Sales compensation management processes differ for every organization. Some companies utilize sophisticated tools and applications to manage their sales compensation plans, while others rely on simple spreadsheets and calculations. Browse this list of sales compensation terms and definitions to get a better understanding of sales compensation management, sales compensation technology and the various ways organizations are compensating their sales staff.
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A sales incentive plan is used to entice and motivate an organization's sales representatives. According to expert Liz Roche, sales representatives are generally quite competitive and are motivated by the perception of "winning." Roche recommends sales incentives be a mix of variable and non-variable compensation and include some rewards that visibly identify "winners."
- Find out if sales incentives can help encourage sales reps to use a new CRM system.
Many organizations are turning to sales compensation automation systems to help them manage their sales compensation plans and improve the productivity of their sales staff. According to research by the Aberdeen Group, many best-in-class companies are automating their sales compensation plans. A sales compensation automation application can reduce the time companies spend answering commission questions and allow the sales force to spend more time selling.
- Visit the sales force automation learning guide to learn more about sales compensation automation systems and SFA software.
Commission forecasting is often found in a sales compensation management system, allowing the sales force to forecast commission earnings based on opportunities in the sales pipeline. According to Gretchen Duhaime of Aberdeen Group, many sales representatives spend time doing "shadow accounting" to try to figure out how much they've earned in any given month. A commission forecasting tool eliminates the need for that practice, keeping the sales reps focused on their leads and selling.
Non-variable compensation is a type of "fixed" compensation, such as salary. Roche recommends using non-variable compensation to motivate and reward customer service representatives, since they are less likely to be competitive and not usually motivated by types of variable compensation, as opposed to sales representatives.
- Get tips for motivating call center agents to up-sell and cross-sell.
Variable compensation is compensation that is not fixed, such as commission, bonuses, prizes, extra time off, etc. According to experts, sales representatives are usually motivated by a mix of non-variable and variable compensation, more so than other employees.
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