Why a Target-Based Compensation Plan is Ideal for the Promotional Products Industry — commonsku Blog

Why a Target-Based Compensation Plan is Ideal for the Promotional Products Industry  — commonsku Blog

Resources for the Promotional Products Industry
Why a Target-Based Compensation Plan is Ideal for the Promotional Products Industry
In this new series on sales compensation, we’re sharing the trends that are changing the way the promotional products industry compensates their salespeople and their selling teams. In a series of interviews with leading distributors, we’re unpacking unique ideas that are bucking conventional methods and rebuilding a unique comp model that inspires growth. Join us as we share through this series a guide for inspiring sales growth through creative comp!
Most distributors grow by osmosis: Land a client, nurture that client very, very well, and tend to its every call, email, and demand until, gradually, by an almost unconscious process, revenues increase. 
Growth by osmosis is not a targeted strategy as much as it is a nurturing instinct. Which is not bad except, it puts all the growth opportunity with that client solely in the hands of the customer with no driving influence from you.
But imagine for a moment if you could combine both: your team’s amazing ability to solve, source, and sell to your clients through high-touch, consultative service, as a result of a strategic, targeted growth plan.
When it comes to sales planning, we often conflate wishes with plans. We wish: “Next year, I want to grow my base by 20%” which soon becomes —oddly— a generic target we share publicly “our growth target is 20%.”  
But transforming a wish into a goal without a plan is a covert-op wish, a deep fake virtual cocktail of positive thinking and hope. 
The irony is, that while our industry often sets arbitrary goals through wishful thinking, we are incredibly fortunate to be in a business that allows us to actually create targets and hit them (or exceed them). And if we can set, hit, and exceed targets, then we can build compensation structures that inspire goal-exceeding, because comp –for most of your team– should be uniquely tied to growth.
What’s more ironic is that the industry’s longtime gold standard of compensation (the straight-commission model) didn’t lend itself well to sales targets, it created instead, a world of us vs. them (salesperson vs. house). For years, the promo industry embraced this commission-only model, and traditionally, the industry employed a 60/40 split or a 50/50 split (50% of the gross profit going to the sales rep, 50% to the house). But times have changed ( as we highlighted in our previous post ). The commission-only structure is a decades-old model that no longer fits the progressive way clients are served nor the stability demands of a younger workforce. Yes, some reps are grandfathered into this model and function just fine, there’s no need to abandon it as long as it works for the rep, the house, and the team.
But a target-based approach to your sales planning and compensation structure is ideal for our industry. In fact, it’s so ideal, that it’s worth reengineering even those grandfathered structures into a catalyst plan for growth. 
When Deloitte, the accounting powerhouse, compared various comp structures and their effectiveness, I found it curious how long we (as an industry) clung to a straight-commission structure. Deloitte contrasted a commission-based plan vs a target-based plan, and through its pros and cons showed that —for our industry— a target-based compensation plan is the most effective. 
Why? Here are four reasons a target-based growth plan is ideal:
A focus on retained sales and account penetration
Most of your business growth comes from existing clients (and the 80/20 rule is alive and well in our industry). And 84% of B2B new business is acquired by referral. So, a continual focus on sales retention plus penetration into each of your existing accounts is the most effective (fastest) way to grow. A commission-based plan often rewards transactional sales and short-term growth; a target-based plan rewards retention because you must build upon a foundation of sales to increase. And ultimately, a growing client is a happy client, which results in more referrals. 
2. Multiple marketings / broad product line
Our industry is not a simple selling model. And despite our sales occurring through transactions, it is not a transactional model, it is now very much a consultative model. And “broad product line”? Try over 1 million products now in the industry. Mind-boggling. You don’t need me to tell you: that you learn something new every day. A new product category, a new imprinting process, a demand from a client you’ve never fielded before. A target-based approach to growth keeps your salesteam from becoming one-trick ponies (selling only caps or selling only apparel, or selling for tradeshow giveaways) and forces your team to think and sell widely into existing accounts.
3. Team Sales Driven Growth
Today, you likely have at least one project that’s open in your book of business that involves more than just the salesperson. It might be a kitting project, a shop you’re building for a customer, or, you might be involved in a rebranding for a client. Regardless, it is no longer just you involved. Team-selling is now the norm. In fact, in a recent conversation with Caleb Gilbertson, founding partner of imprint engine who is in mega-fast growth mode, he shared how they recently reorganized their teams into pods . And according to Deloitte, a team-driven sales approach, with multiple resources involved and what they call “seller plus overlay” is optimum for target-based sales. Why? A successful client relationship entails everyone pulling together. With teamwork comes increased momentum. When everyone is bonused or rewarded for growing a client, everyone contributes to the sale. 
4. Longer / more complex sales cycle
Hello, kitting. Prior to the pandemic, the bulk of a distributors projects involved simple, one-location drop-ships and quick-turn orders. Now, complex orders cross your threshold all the time. It’s no longer an anomaly, it’s the norm. And as our friend Danny Rosin says, “good salespeople love complexity.” Complexity adds value to your service. Complexity makes the client depend on your expertise. Complexity (should) command higher margins and deeper client connections. Yes, it’s still relatively easy to close a quick sale to that long-time client and have that rush order turned around in 72 hours, but on average, orders are both increasing in size and complexity. The good news? Complexity creates higher retention value. 
5. Target-Based + Commissions + Bonus
Many salespeople who have been in the industry for some time are grandfathered into straight commission models. And it works for them largely because they have a foundational base of ongoing client revenue. 
A target-based comp plan does not exclude commissions, but the difference is that a target-based plan becomes the activator, the leverage. The driving force for growth comes from a strategic plan that rewards sales increases through commissions and bonuses for hitting or exceeding growth goals, rather than commission structures and percentages as solely fixed denominators default, regardless of growth.  
In our next post, we’ll share some creative ways distributors and other B2B businesses are compensating salespeople and teams but as you begin to turn your mind to Q4, you’ll start to think about your 2023 strategy. What should drift to the top of your list is creating client-by-client growth goals with compensation plans that reward sales growth and become a catalyst for your entire organization. Stay tuned!
For other posts in this series, check out:

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