Sales Compensation Management

Sales compensation is typically the largest part of cost of sales. A well managed sales compensation leads to well managed sales cost.


Sales Behavior


Sales performance is not only to get good sales numbers. It also has a part to play on the profitability and long-term sustainability as well as brand image of a business.

Following are some of the sales behaviors (refer Sales Process Management for details), which you may want to encourage through your compensation structuring

  • Risk profile of the customer.
  • Sales representation to the customer.
  • Sales closure and fulfillment (from Sales person perspective and not supply chain perspective)
  • Credit period given to the customer. (lesser the better)
  • Sales collections (if sales people are fully OR partly responsible for collections)
  • Quality of customer related information (for example- the accuracy and completion of application forms and supporting documents)
  • Retention of the customer, over a period of time.

Following are the methods OR constructs in the sales compensation, to drive non-sales revenue behaviors.

  • Holding back part of the compensation and release it only once part OR full payment against the sales delivery is received.
  • Have different level of commissions for different number of credit days.
  • Rewards and recognitions for (say) 'Most accurate and comprehensive application form and supporting documents'
  • Commission to sales person for contract renewal (for example- a %age of credit card annual renewal fee OR renewal of maintenance contract for data centre). This kind of compensation may be given to customer service OR customer relationship manager OR supply chain people as well.