Sales commissions can powerfully motivate your team, but when structured incorrectly, they can undermine your profitability. At SalesNow, we’ve seen many businesses focus exclusively on revenue-based incentives without considering how commission structures affect the bottom line.
The Problem with Revenue-Only Commissions
When commission plans reward sales representatives solely for closing deals without considering margins:
- Sales reps offer excessive discounts to secure deals
- Teams pursue high-volume but low-margin opportunities
- Product mix skews toward less profitable offerings
- Overall margins erode despite revenue growth
This misalignment creates a situation where sales activities increase while profitability declines.
Finding the Balance: Growth and Margin Protection
Creating effective commission structures requires balancing multiple objectives. SalesNow’s CRM system helps design and implement commission plans that incentivize both revenue growth and margin protection:
- Track Deal Profitability
Our sales database monitors not just revenue but also the profitability of each deal. When reps see the margin impact of their pricing decisions within the CRM software, they make choices that benefit both their commissions and company profitability. - Implement Tiered Commission Structures
The SalesNow sales tracker enables businesses to create commission structures that reward higher-margin deals with increased rates. This encourages your team to pursue the right kind of business. - Monitor Product Mix
Our product database integration helps track which products each representative sells. This allows you to incentivize the sale of higher-margin offerings through targeted commission bonuses.
Using CRM to Align Sales Incentives with Business Goals
SalesNow’s CRM tools provide the visibility and tracking capabilities needed to:
• Design commission structures based on actual profitability data
• Monitor how commissions affect margins in real time
• Adjust incentives quickly as market conditions change
• Give sales representatives visibility into their performance
When teams log meeting details in SalesNow, managers gain insights into how different commission approaches influence selling behaviors and affect the bottom line.
Practical Approaches to Profit-Focused Commissions
Consider these strategies that balance revenue growth with profitability:
- Gross Margin Commission Models
Structure commissions as a percentage of the gross margin rather than total revenue. This aligns sales incentives with profitability goals and discourages excessive discounting. - Tiered Approaches Based on Margin Thresholds
Implement increasing commission rates as deals achieve higher margin thresholds. SalesNow’s sales pipeline tools make tracking these structures straightforward. - Product Mix Incentives
Offer enhanced commissions for selling strategic high-margin products. Your CRM system can automatically calculate these specialized incentives. - Client Retention Bonuses
Include retention metrics in your commission calculations to encourage ongoing relationship management, recognizing that maintaining existing clients is often more profitable than acquiring new ones.
Implementing Changes Effectively
Making changes to commission structures requires careful planning. SalesNow’s workflow automation tools help you:
• Model the impact of commission changes before implementation
• Communicate new structures clearly to your sales team
• Track performance during transition periods
Our CRM business analyst experts can help you design commission structures that work for your specific business needs.
The Bottom Line
Effective commission structures don’t force you to choose between motivating your sales team and maintaining profitability. With SalesNow’s customer relationship management (CRM) platform, you gain the visibility and tools needed to implement commission structures that drive revenue while protecting your margins.
SalesNow’s comprehensive CRM systems help businesses optimize their sales pipeline and improve profitability. Our platform supports both enterprise sales teams and inside sales organizations with tools that align sales activities with business objectives.
From mobile CRM solutions—including CRM for iPad and Android CRM—to comprehensive business management software, SalesNow delivers the capabilities needed to build profit-conscious sales organizations.
Contact us today to learn how SalesNow can help you implement commission structures that motivate your team while protecting your bottom line.