What is Inside Sales – Ultimate guide to the sales compensation plan

 22 Jun, 2018

1. Introduction

A good and effective compensation plan needs to accomplish quite a lot of time.

It should provide fair compensation to all the inside sales representatives who are in a customer-facing role.

It needs to provide incentivized behavior and specific action that suits the need of both the inside sales representative and the customers. 

So in this blog, we are going to work on what is inside sales, inside sales vs outside sales and discuss the importance of sales compensation plan, sales compensation plan examples and how to create one for your own.

2. What is Inside Sales?

Inside sales is a dominant sales model for inside sales representative where sales are managed remotely. It also involves high-touch transactions through emails or phones. It generally requires well-trained and qualified marketers to complete the job. The job description inside sales is that they should have good communication techniques, this is possible for inside sales representative to give presentations, demos, and perform popular marketing functions too.

During the last few years, we have experienced a massive migration to the inside sales model where most of the Companies are planning to move towards the inside sales model. The model explains how to dominate the internet market space and how sales will continue to evolve over the next few years.

History of Inside Sales – How it became popular?

Selling products remotely is nothing new but telemarketing is common worldwide for decades. But the difference is that telemarketing is usually scripted and focused on selling low budget items only. This is a door dies situation where a deal is either lost or gained quickly and reps move to next lead.

On the other hand, the inside sales model is focused on selling high-ticket items that involve high touch and are most prevalent in the B2B landscape. The inside sales model is represented by skilled and knowledgeable reps and telemarketing can be performed by anyone with little training and experience. Also, inside sales representatives usually get attractive salary packages as compared to the telemarketers or other marketing professionals.

Evolution of Inside Sales – How it helps businesses in getting successful?

There are two major reasons for the evolution of inside sales and how it helped businesses in getting successful 

  • Firstly, the model is growing immensely because when people are busy closing deals during office hours only. The inside sales representative can work anytime anywhere where deal closure is possible through mobile devices and after office hours too.
  • Secondly, inside sales have much to do with advances in technology that helps in generating more leads, more deals closure, or smarter conversations, etc.

2.1 Inside Sales vs Outside Sales 

Here are the few advantages of an inside sales model that are enjoyed over the outside sales model.

  • Highly cost-effective – This is a cost-effective model that reduces the project costs up to six times when compared to the outside sales model. Also, it can generate more leads, improve decision-making capacity, and connect more reps during a single day.
  • Appreciated by the customers – Most people wanted to buy remotely instead of in-person meetings. This is the reason why it is so popular as compared to other sales models.
  • Encouraging collaboration – To close more deals, there should be effective communication among team members, sales reps, managers, and marketers, etc. Within the inside sales model, all these things are managed automatically and can be leveraged in real-time for superior collaboration.
  • Boosting Productivity – Every year plenty of sales acceleration tools are released into the market to boost sales and productivity. Within the inside sales model, the objective can be achieved by utilizing a variety of sales tools and maximize conversion rates too.

3. What is the sales compensation plan?

A sales compensation plan is a strategy that many businesses use to pay their sales representative and drive their performance in a way that will help their business to become more profitable. There are different aspects of the sales compensation plan which include base salaries, benefits, and incentives.

Below are some sales compensation plan examples, let’s see:

3.1 Inside Sales Compensation Plan Examples

Common Sales compensation factors

More than 50 percent of larger IT Companies are planning to increase their revenues in 2020 through the inside sales model. But hiring just inside sales reps does not complete your job, you have to decide on the right compensation plan. The example is the biggest craving path to success.

The compensation plan makes the actual difference in increasing sales of an organization. Obviously, the question is repeatedly asked by the Companies about the right compensation plan example. Here, we will discuss the top five inside sales compensation plan examples and their benefits so that you can quickly decide which plan will work best for your organization.

3.2.  Common Sales compensation factors

Generating a perfect compensation plan always demands to deal with plenty of challenges –

  • Set quotas accurately – More than 80 percent of the Companies rely on quota-based compensation plans where setting the right quotas is the primary requirement. If quotas would be aggressive then it may lead to a lack of motivation. To set the quotas accurately, you need to forecast sales wisely with the right data analytics.
  • Weighting compensation plans Inside sales representative salary should always be the right combination of base salary and bonus. The base inside sales representative salary should be defined nicely so that representatives can feel a sense of security. At the same time, the bonus should be defined in such a way that it could motivate the employees to give their best shot.
  • Satisfactory inside sales representative salary – Any inside sales representative with a proven track record of success is high in-demand. So, you need to pay competitive salaries to retain the best resources as per the latest market trends. Do proper research and decide the pay accordingly to deal with seasoned reps. In the case of less seasoned, the salary scale could be less as compared to skilled marketing experts. Here, the structure of compensation is the major factor that affects your Company sales directly.

3. 3.  Outbound Sales compensation plan example

Outbound Sales compensation plan example

Outbound sales reps are responsible for lead generation and maximize conversions. They don’t close the deals actually but hand it over to account executives. They are usually freshers who passed out recently and don’t demand higher salaries. Here, are the tips on how to structure salary plans for outbound sales reps.

  • Simpler compensation plan – For the beginners, keep the salary structure simple and divide it into three sections only – base, bonus, and kicker. The Base is the fixed amount that is unaffected by the performance. The Bonus amount is variable depending on the performance of reps. The Kicker is the additional amount that is tied to deal closure or any other special requirement.
  • Base vs bonus – The Base is the fixed value that comprises 70 percent of total salary and the rest 30 percent is the bonus amount.
  • Bonus calculation – The bonus calculation depends on Company rules and it varies from Company to Company. This is an important part of the salary that motivates employees and encourages them to give their best shot.

3.4. Inbound Sales compensation plan example

Inbound sales reps generally follow the people who have shown interest in your products, downloaded content, or fill out the registration forms, etc.

  • Compensation plan – Here, also the compensation plan should be simpler as an outbound sales compensation plan. It should be divided into two parts only i.e. Bonus and Base value. Mark up 60 to 80 percent salary as the base amount and rest is marked up as a bonus amount. Like outbound sales reps, inbound marketing experts are freshers in their career or they have minimum experience in marketing activities. The salary packages can be kept lower here.
  • Bonus Calculation – Mark 70 percent of the bonus amount with accepted opportunities where account executives can help you in qualifying the deals. 20 percent of the amount can be tied to deals closure and 10 percent is tied to hitting SLAs. All these things should be clearly defined in the salary structure of inbound sales reps.

3.5.  Account executive Compensation plan Example

AEs are the inside sales reps whose tasks are associated with deal closures. The major difference in the AE compensation plan from the inbound and outbound sales compensation plan is the commission. As per the basic compensation rule, for the AE salary, 50 percent would be the base amount and 50 percent would be the bonus. Let us see how salary structure should be defined for account executives inside sales reps.

  • Bonus threshold – This is a great opportunity to motivate your employees and covers Company costs too. It implies that AE would not be paid any bonus until they will not reach a certain percentage of quota. For example, in the case of ABC Company, AE needs to hit 80 percent of quota before claiming for the bonus.
  • Commission criteria – Company should never put a cap on commission in case of AE compensation plan. Why should any AE be punished if he hits 200 percent of quota.
  • Increase quota gradually – There is no professional who can hit the sky in the first attempt only. So, you should keep ramping quota as AE starts performing better with the passage of time. It could be 2000 Rs for the first three months then it can be increased to 4000 Rs for the next 3 months and so on.

3.6.  SaaS Reps compensation plan Example

SaaS Founder suggested an innovative compensation plan consisting of a high quota, base salary, and commission that equates to 8 to 11 percent ACV. However, there were some problems associated with the plan –

  • Incentives were not attractive that lead to poor retention.
  • The low commission was not inspiring the reps to stay connected with customers and Companies were not able to lead a customer-centric organization.
  • Medium performers were making good enough but extraordinary marketers were earning only optimum.

As a result, revenues fall dramatically and there was an immediate need for a new compensation plan with a competitive base salary, double bonus, and flexible commission scheme, etc.

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4. Final Words

By opting for any of the sales compensation plans as discussed above, you may convert the opportunities into revenues for your business. The beauty of these plans is that inside sales representatives get motivated and perform their level best to optimize Company sales. Most importantly, resources would never get wasted and you can enjoy the maximum benefits by keeping your sales reps energetic and motivated all the time.

I hope you got every detail about what is inside sale, sale compensation plan example, the difference between inside sale vs outbound sales

If you are currently retaining sales reps that you actually want to keep? Let us know in the comments below.

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