I've started working for a restructuring firm and I'm currently in an engagement where I need to redesign the compensation plan for a distributor where customers often place repeat orders for the same items monthly. My background is in capital equipment sales where there are no consumable items, so I'm looking for a little guidance.

This firm currently pays a flat % of gross margin commission allowing for reps to become order takers and live quite comfortably while the business desperately needs new customers and new product lines sold to existing customers.

My initial thoughts are to provide a 1.5x multiplier for the first year of new customers or new business to existing customers, while lowering rates for existing business over time to a point where they become house accounts.

I'm looking for any advice or examples of plans that provide incentive to drive new business. Here's an email address if any of you could provide a sample - please scrub any identifying info.

Any advice is appreciated.

cajunalumTD@gmail.com

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Posted by PlanoPrivateer

Frisco, TX

Member since Jan 2004

2796 posts

Posted on 2/17/15 at 12:31 pm to CajunAlum Tiger Fan

As you mentioned, it is not uncommon to offer a higher commission on new business brought in by the sales person or new product lines sold into existing customers for the first time. The amount and timeframe of the additional commission depends on your margin and how much it would take to get the attention of your sales people. Also, could be different amounts for different products.

Another technique I've seen is simply add a new salesperson and take some accounts from the existing sales people. Tell the old sales person you are giving the account to the new salesperson because you feel that the account wasn't being handled properly. The sales staff will get the message.

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Posted by CajunAlum Tiger Fan

The Great State of Louisiana

Member since Jan 2008

7878 posts

Posted on 2/17/15 at 2:01 pm to PlanoPrivateer

quote:
Another technique I've seen is simply add a new salesperson and take some accounts from the existing sales people. Tell the old sales person you are giving the account to the new salesperson because you feel that the account wasn't being handled properly. The sales staff will get the message.

That's one situation I face. The most tenured rep has been handed accounts each time a rep leaves. He has 90‰ of the active customers and has become lazy while new hungry reps come and go because it takes a while to gain traction. Your suggestion is in the works.

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