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Base Salary Range Minimum $67,200 Bonus Matrix Paid as a percent of target incentive = $36,000 Midpoint $84,000 Maximum $100,800
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Price Realization (% to Quota)
Figure 6-22 (Continued)
TLFeBOOK
Formula Construction
Summary
The math is simple Income producers get a percent of what they sell Determine the preferred cost of sales and make that the commission rate For sales representatives, determine what you want sales personnel to earn and how much volume they should produce, then simply divide pay by performance to get the payout rate
TLFeBOOK
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TLFeBOOK
Support Programs: Territories, Quotas, and Crediting
Sales compensation programs function in concert with the following support programs: territory configuration, quota management, and sales crediting Each of these mission-critical support programs performs an important sales management role Collectively, sales compensation and these support programs form the backbone of the sales performance management system Sales management needs to continually define, monitor, and revise these support programs to serve the company s evolving sales strategy The success of the sales compensation program rests with the effectiveness of these interdependent programs Consequently, when redesigning the sales compensation program, sales management must also review and revise these support programs Briefly, each of these support programs can affect the sales compensation program including scope of responsibilities, performance commitment, and achievement measurement in the following manner:
Territory configuration: Territory configuration defines sales territories scope of responsibilities The territory configuration policies provide rules for account assignment and reassignment Quota management: Quotas define performance expectations performance commitment Quota management encompasses two activities: quota allocation and quota adjustments Sales crediting: Sales crediting defines sales success achievement measurement Sales crediting specifies to whom and when individuals earn sales credit for compensation purposes
The material that follows examines territory, quota, and sales crediting practices for sales representatives, but not for income producers While some of these concepts do apply to income producers, they
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TLFeBOOK
Seven
have a more limited application So, our focus is on sales representatives those who can earn and exceed a target incentive for sales performance
Territory Configuration
Sales management assigns accounts to territories for sales coverage purposes The best performing sales organizations structure territories with homogeneous buyer populations making it easier for sales personnel to identify customer needs, deliver sales messages, and guide customer decision-making Because sales personnel receive incentive compensation payments for territory sales performance, we will examine how initial territory configuration and account reassignment practices affect sales compensation effectiveness We will begin with a review of the most prevalent territory typesThen we will examine practices for making account changes mid-year, an area that needs watchful governance
Configuring Effective Sales Territories
The art of configuring effective sales territories requires superior interpretation of company business strategy, rigorous analytical investigation, and studied judgment about customer needsThe objective of effective territory design is clear: create sales territories with the best return on sales investment dollars This means optimizing dozens of trade-offs to arrive at the optimal territory design so that profitable revenue production is high and sales costs are low Some sales organizations invest substantial resources in gathering market information and performance yield data to construct advanced analytical-based territory optimization models Others find the variables so complex or resources so limited; they make their best guesstimate of the right territories and then make real-time adjustments as performance unfolds Finally, others maintain historical territories as a rational approach if business conditions remain unchanged, but this is a risky position when sales conditions are changing For sales representative jobs, sales management attempts to provide balanced (equally challenging) territories by using different job titles In this manner, sales management seeks to configure territories of
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