Ecommerce Compensation

One of my first sales jobs was selling copiers and printers for one of the big players. Every quarter they would release a new sales program to entice the sales team to sell new products; from a couple of extra percentages towards commission to company dollars that could be used for a wide variety of items at the company store. In conjunction with the programs release, we would receive a report that listed all of the used inventory available around the country. Despite their best efforts to intrigue the sales team with the new product programs, the used inventory carried a higher commission rate and was a surefire way to line your pocket. Every quarter, I would put my plan together for how much I wanted to make and almost always, the used equipment path was my quickest way to get there. Despite sales targets associated with new equipment, I would zero in on how I could be the most financially successful.

Often, we find ourselves in conversation with leadership determining how to structure sales compensation through ecommerce that benefits both their sales team and their profit. This can get complicated but creating a strategy that fosters a symbiotic relationship can be approached in a variety of ways. I have had the opportunity to learn from a handful of customers on their approach to ecommerce commissions and this what I have learned:  

Compensate your sales team for 100% of ecommerce sales (as if they placed the order with the salesperson)  

Pro’s:

  • Sales teams will be motivated to promote the use of your ecommerce channel and they will be freed to chase new accounts instead of spending their time as order-takers
  • Tracking commissions will be simple

Con’s:

  • Potentially less profit than a reduced or variable compensation rate 
  • Less ability to gauge the ROI of the ecommerce site 

Weight ecommerce sales differently than direct sales 

Pro’s:

  • Allows variability of ecommerce compensation (e.g. 100% of sales within a territory, 50% for sales in a nearby, uncovered territory, etc.)
  • Business can retain more profit by avoiding overcompensating sales reps

Con’s:

  • More work for finance to sort out commissions
  • The weighted commissions could lead to sales department targeting the opportunities that create more commission 

Incentivize reps for customers that setup ecommerce accounts and first sale (this could be an extension of another plan and not a mutually exclusive approach)

Pro’s:

  • Adoption of ecommerce will increase
  • Business will see increased profit from ecommerce

Con’s:

  • After initial adoption, not highly motivating for sales team
  • Potential for reduced long-term usage of the ecommerce site

Assign commissions to product lines specifically for ecommerce sales. Products that need to be replaced and require repeat purchases would be a great example (I.e. - Parts)

Pro’s:

  • Businesses can target product lines that would generate more profit
  • Sales reps can focus on higher dollar opportunities

Con’s:

  • As the business changes, product lines change as do revenue streams
  • This will require additional reporting and reviews to ensure success as new product lines are added/removed (i.e. – a lot of communication with sales leadership)

Unfortunately, after a few years at the printer/copier company, I was let go. I often wondered if my approach, prioritizing selling used, led to me not making the cut. Financially, I had done quite well but my numbers for new products were often short. How could I apply what I learned from my experience in that world and apply it to the business challenges an ecommerce company faces? Building a sales compensation strategy is essential for any business. Creating a sales compensation strategy that incorporates an ecommerce channel is critical. Architecting a commission structure for ecommerce can be approached in many ways; the most valuable step you can take to safeguard success is involving leadership across all departments. Sales teams are a key component to the success of your ecommerce channel; properly motivated and your sales team and ecommerce will flourish.

 

Jared Hackbart

Director of Sales

About

Jared Hackbart

Jared is passionate about providing clients with the right tools and applications to help their business grow.  Drawing from his experiences at Canon Solutions of America & Ken Cook Co. with manufacturing companies, Jared provides solid solutions and guidance to Brilliance's clients on a daily basis.

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