Digital sales compensation is a primary concern and topic of conversation for every media company. No matter how mature your digital sales strategy is or your success, compensation and commission for sellers are pivotal to recruitment, retention and revenue growth.
With so many models to use, many sales managers feel overwhelmed and unsure how to incentivize sellers while ensuring healthy margins. The world of digital sales commissions is much different than linear and O&O (owned and operated) inventory, yet it needs to work in concert with your linear commission strategy. It’s complex.
In this guide, we’ve put together information, data and insights to help you navigate digital sales compensation.
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Commission on Gross Sales
Sellers receive a commission based on the gross value of the total sale.
- Calculations are easy.
- It encourages solution selling vs. margin selling.
- Gross doesn’t account for retail costs, so the revenue for the station could be less.
- Leadership may discourage it to protect margins.
Commission on Net Sales
Sellers receive a commission based on the net value of the total sale.
- Net accounts for the retail costs of executing digital ads, so it’s less likely to impact margins.
- It’s the most popular model, so sellers are familiar with it.
- Sellers may be dissatisfied with the lower amount.
- Calculations are more complex.
- It may discourage sellers from selling low-margin tactics.
Commission Per Tactic (Gross or Net)
Each tactic they sell (e.g., display, video, geofencing, OTT, etc.) has a different weight for commission.
- It can incentivize sellers to add more tactics to a proposal, which can positively impact campaign performance and advertiser satisfaction.
- Margins are consistently fair across tactics.
- Sellers may only recommend the tactics with the highest commission rather than what will help an advertiser meet their goal.
- It’s complicated to calculate and track.
Sellers must deliver a certain number of digital orders or new business to increase their commissions. This may reset annually.
- It’s a good motivator for new salespeople to include digital in all proposals.
- A concerted focus can ensure you hit target numbers.
- There are more fluctuations in payouts, which could impact cash flow.
- It may be a short-term incentive.
Ad Hoc Commission
This option mixes different models.
- Paying higher commissions at the beginning to incentivize and account for extra work sellers must do to build a book of business
- Raising commissions after an “introductory” period
- Increased commissions on renewals
- Higher commission rates on new business
- It can align with where the organization is in its digital maturity.
- Ad hoc can help sellers give equal value to new and existing business.
- It’s hard to manage and scale.
- Some sellers may fall off in production after moving to a lower tier of commissions.
Reviewing these pros and cons is a good starting point for choosing a compensation model. What other factors should you consider?
Selecting a Compensation Model: What to Consider
When weighing your options, these are questions to answer.
In the beginning, it makes sense to pay higher commissions to incentivize. Once digital becomes a reliable revenue, you should reassess. You may also consider an introductory period for new salespeople.
If they are digital novices, they will need training, education and possibly greater incentives. For more seasoned sellers, their commissions should align with the value they bring as a result of their knowledge. To retain high performers, you’ll need to be competitive while balancing the need to grow revenue.
Your commission structure should align with the expected revenue you’re budgeting for. This alignment must involve seller feedback on goals and what’s reasonable. If the numbers are too high compared to previous years or what your local market can produce, sellers may feel it’s unrealistic to hit these, which can lead to disengagement and churn. On the other hand, if it’s too small, the incentives may not be enough motivation, resulting in missed revenue.
If sellers don’t have support for ordering and executing digital ads, they must do more work. Thus, you may motivate them with larger commissions. As you build out your operations with technology, they’ll have fewer burdens, and that’s a time to reconsider percentages.
Getting feedback from your sales team should influence your decision. Making them part of the discussion shows you want to keep them motivated and happy. After all, compensation has much to do with recruitment and retention.