Three incentive models for recurring business

Loyal clients are the backbone of every company’s continued success. It’s more cost-effective for sales representatives to work with returning customers rather than generate leads and initiate new transactions. As a result, managers must develop compensation solutions for recurring business to motivate agents to create lasting bonds with their clients.

According to CRN Magazine, there are three primary incentive plans for personnel who work with returning customers. The models encourage different styles of relationship management and selling merchandise. Managers should consider all of their options and decide which strategy is best suited for their corporate culture.

Recurring compensation
One of the most popular compensation solutions is offering incentives for the lifetime of a client’s contract. Sales agents are paid the same commissions every year that customers repeat their purchases. The option motivates employees to develop personal relationships and build trust with their patrons to avoid losing business.

The primary advantage of the plan is that it simplifies incentive compensation management (ICM). Managers know how much their sales representatives will earn each year from their repeat contracts so that new rewards don’t have to be calculated. ICM software can be automated to pay out incentives as soon as agents complete their repeat sales.

One-time incentives
Some vendors only offer compensation for the first year of a customer’s contract to their representatives. Incentives for subsequent years of work aren’t distributed because managers don’t want stagnant annual sales based on relationship management. CRN Magazine reports that managers who use this strategy want to motivate personnel to push new products and services, rather than rely on repeat business.

One-time incentives might be the ideal choice for the sales on-boarding process. The compensation plan encourages new employees to gradually ramp up production and reach the work levels of tenured staffers.

Inflated commissions
Managers can also increase the first-year incentives for sales and then pay the normal rates during subsequent years of the contract. The diminished totals reward employees for relationship management, but also create motivation for selling new goods to their clients. The model helps companies increase sales and avoid stagnant returns.

The news source points out that representatives start the sales with low-end merchandise and then push expensive goods over the lifetime of a client’s contract. The compensation plan ensures that agents who can’t sell new goods can still earn rewards for their production, which is an important aspect of workplace satisfaction.