Commission Structures for Online Advertising and Software Sales: A Guide for New Sales Professionals

As a sales professional transitioning into the realms of online advertising and software sales, it's crucial to understand the typical commission structures that govern these industries. Whether you are working with advertising contracts or software licenses, the commission structure can significantly impact your earnings and motivation. This guide will explore common commission structures and provide insights into how these may vary between online advertising and software sales.

Understanding Commission Structures in Online Advertising

The commission structure in online advertising often relies on the contract value achieved. Many companies adopt a tiered commission structure, which means that the percentage of commission varies based on the amount of revenue generated. For example, consider a scenario where a salesperson initially earns a commission on 10 contracts until they hit a certain quota. Once the quota is reached, the salesperson might receive a higher commission on additional contracts, along with a lump sum payment based on the total contract value. This can be summarized as follows:

Example 1:

The salesperson earns a 10% commission on their first 10 contracts (up to a certain quota). For contracts beyond the quota, the salesperson earns a higher commission of 25% on the total contract value. At the moment they hit the quota, they receive a lump sum payment equal to 25% of the value of the contracts.

Example 2:

The salesperson earns a flat commission of 70% on all contracts, as long as the monthly sales target is met.

The commission is often tiered, meaning the better the salesperson performs, the higher the percentage of commission they receive. This structure motivates salespeople to work harder and exceed their quotas, leading to higher earnings and potentially better commission rates.

Commission Structures for Software Sales

When it comes to software sales, the commission structure can vary based on the company, the product, and the industry. For positions like software sales, where basic and advanced licenses are sold, the commission structure is generally more straightforward. Here's an overview of typical commission structures:

Common Structures:

Flat Percentage Commission: Many companies offer a flat percentage of the total sales value. For instance, a commission rate of 20% on all sales. This can make life easier for the salesperson as they don't have to worry about tiered structures. Tiered Commission Structure: Similar to online advertising, some companies use a tiered commission structure. The salesperson might earn a certain percentage on basic licenses and a higher percentage on advanced licenses.

The price range of the products sold can significantly influence the commission structure. If the price range is between $35 and $700, the commission might be slightly higher to account for the higher complexity or value of the sale. For instance, a commission of 35-45% on advanced licenses might be common.

Negotiating New Accounts: Independent Salesperson Commission

If you are an independent salesperson negotiating deals for new accounts without a webpage, the commission can be negotiated based on the value of the contract and the level of service you provide. Here are some considerations:

Accuracy of Price: Since you are negotiating the deal, you may need to offer a slightly higher commission to incentivize the client to sign the contract. For example, a 40% commission on new contracts might be appropriate.

Level of Service: Additional services like technical support, training, implementation, and ongoing support may warrant a higher commission percentage. If these services are crucial, you may need to negotiate a commission as high as 45-50%.

Competitive Pricing: Ensure that your commission structure is competitive and fair. Do market research to understand what other salespeople in the industry are earning. This will help you set a benchmark and ensure that you are fairly compensated for your efforts.

Conclusion

Both online advertising sales and software sales have distinct commission structures that can affect your earnings as a sales professional. In online advertising, tiered commissions are common, while in software sales, both flat and tiered structures are used. As an independent salesperson, you need to negotiate a fair and competitive commission structure based on the value of the contract and the level of service you provide.

Understanding these structures and negotiating effectively will help you succeed in your role and ensure that you are well-compensated for your efforts.