If you're a publisher or ad sales manager, you're no stranger to examining (and re-examining) your ad sales commission structure. And when you ask around, you've probably noticed that every media company seems to do things a bit differently. When it all comes down to it, sharing success is vital here: What ideas can you implement to help make your commission structure a win-win for stakeholders and your reps?
We sat down with Todd Lemke, publisher of Omaha Magazine, to discuss his advertising commission model and why it works.
A Good Ad Sales Commission Starts With Honest Goals
Todd's sales reps start each year with a goal—but they're in control of their own destiny (and paycheck). "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 get an added retroactive 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, at the end of the year, sales reps who fail to meet their expected goal can start the next year in the red. On the upside, reps who exceed their goals are owed more money during the settle-up period.
Second, you must meet your goal to get your retroactive commission bonus. If you think you can sell $2 million in a year, you have to be ready to put your future paychecks on the line to prove it—and show that it's realistic based on past performance, too.
Todd explains, "Like all things in life, judgment day always comes. And we do, you know, 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."
In the case of 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 if you have 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. If they show potential but fail to meet the goal, consider forgiving the negative draw going into the second year. This sets the framework for the next goal.
"Now that [the rep has] the experience here, what do [they] think is a realistic 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 goals 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 up. Boom—year-round focus and increased retention!
Let's Talk Commission Percentages and Ad Traffic Management
Todd will be the first to tell you that he 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 able to reduce his commission rate from 17% by adding an ad traffic manager to his team.
The addition of an ad traffic manager allows his reps to 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."
There's another benefit, too. If a rep decides to leave or change accounts, advertisers have a second point of contact with your business.
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.