Designing Sales Incentive Program

When you manage a team of sales reps, your compensation structure determines the type of talent you’ll be able to hire and retain. Not only do you want to attract and retain gifted sales reps, you want to motivate them to do the best job possible. So, are sales bonuses the key to recruiting top sales reps to your company? How should you reward your best-performing employees for landing major clients?

To get the optimal work out of a rep, you should in theory tailor a comp system to that individual.

There are couple of good books on this topic as well such as:

1. The Complete Guide to Sales Force Incentive Compensation: How to Design and Implement Plans That Work
2. Compensating the Sales Force, Third Edition: A Practical Guide to Designing Winning Sales Reward Programs
3. What Your CEO Needs to Know About Sales Compensation: Connecting the Corner Office to the Front Line

There are 5 types of compensation plans as you can see in below:

There are various unit rate plans, such as:

1. Flat commission

2. Ramped Commission

3. Residuals

4. Pool

5. Override

6. Ramped, Progressive and Regressive

7. Ramped with Base Salary

8. Commission with Limit

9. Variable Commission, product rates

10. Variable Commission, value table

11. Variable Commission, Product Points

12. Variable Commission, Profit Variance

1. Hurdles requires sales rep to accomplish measure

2. Multipliers, incentives increase or decrease

13. Link Commission with Hurdle

14. Link Commission with Multiplier

Positive Impact

Negative Impact

14. Key Sales Objectives

KSOs provide a handy framework for sales executives to develop incentive payouts tied to individual performance.

Formula Graph

Sales compensation formula construction is all about mathematics but it not complicated.