As far as how much to pay, it’s probably best to start with the total comp needed to attract the right kind of people into the role, and a reasonable number of appointments they should be able to set (that close) per month. If some portion is being paid as base salary, then take the remaining total comp at target per month and divide by the expected number of total appointments that close, and that’s the rate per appointment. Finally, check affordability – is each appointment worth that amount to the company? If not, the sales model doesn’t work and needs a re-think. If so, you’ve got your answer.

The rate per appointment varies wildly from one industry to the next, based on the maturity of the business, the strength of the brand, access to good target buyer lists, etc. But the fundamentals above will guide the comp designer to the right answer.

I have put in links to a couple of “Sales Comp Answers” below that are not specifically about this exact situation, but that do give more detail about the principles that will guide you here.

In general, inbound telesales is one of the lower prominence sales roles, and also generally lower in TCC (Target Cash Compensation) than the outbound rep. So there may be less pay at risk as a percent of total compensation for the inbound rep than for any other member of the sales team (including field roles). And there would also be less upside for over-achievement for these roles. But their base pay level may be higher than that of an outbound telesales rep.

Outbound telesales reps are often one of the highest prominence sales roles, and may even function very close to the level of a field rep with the distinction that they don’t actually visit the customers on-site. Often their plans are relatively aggressive in terms of pay mix (50/50 might be typical, but check on this for your industry), and include some dramatic upside for overperformance. They are usually running shorter sales cycles than the field rep with their total quota made up of a large number of small deals. So they are often paid monthly even when the field rep is paid quarterly.

Outbound renewal-only telesales reps are one more refinement of the above, with responsibility for calling into the existing customer base to secure a renewal for a subscription-type service (e.g., phone service, online data access, SaaS). They may have upsell/cross-sell opportunities as well. For these roles, there is probably a known/expected renewal rate. Ideally their earnings start to be meaningful at some minimum acceptable rate of renewal generation, and go up dramatically if they manage to beat expectations and/or add on services. For example, if 85% of customers renew when prompted, then the performance threshold might be 75% or 80% of customers renewing. And outstanding or “excellence” performance might be set at 90% or 95% of customers renewing. Clearly no more than 100% of customers can renew, resulting in a natural cap if the plan rewards for percent of customers renewing. In order to ensure meaningful earnings throughout the year, this role would most often be paid monthly based on results that month (not cumulatively for year-to-date performance).

Standard direct rep plans, in contrast to the renewal-only telesales plan, would likely have

• More total compensation at target (as field roles generally do, compared to inside roles)
• Wider performance ranges (for example, 50% of quota as the threshold and 150% of quota as excellence performance, or maybe 75% to 125%)
• A core measure (like sales value) augmented by a secondary measure of sale quality (like profitability, new name account, or percent of sales from a strategically important product line).

Practices vary from situation to situation, but these general directional pointers would apply in many businesses with these roles. If you have good ideas to add, please comment below!

1. Pay only for leads that close, not for all appointments/leads. If you pay for all leads, you’ll likely compromise lead quality and end up wasting the time of your sales people who will have to re-qualify them before investing more time.
2. If the Lead Gen person has some ability to know which leads are likely to close as “large” deals/relationships (whatever that means in your world) and which ones could be smaller, then you may want to pay differently based on deal size – less for smaller deals and more for larger ones. If, however, they have little ability to anticipate eventual deal size then you might just pay a flat amount for leads that close.
3. How much to pay for each lead goes back to the basics of how much you need to deliver in total comp, how much in the base vs. the incentive, and how many deals (or how much sales value or margin value) you expect to come out of their efforts. Then you do the math to figure out the rates. And if it’s not affordable, then you’ve got a selling model issue (means this may not work for your company).

Once you’ve established the pay level and pay mix, you’ll need to decide what to measure for the variable portion. Most often this is either the sales value of closed deals, or the margin value of the deals, though other measures are more appropriate in some businesses.

The mechanics of how the performance is linked to pay can be as simple as a straight commission rate (e.g., 3% of sales), or can accelerate as productivity increases, and even possibly decelerate at high levels of attainment. There can be multiple measures, a bonus for quota attainment, etc. As the business matures, the plans typically become a bit more complex to reflect the needs of the business.

The basic principles of plan design apply here as well, but this should provide a few tips to get started.

Any tips for putting together an incentive plan for “inside sales” employees? We are trying to get our employees into a “value-added selling” frame of mind (instead of price-point) and want to provide an incentive.

Answer

What type of inside sales are they doing? Do they qualify for the 7i exemption or are they non exempt employee? These questions must be answered because, if they are non-exempt, any incentive earned must be included in their hourly rate. If they are exempt, it would make it much easier to implement an incentive with less administrative costs. Assuming you conclude they are either exempt, or that the administrative burden if they aren’t is “worth it,” then here are a few tips for designing their incentive plans.

Tips for Inside Sales Plans

1. Incentives are a great way to support an initiative to change behavior, but the rest of the initiative needs to be in place as well. This may include training, systems enhancements, coaching and mentoring, etc.
2. If you really want to use incentives to motivate and excite, they need “carrots and sticks” to be part of them. Over time you will want to migrate base salaries down as a percent of target total compensation so that the target incentive must be earned in order for the employees to maintain market-competitive pay.
3. The amount of pay at risk depends a great deal on the nature of their inside sales roles. Although it can be more complex than this, one simple division is between jobs that are primarily “inbound” and those that involve more aggressive “outbound” calling. If an inside seller mostly reacts to requests from customers and is primarily doing an order management function (perhaps with some ability to cross-sell or up-sell), then a relatively smaller percent of pay at risk (in the incentive) is appropriate. For outbound inside sales people who more strongly influence a prospect’s decision to buy through their own creativity and initiative, more pay at risk (and more associated upside) would be a good idea.
4. Beyond this, the basic principles of role-based incentive design apply, including the following.

Basic principles for role-based plan design success

1. Pick measures that are linked directly to income generation for the company (e.g., revenue, units sold, margin) rather than activity level (e.g., number of calls)
2. Pick as few measures as possible to cover the primary accountabilities of the role. One or two would be a good number for a newly-instituted plan. Three might be OK. More than three would have to be well-justified as it dilutes both the message communicated by the incentive plan and the payout value of accomplishing any of them.
3. Design the plans with sales leadership’s involvement so that they introduce them with a message like, “Here are our new incentive plans. We are thrilled to share them with you because we believe they will significantly increase both your income and that of the company. Let me show you how . . .”
4. Provide great materials to communicate the plans — since the reason you’re doing it is to motivate and excite your inside sales people.
5. As soon as you have an idea of what the final design may be, start planning for accurate and timely administration of the plans and great reporting. You risk losing much of the motivational value if employees don’t see a frequent and easily understood connection between their results and their earnings.

What type of inside sales are they doing?

Do they qualify for the 7i exemption or are they non exempt employee?

These questions must be answered because, if they are non-exempt, any incentive earned must be included in their hourly rate. If they are exempt, it would make it much easier to implement an incentive with less administrative costs. Assuming you conclude they are either exempt, or that the administrative burden if they aren’t is “worth it,” then here are a few tips for designing their incentive plans:

1. Incentives are a great way to support an initiative to change behavior, but the rest of the initiative needs to be in place as well. This may include training, systems enhancements, coaching and mentoring, etc.
2. If you really want to use incentives to motivate and excite, then you need “carrots and sticks” to be part of them. Over time you will want to migrate base salaries down as a percent of target total compensation so that the target incentive must be earned in order for the employees to maintain market-competitive pay.
3. The amount of pay at risk depends a great deal on the nature of their inside sales roles. Although it can be more complex than this, one simple division is between jobs that are primarily “inbound” and those that involve more aggressive “outbound” calling. If an inside seller mostly reacts to requests from customers and is primarily doing an order management function (perhaps with some ability to cross-sell or up-sell), then a relatively smaller percent of pay at risk (in the incentive) is appropriate. For outbound inside sales people who more strongly influence a prospect’s decision to buy through their own creativity and initiative, more pay at risk (and more associated upside) would be a good idea.