Should there be a different commission rate on a "new" sale versus a repeat sale for an existing customer?
I am looking for advice on paying commission to independent sales reps. Should there be a different commission rate on a "new" sale versus a repeat sale for an existing customer?
My recommendation is that you have separate teams for new and repeat sales. For new sales you hire the hunter, the hungry salesperson that is motivated by the kill and the idea of fast money. For the account development and future sales you hire a different character, the caregiver, a person that enjoys building relationships and is good at identifying the clients needs as they arise. The first one you pay commission only as they thrive on the hunt and are motivated by money. The second group gets a salary and a small bonus for every repeat sale, They are not motivated by money in the same way as the first group and also you want them to take the time to get to know the client and be willing to spend time listening to their issues and finding solutions. Depending on the product, the average ratio of hunter versus caregiver is usually around 5 hunters = 1 caregiver
As I know so far yes there should be the same rate each tie of transaction , In some cases It can be less if the sale is done very often , But it depends on client s quality , the size of the sale too .
In situations where it is harder to get the first order than repeat orders, a two-tiered commission plan can work. It is a matter of rewarding those who will get new business while allowing those who just want to service existing accounts to survive.
This really depends. If they are servicing that customer and taking care of everything, than it should be the same. If they sell, and its your job to keep the customer happy, then they shouldn't get same price for a renewal. I do 50% in that situation. Hope that made sense?
It really depends on whether you are front loading the commission or not. I agree with Ed that generally having a lower commission on continuing sales is a disincentive but if you have front loaded the commission to account for the additional prospecting time required and then reduced the commission on later sales because the sale person is not required to manage the day to day activities associated with the account but rather gets an annuity from future sales without much or any involvement, then that is a different story.
Yes, this is an agreement I have with my clients currently. I get X% for a new account and am incentivized accordingly and .5x% (or half) for an existing customer. The goal is the incentivize to develop net new business and expand the market, not farm. Also the higher commission reflects a higher level of difficulty for hunting rather than farming.
If you value the sale (as well as the person making it and the person receiving it) I believe that the commission should be the same. Otherwise you are creating a disincentive for the seller (and as a result, the buyer). Building loyalty with good sales people can have far reaching benefits for you, your sales folks and for your clients.