By Editor Morten B. Reitoft 

I have worked in sales most of my life, and I actually like all the disciplines from cold-canvas to project-sales, to managing other salespeople, and all the things in between. One of the ever-recurring discussions with salespeople is the compensation plan.

There are many different ways to do it, but there is always only one to pay the bill - and that's the customer. 

Let's take a look at some of the most common plans.The easiest one is to have a fixed salary, no bonus, no commission, no nothing except the salary. The salary can, of course, include expenses for cars, hotels, travel, phone, computers, etc. Some salespeople like this model, since they know what they get and they may find the job so exciting that a bonus or commission wouldn't make any big difference. 

One of the most used compensation plans for salespeople is most likely a combination of a fixed salary and a commission. Typically the fixed salary is a bit lower compared to the first model, but then the salesperson has the incentive to compensate for that. Here, however, the first problems often appear. The commission. What is it based on? Some printing companies, and also some vendors, set their commission as a percentage of the sales price. That is, of course, the easy way to motivate, but you have to ask yourself who does it serve best? I believe that it serves your customers best because the salesperson has an incentive to sell rather than focusing on profits! So the worst-case scenario is a lower sales price than possible.

To avoid above, you could have a compensation plan where again a fixed salary is combined with a commission; however, this time based on the profit. If you buy and sell things, this is also pretty easy to do, but if you produce, it becomes hell. Let's say your pre-calculations comes out with a gross margin of 30%, but then the production makes an error reducing the gross margin to 3%. Then what? Even more complex it becomes when the printing company or the vendor have a lower than anticipated utilisation of the machines and therefore end up with gross margins on all their products lower.

All of us in sales know about these problems, and in times where demand is decreasing, it's not as easy as it sounds since most people, of course, depends on some level of continuity in their income.

When I used to work for Xerox almost 15 years ago, I even ran into an even bigger problem. At that time (maybe still the same), Xerox operated with an office team, and a PSG team - essentially targeting two different markets. However, when I was working for Xerox, they sold a machine that was sold in both segments. One with a professional, Fiery rip, and one with a built-in Fiery rip. A customer wouldn't be able to see the immediate difference, except for the size of the invoice. Mostly the relationship between our two teams was good, but since leads, pipeline, etc., was on a public board in the office, both teams could see what was in work. I lost a sales of 14 printers to an office salesperson - he needed the commission, the sales, and the customer wouldn't know the difference of the two printers before some time after - and the salesperson didn't care. The competition is therefore not only between companies and vendors, but also dramatically between different teams within a company.

This, I believe, leads to an unhealthy situation for at least two reasons. One is, of course, how unpleasant it is to fight with colleagues inside your own company, but even worse is that the customer may end up with the wrong product? If you depend on your sales month after month, which most people do, you may end up in the grey-zone of what's acceptable. You can end up in a situation where dinners, wine, gifts, and promises to your customer may look like bribery. If the customer, i.e. have toner-based equipment, but he is now looking into inkjet. Will he get the proper professional advises from the person who sold him the toner-based equipment, and who may be allowed not to sell the inkjet devices at all?

We believe this is something that could be interesting to look into. Over the next weeks, we will write articles and interview various people in the industry, whether this is a sought- or real problem.

If you are salesperson, a printer, a vendor who would like to participate with us in this discussion, please feel free to reach out to editor Morten Reitoft.