4 Types Of Sales Commission Plans (With Examples)
- Total gain
Every product sold has a cost basis which is nothing but the item or service charges to create or supply of that product. The total gain is nothing but the difference between the selling price and the cost basis.
For instance, you are selling a laptop for a company. Every product has a cost which is often referred to as “the floor”. You are selling the laptop for Rs.1,50,000 which has the floor value of Rs.1,00,000. The difference between the prices is the total gain. You are not supposed to sell beyond the floor or else you will lose money.
- Revenue Commission
This is also a common form of commission. Sales agents get a certain percentage of the total income they made by selling the product/service of a company.
If you are making Rs. 3,00,000 revenue by selling the products of a company which provides 8% of the revenue, then your sales commission will be Rs. 24,000.
This kind of commissions is profitable only if you are selling high-value items. Because in revenue-based commission, the sales agent who sells machines or custom jets will get more commission than those who are selling apparels and similar items.
- Placement fee
This type is commonly found in automobile sales, in which a particular amount of the sale is provided for each unit sold. For instance, if you’re paid Rs.15,000 for a sale, then it is considered as the placement fee.
Placement fees are added as extra bonuses in comp plans and intend to improve other commissions earned by sales professionals. The companies with high competition and turn over are tend to provide only placement fee. So, you should do a thorough study before looking for a job in a company which provides only placement fees.
- Revenue Gate
Some commission plans are based on revenue or performance, and they are the most profitable for great achievers. They are also complicated and hard to understand. This kind of model is structured so that the more you sell, the more you earn