Currently, many distributors evaluate salespeople based on results rather than process, making sales volume the sole criterion for assessing salespeople. With sales, salespeople earn more; without sales, they earn less or even leave. The reality is that veteran salespeople do not work but earn high salaries, while new salespeople work hard but receive meager pay. The direct consequence is that the sales force becomes speculative, lazy, and corrupt. Especially when distributors use a commission model as the basis for assessment and compensation, salespeople's performance is such that they open stores in the early stage, but once sales stabilize, they become complacent, satisfied with the status quo, and no longer committed to working for growth and sustainable development. Being able to perform general maintenance is considered a good veteran salesperson, or even "being in Cao camp but thinking of Han," selling other products part-time.
The base salary plus commission compensation model is adopted by most distributors. This model enlarges the "pie," which helps increase pressure on salespeople and prompts them to achieve minimum targets. However, this model positions the mission and responsibility of salespeople as "selling volume," which is only a compensation model that guarantees quantity but not quality, staying at the level of "just sell it out," without managing or assessing the work process and quality. A temporary situation does not equal long-term success. When more salespeople find that tasks are impossible to complete or there are more competitive opportunities, they will leave.
Factors to Consider in Compensation Design
Distributors need to consider the following two factors when setting compensation:
Competitive compensation system design models for salespeople in the industry. "How can the canal be so clear? Because there is living water from the source." Recruiting from the talent market is the main source of a company's sales personnel. At this time, if the distributor's compensation system design is not competitive, you may need to seek balance for salespeople from other aspects (such as brand, strength, development space, etc.). For example, Manager Qu from Inner Mongolia set a compensation structure of basic salary + commission + lunch, with a base salary of 400 yuan, lower than other distributors. But his product profit is higher than other agents, meaning higher commission: he gives salespeople 1 yuan per box, 0.3 yuan higher than other distributors.
The distributor's own development stage. If the distributor's company is just starting out, many aspects are not standardized, and the management span is small, then at this time, what is often needed are "hardworking" salespeople, so it is advisable to adopt a commission system because the distributor does not have enough personnel and management models for detailed management.
If the company has developed to a certain stage, the market is stable, and it is time to seek benefits from management, the drawbacks of the commission system, such as "turning veteran salespeople into lazybones," are prone to appear. Then a growth-based compensation model is needed, mainly including sales task assessment and comprehensive evaluation. The sales task assessment system assigns work indicators to salespeople by time and extracts wages according to completion rate. Salesperson compensation = actual completed sales / target task sales × benchmark wage, which can also be optimized to: Salesperson compensation = actual completed sales / target task sales × benchmark wage × adjustment coefficient. This can effectively decompose company goals downward, fully distributing tasks and pressure to each salesperson, setting goals and assessing salespeople according to local conditions. This requires the distributor to have an accurate understanding and mastery of the regional market and products for which the salesperson is responsible, and to plan key target markets so that salespeople can be used to their full potential.
The comprehensive evaluation system is a method that assesses both results and process. The amount of a salesperson's compensation depends on the quality of the work process and the final result. The distributor gives a benchmark wage indicator, and the salesperson obtains compensation based on the score: Compensation = benchmark wage indicator × salesperson score / 100. Distributors can set various assessment items, such as sales volume, completion of terminal work, etc. These items can be adjusted and selected according to the company's overall goals, but the process must be assessed and linked to compensation. This process requires monitoring and evaluation personnel such as market supervisors, and at the same time, it is necessary to do a good job in evaluating and designing compensation for the monitoring and evaluation personnel to ensure the evaluation process is objective and fair. On the one hand, it evaluates the salesperson's sales performance; on the other hand, it can promptly correct the salesperson's work problems. It is a compensation system of process management.
How They Pay Wages
Adhering to the principle of "practical and effective," we have selected several useful compensation setting methods from the market, hoping to provide some reference for distributor friends:
Manager Xiong from Jiangxi adopts a base salary plus commission system, but different commission rates (from 1% to 10%) are applied based on product sales volume and profit levels, rewarding diligence and punishing laziness. For personnel who have been with the company for more than half a year, if the commission does not reach a certain proportion, they are dismissed, maintaining a certain turnover of the above personnel to keep the company's vitality eternal.
Manager Yuan from Jiangsu adopts a "installment payment" form. Manager Yuan promises salespeople 1,000 yuan per month, but actually pays 800 yuan, and the remaining 200 yuan each month is made up at the end of the year; for regular commissions, they are given once every six months, which maintains the stability of salespeople to a certain extent.
Manager Chen from Hebei mainly uses "fuzzy bonuses." His compensation structure is base salary + commission + bonus. Although the base salary is public, bonuses and benefits are vague. At the same time, Chen has everyone select the best promoter and salesperson every week and month, and distributes different amounts of bonuses.
Manager Feng from Anhui is a county-level distributor. He introduced that in the county-level market, the level of salespeople is generally not high. Generally, capable people do not take you seriously, and those with low ability leave. Therefore, Manager Feng values experienced salespeople. Anyone who can work in his company for 3 years will receive a bonus of 3,000 to 4,000 yuan. On the one hand, it helps motivate other sales personnel; on the other hand, it helps retain experienced sales personnel.
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