I’m a huge proponent of implementing an effective compensation plan as part of your sales program. A well-designed compensation plan can make the difference between a mediocre sales team and one that excels. When sales people put in the energy and enthusiasm they need to connect with their guests and to generate higher sales, they should be compensated for those efforts. Below are some best practices that I have identified over the years that are helpful in setting up an effective commission structure:
Don’t give away the farm. You should be paying your team 3% and 5% of the incremental revenue they have generated. By doing so, they have a stake in their own success…and yours. For example, if your general admission is priced at $39.95 per adult and your annual pass is priced at $79.95 per adult, your incremental revenue would be the difference between the two–$40. At a 5% commission rate, you might pay them $2 per unit sold.
Set thresholds. You don’t want to pay commission on products that you were already selling and in which your seller’s efforts did not generate the sale. To ensure that you are only paying commission on incremental revenue and not on sales that would have been generated regardless of your team’s sales efforts, you can set thresholds:
Pay per unit sold. For example, if a seller sells 20 annual passes on a given day and the average number of annual passes normally sold is 10, then everything above and beyond the initial 10 units sold should be paid to them as commission.
Pay by percentage sold. Continuing the annual pass example, if you know that your annual pass sales average around 10% of total sales, you could pay on a threshold scale for ranges hit above the baseline percentage. Here’s how that might work:
It’s important in this model to also establish a minimum number of GA sales to quality. You could require your sellers, for example, to process a minimum of 40 admission sales (inclusive of the annual passes sold) to qualify.
Pay it out regularly. It’s important that the commission makes it onto the sellers next paycheck. It’s a simple matter of positive reinforcement. Just like when you are working to improve a child’s behavior, positive rewards for actions must be timely. A delay of more than a week or two can make commission less effective.
Have a great week!
“The best move you can make in negotiation is to think of an incentive the other person hasn’t even thought of – and then meet it.”
— Eli Broad