As you examine (and re-examine) your ad sales commission structure, you're probably wondering how you can create a win-win policy for both stakeholders and reps. While there's no universal best answer here, it pays to replicate what works.
Todd Lemke, publisher of Omaha Magazine, has a sales commission structure that is driving constant growth. We sat down with him to discuss his current strategy and how other publishers can follow suit.
A Good Ad Sales Commission Starts With Honest Goals
Todd's sales reps start each year with a goal. From there, they're in control of their own destiny. "In a nutshell, what we do is have people come up with what they believe they can sell," says Todd. "Once we have that goal, we divide it by 24 pay periods. We pay twice a month and we give them the good faith...that they're going to hit their goal."
Essentially, this means that sales reps are guaranteed regular paychecks throughout the entire year. If reps meet their goals, they receive an added retroactive yearly one-and-a-half percent bonus on top of every dollar sold and collected.
By now, you might be wondering if there are guardrails on this process. The answer is YES! First, the overarching commission structure here is a "draw against commission." This essentially means that sales reps who fail to meet their expected goal will start their next year in the red. On the upside, reps who exceed their goals are owed additional pay during the settle-up period.
Second, reps must meet their goals to collect retroactive commission bonuses. If a rep thinks they can sell $2 million in a calendar year, they have to be ready to put their future paychecks on the line to prove it. For loftier goals, they must also show that it's realistic based on past performance.
Todd explains, "Like all things in life, judgment day always comes. And we do have to settle the books at some point. If you've got someone who isn't settling it at all, that's when you have to go in there and have some serious discussions."
During peak COVID, for example, Todd adjusted goals on a quarterly basis instead of once per year to keep his reps on track through the thick of the crisis.
Setting Goals for Rookie Ad Sales Reps
Setting a sales goal is easy when a rep has a track record of success. In contrast, new hires present a bigger challenge. Todd's quick and dirty advice is to set a realistic draw against commission goal without giving them accounts to start with.
If a newer hire shows potential but fails to meet their goal, consider forgiving the negative draw going into the second year. This sets the framework for their next goal.
"Pay on Paid" Keeps The Ad Sales Commissions Flowing
Ad sales reps at Omaha Magazine don't get their bonuses until they collect the ad dollars (pay on paid). This is the big reason why Todd pays his commissions in February. The sales goals tied to commissions apply from January 1st through December 31st each year. However, his team must collect sold ad revenue (and any past due revenue) by February 15 for the sales to count.
Sales managers see benefit from this ad sales commission structure, too. Employee turnover often occurs at the end of a calendar year. But reps won't jump ship if they get their payout in February. Furthermore, the overlap between goal years keeps numbers strong year-round.
Let's Talk Commission Percentages and Ad Traffic Management
Todd pays a higher commission than many publishers. At 15%, he's nearly double some of the higher revenue players in the publishing space. However, he was recently able to reduce his commission rate from 17% by hiring an ad traffic manager.
The addition of an ad traffic manager means his reps take a slightly lower commission in exchange for more time devoted to sales. "Having an ad traffic manager does a couple things. One is the sales rep can do what we call 'highest and best use,' which is prospect. [They can] get in front of a customer in today's world that can be phoned, Zoomed, or met in person."
Another benefit of hiring an ad traffic manager? If a rep decides to leave or change accounts, advertisers have a second point of contact with your sales team.
Good Ad Sales Commission Structures Benefit Everybody Involved
Todd created his commission structure with the intent to keep his sales reps honest with what they can accomplish. This makes it easier to forecast his ad revenue. And, because the commission is pay on paid, it's all based on collected revenue.
In return, Todd's reps get a steady year-round paycheck without sweating bullets during a down week or even month. And, when they exceed expectations, they receive a killer reward for a job well done.