Sales Commission Strategies: Digital Innovations Can Benefit All Media Companies

Fragmentation in the media industry makes advertising sales more of a street fight every day Television and radio executives must find ways not just to motivate their sales forces but to make sure they are motivated in a focused and productive way all while keeping costs in line This is a delicate balancing act indeedThe Media Financial Management Association MFM sponsored an August 8 Webinar entitled Digital Sales Compensation What Media Companies Need to Know to Incentivize Sellers and Grow Revenues Led by two executives from Marketron Dustin Wilson Senior Director of Digital Strategy and Jeff Ulrich Director of Sales Enablement Services the session raised provocative questions and offered choices that are relevant to all media companies ranging from those well down the digital path to those just getting startedDeveloping a Commission StructureA threshold issue is developing the proper commission structure the primary alternatives being straight commission or a hybrid of base plus commission The digital environment is dramatically different from the traditional spot sales environment according to Wilson and Ulrich It is significantly more competitive lends itself to multiple tactics has a higher cost of goods and requires a much higher degree of seller sophistication In short digital needs to be learned it is a totally new service suite for traditional sales professionals Surprisingly in general digital sellers prefer a full commission structureOnce the full commissionsalary commission decision has been made a deeper dive into the commission mechanics is necessary There is no quotindustry standardquot and the mechanics should be tailored to a business39 situation looking at variables such as market size location and the availability of talent Options include calculating commissions on gross revenues net revenues per tactic eg display geofencing OTT and video Consistent with a quotfeed your eagles starve your turkey39squot philosophy commission structures can also be tiered providing more generous rates above certain revenue thresholdsEach mechanism has its pros and cons Commissioning on net revenues bolsters the profitability of the company but can be more complex to calculate and less attractive to sales staff creating a disincentive to offer lower margin products Digital display ads may yield a gross margin of 70 whereas video and other more expensive products may be less than 50 Commission on gross sales is easy to calculate and creates an incentive to offer the best solution to clients regardless of margin but may also depress overall profitability Commission by tactic which can be gross or net can incentivize the team to offer a more sophisticated and effective suite of components to an advertising campaign however this approach can also be very cumbersome and sellers may gravitate to the higher commission productsVarious ad hoc features can also be built into the commission structure For example the commission rate can be increased for renewals which incentivizes long term relationships Or conversely rates can be higher at the beginning to encourage sellers to build a robust client portfolio As a station strives to build its digital business an incentive can also be developed to compensate sales personnel for hitting targets for new digital ordersFailing to get the commission structure right doesn39t just jeopardize topline revenues it is also expensive According to data cited by Wilson and Ulrich turnover among sales professionals is 35 much higher than other roles The cost of a new hire is almost 4500 and the allin cost of turnover can range from 50 to 200 of annual salary Marketron has developed a Digital Sales Commission and Margin Calculator to help companies manage the multitude of variables that go into building the revenue and cost variablesDuring the webinar a question arose as to the pros and cons of having separate sales forces for digital and linear products Interestingly Ulrich encouraged a hard look at integrating the functions for each salesperson Paradoxically allowing each member of the team to sell both linear and digital products builds both productive collaboration and healthy competition Moreover the downside can be severe if the dedicated digital salesperson turns over and developing a sales force of generalists reduces this risk Another innovation involves providing nonmonetary compensation like additional sales and research support to top performersSales organizations operate in a challenging and dynamic environment that is without precedent Fortunately the digital sector has matured to a point where it offers innovations and ideas to media companies of all stripes so they can more reliably chart their futuresJohn Sanders is a principal with the financial and valuation consulting firm Bond ampamp Pecaro IncClick the social buttons to share this story with colleagues and friendsThe opinions expressed here are the author39s views and do not necessarily represent the views of MediaVillageorgMyersBizNet

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