Nothing motivates manufacturer reps better than a great commission compensation package. There are multiple strategies for rewarding independent sales rep commission. Motivate you sales reps for sales results with generous independent sales rep commission compensation plans.
Independent sales rep commission compensation strategies
A commission only sales position is one of the most ideal approaches to pay manufacturer sales reps. The best strategy for commission compensation is a straight rate of the total sales price. There are a couple of diverse approaches to handle this and most manufacturer sales reps have a tendency to favor a straight rate focused around the total sales.
Commission Compensation on a fixed Cost or Profit Margins:
Independent sales rep commission compensation for manufacturer sales reps can be based on a fixed cost. Another alternative is for a manufacturer to offer a commission rate based on a percentage of the total of profit margins.
Independent Status of Manufacturer Reps:
Independent manufacturer reps are independent, self directing and they do not work directly for the manufacturer. Their goal is to meet the needs of their clients and close a sale. The commission based independent manufacturer sales rep is not paid unless a sale closes. Be sure to give the rep the proper tools to close sales and generate income through a strategic independent sales rep commission compensation plan.
The profit margins for the buyer and the manufacturer sales rep needs to be rewarding.
Providing a wholesale price or purchase price standard allows for the manufacturer’s sales rep to sell at any price above. As a result, this provides the sales rep negotiating power to close the sale. The manufacturer rep is not going to cut his or her commission unless that is what is needed to close the sale. However, no sale equals no commission.
There are multiple considerations that will impact independent sales rep commission and they include:
- How much client administration does the manufacturer sales reps need to give to their clients?
- Is it is a onetime sale or is there a residual component (reorders) without routine follow up?
- Is the sale a long time closing process? (Consuming the time of the manufacturer’s sales rep.)
- Is there a competitive product that would close faster and easier?
- Existing product demand?
- Competitor’s commission package?
Offering an independent sales rep commission bonus for obtaining and building new business accounts:
As a rule, the front end expenses of obtaining new clients can be reasonably high for the manufacturer. As a result, reward with higher commissions offered for initial efforts and for utilizing their professional relationships in establishing new customer accounts. Therefore, a higher commission structure for the initial sale may be extremely motivating for manufacturer reps. A tier level compensation is when the Commission percentage drops for continued reorders of that customer while the high reward is for initiating a new account. Furthermore, many organizations offer a tier level commission structure scheduled based on a time line, such as the first 90 days and reducing thereafter.
Rewarding commission compensation:
The bottom line is structuring a commission compensation package that motivates independent reps to promote YOUR product over another product. As an organization seeking to get your products into the market, your goal needs to focus on rewarding the reps on the front line who are introducing your products and closing sales. In conclusion, compensating commission reps is not about the actual commission percentage but about a rewarding independent sales rep commission compensation package overall.