The View from 30 Feet
Analysis of the Sales Management Process
by Troy Nix
Click image to view Internal Commission Rates.
Business gurus often talk about the view from 30,000 feet – the big picture that provides a look at overall operations. Perhaps, however, the focus should be on the view from 30 feet – a close-up of specific processes and procedures that make an impact now.
The MAPP organization recently conducted and published the 2013 Sales and Management Study for the plastics processing industry. A total of 116 manufacturing executives participated in the survey process in order to gain a better insight into current sales management benchmarks, some of which have never been documented.
The top three most prevalent markets served by the survey participants included the automotive, medical and communications sectors, with 63 percent identifying themselves as custom manufacturers, six percent as proprietary and 31 percent as both custom and proprietary. A total of 89 percent of the participants represented companies below $50M in annual sales.
MAPPs study demonstrated that companies utilize a variety of sales tactics, and over half of this studys respondents use both inside and outside sales representatives. However, the study also revealed that over 20 percent of the companies under $5.0M in annual sales utilize the company owner or president as the sales arm. (Note: Less than one percent of companies over $5.0M in sales assign the primary sales responsibility to the company owner or president.) This statistic indicates that more company leaders understand that functioning as part-time sales executives is ineffective and that a dedicated, full-time sales force is a solid strategy for diversifying and growing sales.
The majority, or nearly 71 percent, of the survey participants pay commissions based on sales price, while one in eight utilize a formula to subtract purchased components, raw material and other items from the selling price to establish the amount upon which commission is based. Companies reported that the median internal commission rate for obtaining new business from current customers was 2.00 percent and for obtaining new business from new customers was 2.25 percent.
Over the last 18 months, 76.5 percent of the survey respondents have frozen commission rates, while slightly over 13 percent have elected to raise commission rates. However, not all companies utilize a sales commission structure as nearly half of the respondents (47.47 percent) use a base salary plan plus a bonus structure to compensate their internal sales managers.