7 Trends That Are Changing Sales Compensation Models in the Promotional Products Industry

In this new series on sales compensation, we’re going to talk about the trends changing the way the promotional products industry incentivizes salespeople. We’ll explore creative alternative comp plans used by some of the leading distributors and alternative ideas that are reshaping how to drive sales growth. Join us as we share through this series a guide for inspiring sales growth through comp!

(5 min read)

Sales compensation is, shockingly, not just about numbers.

It’s about three often-used but vital words: values, culture, and engagement.And as repetitive as those words are, there’s no better way to sum up the net effect of a business that excels on behalf of its two most important constituents: clients and employees.

Aligning compensation with values, culture, and engagement leads to growth. Companies with a great employee experience outperform the S&P 500 by 122%.

The opposite experience? Turnover.

The annual turnover rate among US salespeople is twice the rate of the overall labor force, and the yearly tenure of a sales rep recently dropped from 2.5 years to 1.5 years.A compensation structure directly reflects values, culture, engagement, and highly impacts retention. And this might surprise you (it did me):

Simply tweaking your compensation model can lead to growth.

According to a study by McKinsey, “adjusting the mix of commissions, quotas, salaries, and bonuses for the salesforce … has been found to have a 50% higher impact on sales than changes in advertising investments.”

Repeating that stat for the back row: Changing your sales comp model can have a 50% higher impact on your sales than changing your marketing strategy!

In addition to driving sales growth, changing your comp model means adjusting to modern times.

As you read this series, we’re going to assume a few things: first, this ain’t your first [compensation] rodeo. You’ve tried a few things, some worked; some didn’t. But you’re open to considering new ideas. And there’s a second audience reading this who might not have changed anything about their comp plans in the past several years, and they know it’s a problem. The world has changed, but your comp plans have stayed the same. This series is for you too. Before we get into some ideas on how people are now compensating their salesforce, we must understand why it’s important that your sales comp plans change.

Here are 7 trends reshaping comp models in the promotional products industry.

1. The straight commission structure no longer works. That model was built for another era, a Willy Loman, Fuller Brush era. And if you even know those two names, you’ve likely experienced a straight commission plan. (For our full breakdown on why the 50/50 split no longer works, click here). But it’s not just our opinion. According to ASI’s Distributor Sales Compensation Survey, straight-commission plans as a valid comp structure keep dwindling, and though it was once the dominant compensation method in the industry, it “now only accounts for slightly more than a third of all industry sales rep pay.” Yes, it’s still effective for some, but it’s largely a plan that’s exiting stage left as another generation enters stage right ….

2. Gen Z: You might not know it, but you’re building your business for this generation. Gen Z is 30% of the population, and in a few years, they constitute 27% of the workforce which means they will increasingly take over a larger percentage of your sales roles (and buyer roles) with each passing year. What do they demand? Flexibility. Values (80% of Gen Zers seek employer alignment with their values). Growth opportunities, learning, engagement (76% of millennials want more opportunities to learn and practice new skills). And down the list? Compensation. It’s not that they expect little comp (they demand a lot actually), it’s just how they prioritize and evaluate their employment. Suffice it to say, your future sales force is now or will largely be millennials and Gen Zers who require an investment in them up front to earn their loyalty (ie, salary+, which we’ll cover in another post).

3. Our industry’s high learning curve keeps getting higher. More products enter the market each year, more processes for imprinting and packaging pop up every week, more supply chain challenges, more focus on sustainability expertise, more demand to create a return-on-experience for clients, and more requirements to be a solution seller in a fast-paced environment. While the tenure of salespeople keeps dropping, the learning curve in promo keeps growing. If the average sales rep churns in 1.5 years, they’ve really just begun to learn the industry. Worst of all: the cost of replacing an employee is, on average, 16-20% of their annual salary, and for promo, probably much higher due to the learning curve.

4. Team selling is now the norm. It’s no longer your lone wolf salesperson who finds the client, lands the client, and grows the client. Now, everyone on the team grows a client to its full potential. Why? Because clients now interact with more than just one person throughout their lifetime with your brand. Today, they can even work with more than one person in your org on a single project. So, if team selling is now the norm, shouldn’t the team reap part of the benefit (ie, compensation)? In the past, sales structures were heavily weighted to an individual, now, more and more distributors are incentivizing the entire team to help grow the client and join in on the reward.

5. Complexity: Promotional product projects have changed, they’ve become far more complex. And complexity requires a different sales structure than a simple logo drop on an order of mugs. Multi-touch projects like kitting now require a team approach to solving problems on behalf of clients. Shops, though easier than ever before to create, can sometimes involve more people in the process. And it’s not just what we sell but who we sell to that makes it complex. Even buyers are more complex now than in years past. Salespeople face multiple buyers within a company and multiple decision makers per project. Yes, we still live in a world of fast-turn projects, but the complexity for everyone has grown exponentially. Complex selling cycles call for a different approach for comp than transactional selling.

6. Clients demand strategy, solutions, and service. B2B companies with the fastest rates of revenue growth approach customers with a consultative mindset, and the best sales reps now orient their playbook around solution, strategy, and service. Yes, we still sell a product, but what we really provide is a creative solution to a problem through the vehicle of a product. It’s a strategic selling process finalized through a transaction. Of the top 3 skills B2B sellers need to develop, the one most pertinent to our industry is solution selling which, defined by McKinsey, is: strong product knowledge + solution design + account-planning skills. Straight-commission models are built for easy, transactional selling; consultative selling and account planning requires a more sophisticated mindset and long-range planning.

7. Consultative and creative selling means longer sales cycles. Sales cycles are not short in our industry, they are long. Yes, they are short by order, you can turn around a custom order quickly in this business, but the sales cycle is long by client. First, it takes a while to land a good client, second, it takes time, months, and sometimes even years to grow a client to full fruition. Longer sales cycles require a reframing of comp plans that both reward sales growth monthly or quarter (as you grow) as well as rewards for annual growth too.

Market shifts are dictating changes in how we serve the client and how we sell the client, which requires both a reorg of our team structures and a reevaluation of compensation plans. Moreover, cost of living and inflation force us to rethink our pay structures because employee well-being includes financial well-being.

One encouraging note: Changing comp plans can be an intimating experience. You might worry, “What if my team doesn’t like it? What if we’re wrong? What if we de-incentivize through these changes.” Ask anyone who has managed a sales team and tweaked comp structures, and they will tell you that you can change comp plans, in fact, you can change them and change them again. Meaning, you’ll likely iterate on your comp structure until you come up with the right plan for you and your team but don’t let fear keep you from trying.

Doug J. Chung teaches Sales and Management Strategy at Harvard Business school, and from a massive research project about sales comp, he wrote an article in Harvard Business Review titled, “How to Really Motivate Salespeople.” In it, Chung encourages us with these final words of advice:

“I urge my client companies to consider experimenting with their pay systems. Over the past decade, managers have become attuned to the value of experimentation (A/B testing, in particular); today many consumer goods companies experiment constantly to try to optimize pricing. There are important lessons to be learned from doing controlled experiments on sales reps’ pay, because the behaviors encouraged by changes in incentives can exert a large influence on a firm’s revenue.”

Don’t let the intimidation of making changes to your comp plan keep you from growing because if changing your comp structure can impact your sales growth 50% more than changing your advertising, then it’s well worth your time to reconsider a compensation structure where everyone wins.

Join us for our next installments in this series as we share some of the creative ways distributors are reorganizing their comp structures to amp their sales!