November/December 2005
Cheat Sheet: Sales compensation plans
How to develop compensation plans, set sales goals and measure the effectiveness of your team
By Linda C. Chandler

Pros and cons of different sales compensation plans
Straight commission.
Pro: Since the salesperson doesn’t make money unless the show makes money, they have a strong incentive to do well. Best for competitive personalities and for outsourced sales.
Con: If sales aren’t going well, salesperson is less likely to have loyalty to your organization and may just quit. Also, it takes emphasis away from service and puts it totally on the bottom line. Minimum expectations for customer service or customer retention should be a part of goals.

Tiered commissions. This sets benchmarks and rewards successive levels. For example, the rate may be 3 percent up to $250,000, 5 percent from $250,000 to $500,000, and 6 percent for anything above $500,000.
Pro: This sets minimum expectations, while increasing rewards for higher sales.
Con: It can quickly get complicated if you try to throw in other benchmarks such as incentives for new business, sponsorship sales or upgrades.

Straight salary.
Pro: Ensures security for the salesperson, provided minimum goals are met. A great system for associations that want to stress service to their membership over a hard sell approach. Also offers some stability to sales reps on new shows.
Con: Does nothing to provide incentives for high productivity. Takes out part of the sales “game” of meeting goals, which many salespeople find motivating when that little extra push is needed to make it over the top. 

Salary plus bonus.
Pro: Combines benefits of salary with the incentive of a bonus based on the financial success of the show or total revenues from sponsorships or advertising. It’s easy to build in incentives that reflect not only revenue goals, but also service goals.
Con: Still affords a comfort level even when things aren’t going well.

Base plus commission. A lower base salary with commissions for sales — whether tiered on not.
Pro: Ensures some security for staff selling new shows or taking on traditionally less productive categories or territories, while providing motivation to produce higher sales.
Con: Unless set up with service goals in mind, it can become easy to focus only on making the next deal.
 
How to measure sales effectiveness
Yes, selling is all about money, but here are some additional ways to help gauge success and for which you can recognize sales staff:

• Retention rates. Many companies are focusing on keeping the clients they have in declining markets. Retention reveals the appropriateness of the “fit” of the original sale. Service and relationships are key.
• Up-sale rates. How many existing clients are increasing their booth size or advertising schedules or have made additional buys such as sponsorships?
• New clients. Encourage your sales team to explore potential new market segments and reward selling to them.
• Market share. If the industry pie is growing and your piece of it’s shrinking, you have a problem. If the reverse is true, you’ve got something to celebrate!
• Activity reports. Set contact goals and track the number of calls, proposals or new prospects. Share these with each team member to help identify areas that may need more attention.
• Accomplishing short-term goals. Recognizing short-term and long-term goals ensures management that things are on track and gives salespeople incremental motivation throughout the sales cycle.
• Customer service and satisfaction. Do you get complaints from a sales rep’s clients about slow responses or other issues? Are orders late or are there often extensions, exceptions or emergencies to deal with?

Setting sales goals
Since commissions and bonuses are often determined by whether certain goals were met, setting reasonable yet challenging goals should involve more than guesswork. Here are some tips on how to set sales goals.
• Look at your show’s historical trends. Review your revenue growth, as well as your competitors and the industry’s as a whole. Is it reasonable, for example to expect sales to grow 10 percent if your industry has been through massive changes and one-fourth of the companies that once exhibited have merged with other exhibitors? Or, is 10 percent growth too low if there are enough healthy exhibitors in your universe to easily grow the exhibitor base by 20 percent?
• Goals are not always a one-size-fits-all proposition. You may want to consider different goals depending on the experience level of the sales rep, the territory or industry sector they’re assigned to and the level of competition they’re likely to face.
• Get buy-in from the sales team. Ask for their input. Have them help gather the market research you’ll use to set their goals.
• Respond to market changes. Set up periodic reviews of sales goals. Markets change, and if goals become too unrealistic as the year goes on, sales staff may feel they’re impossible to meet and become demoralized.

Sources
Jodi Ashcraft, American Psychological Association, (202) 336-5565, www.apa.org
Dan Cole, Consumer Electronics Association, (703) 907-7987, www.cesweb.org
Shannon Forrester, International Quality and Productivity Center, (212) 885-2700, www.iqpc.com
Chris Jacobson, Cal Events, (877) Cal-Events, www.calevents.com
Kevin McCourt, Newspaper Association of America, (703) 902-1643, www.naa.org
Mitch Mohanna, Mohanna & Associates Inc., (972) 596-8777, www.mohanna.com
Phil Robinson, George Little Management, (914) 421-3200, www.glmshows.com