity. Activity doesn't mean results.

I am not certain the size of your sales team but take a look at Price's Law. Price's law says that 50% of the work is done by the square root of the total number of people who participate in the work. For thirty years this has been nearly a science. Keep that in mind when creating an incentive plan. I also keep this in mind when creating teams. 4 is a magic number. 2 people do 50% of the work and the other two do 50% of the work.

I have created many comp plans. I have seen some that work amazingly and if you have done this long enough some that you look back and think what was I thinking. It's nice to have lived long enough to make mistake to learn from. If someone tells you that they haven't either they are lying or their mistakes are coming soon.

Feel free to give me a call if you wish to brainstorm or develop a plan for growth.

Make it a great day!


Answered a year ago

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