Throughout history, developing a brand new territory to establish a commission’s plan has been a challenging task for the Sales Department of all companies. With the advent of international trade agreements and globalization, the customers have been scattered to remote locations. Those remote sites might be in different cities, states, or countries. Sales representatives have now many different markets to sell their products but cannot be expected to service all remote sites involved with a sale. In order to align all of the disparate reps toward the common goal of closing sales for a single customer, a commission program must be organized that motivates all reps simultaneously.
Split commissions commonly called Territories are the technique that accomplishes that objective. Commission splitting programs, Territories, are not easy to implement. Sales management must have the authority to determine which customers will be involved with commission splits. Minor customers may legitimately be excluded from a split commission program because the cost of implementation exceeds its cost.
Sales management must determine the ratio of the split among the sales representatives. In addition, the sales organization and the finance or accounting department must track all of the sales to customers involved with territories, provide sales data to all applicable reps and pay the reps accordingly.
The territories for commissions can be established in many different ways considering the company´s sales goals, type of products sold, markets and locations. For instance, a company that sells shoes could create the following territories to pay commissions to its sales reps:
- Shoe sales in a determine State.
- Shoe sales in a determine country.
- Shoe sales in a determine zip code.
- Tennis shoes.
- Men shoes.
- Women shoes.
- Basketball shoes.
By combination of both location and product:
- Tennis shoes sales in New York.
- Men shoes sales in UK.
When setting up territories the number of opportunities and revenue potential are important, but not nearly as important as understanding how customers in that market and territory prefer to buy your type of offering. For example, some industries have formal RFP (Request For Proposal) processes; some don’t. You also have to get a good idea of what goes on internally during the buying process. The more you know about how the customers in that territory buy, the better you’ll be able to optimize your marketing and sales approach so that it fits.
For example, if you’re set up to answer RFPs, and the buyer generally makes the real decision prior to writing the RFP, you’ll need to completely rework your skill set so that you get into the opportunity much earlier. Similarly, if you’re all about cold calling and the target industry tends to do all its research online and then contact vendors, you’ll need to set up a support center to field incoming calls.
Commissions are a world full of different strategies, technologies and opportunities for the companies that want to incentive their sales people to get more revenue by increasing their sales volume.
- On April 14, 2015