Sales commissions are an important method of aligning an employee's incentives with those of the firm. By making pay contingent on performance, a manager can increase the rate of individuals acting in ways
that are beneficial for the company as a whole, as opposed to acting in their own interest at the expense of the organization.
Frequently, if companies use performance-based sales incentives at all, they tend to use revenue as the unit of measurement. While using revenue may be better than no incentive at all, there can remain a substantial disconnect between revenue and the goals of the firm: profit dollars.
In this white paper, we discuss the use of deal points to align sales compensation to the profit goals of the firm. Deal points are a simply-calculated method of sales incentive that closely aligns sales commissions with profits, both those of individual deals and the company as a whole.
In the right industries, deal points are a much more effective method of sales compensation than those based on various revenue and product mix measurements. Successful use of deal points results in the closest alignment of sales and company goals, encouraging the right behaviors and selling patterns to make both individuals and organizations succeed together.
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