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The following video explains two different approaches to compensating salespeople. These two options are essentially, low base salary with a high commission structure versus a high base salary and low commission structure.
A low base salary with a high commission structure for salespeople is ideally suited to those situations where the salesperson is constantly fed with qualified leads from marketing. They work with short sales cycles where customers make immediate decisions on purchases.
These salespeople operate in a large market, have a substantial client list to sell to and are able to call upon a large inventory of finished goods. Their job is to ensure that inventory moves quickly. However, because they operate in a large market with a lot of potential for sales, their compensation structure should be build around a low base and high commission structure.
When it comes to a high base and low commission structure, you are really looking for business development professionals as opposed to strict salespeople. In this case, these sales compensation plans are best suited to long sales cycles, long inventory turns, technical (cost-per-use) sales strategies and a situation where the salesperson has to qualify the leads themselves.
A high base and low commission structure is needed in this type of role because the salesperson is charged with opening up new markets, new territories and new business. They must generate their own leads, and deal with extremely long sales cycles. So, they can't push too hard too early for a customer decision.
