This is basically a commission for executing a part of the sales process, so the first suggestion is that only appointments that result in closed sales result in a commission (even though the appointment setter doesn’t close it). That will lead to better quality appointments and some accountability for not wasting the time of the “closers.”
As far as how much to pay, it’s probably best to start with the total comp needed to attract the right kind of people into the role, and a reasonable number of appointments they should be able to set (that close) per month. If some portion is being paid as base salary, then take the remaining total comp at target per month and divide by the expected number of total appointments that close, and that’s the rate per appointment. Finally, check affordability – is each appointment worth that amount to the company? If not, the sales model doesn’t work and needs a re-think. If so, you’ve got your answer.
The rate per appointment varies wildly from one industry to the next, based on the maturity of the business, the strength of the brand, access to good target buyer lists, etc. But the fundamentals above will guide the comp designer to the right answer.
I have put in links to a couple of “Sales Comp Answers” below that are not specifically about this exact situation, but that do give more detail about the principles that will guide you here.
Telesales generally comes in two big categories: inbound and outbound. Inbound reps are responding appropriately to the calls that come in, generally triggered by marketing of some kind (ads, promotions, etc.). Outbound reps target prospects and initiate contact themselves.
In general, inbound telesales is one of the lower prominence sales roles, and also generally lower in TCC (Target Cash Compensation) than the outbound rep. So there may be less pay at risk as a percent of total compensation for the inbound rep than for any other member of the sales team (including field roles). And there would also be less upside for over-achievement for these roles. But their base pay level may be higher than that of an outbound telesales rep.
Outbound telesales reps are often one of the highest prominence sales roles, and may even function very close to the level of a field rep with the distinction that they don’t actually visit the customers on-site. Often their plans are relatively aggressive in terms of pay mix (50/50 might be typical, but check on this for your industry), and include some dramatic upside for overperformance. They are usually running shorter sales cycles than the field rep with their total quota made up of a large number of small deals. So they are often paid monthly even when the field rep is paid quarterly.
Outbound renewal-only telesales reps are one more refinement of the above, with responsibility for calling into the existing customer base to secure a renewal for a subscription-type service (e.g., phone service, online data access, SaaS). They may have upsell/cross-sell opportunities as well. For these roles, there is probably a known/expected renewal rate. Ideally their earnings start to be meaningful at some minimum acceptable rate of renewal generation, and go up dramatically if they manage to beat expectations and/or add on services. For example, if 85% of customers renew when prompted, then the performance threshold might be 75% or 80% of customers renewing. And outstanding or “excellence” performance might be set at 90% or 95% of customers renewing. Clearly no more than 100% of customers can renew, resulting in a natural cap if the plan rewards for percent of customers renewing. In order to ensure meaningful earnings throughout the year, this role would most often be paid monthly based on results that month (not cumulatively for year-to-date performance).
Standard direct rep plans, in contrast to the renewal-only telesales plan, would likely have
- More total compensation at target (as field roles generally do, compared to inside roles)
- Wider performance ranges (for example, 50% of quota as the threshold and 150% of quota as excellence performance, or maybe 75% to 125%)
- A core measure (like sales value) augmented by a secondary measure of sale quality (like profitability, new name account, or percent of sales from a strategically important product line).
Practices vary from situation to situation, but these general directional pointers would apply in many businesses with these roles. If you have good ideas to add, please comment below!
In some businesses the job of identifying qualified interested prospects is done by an inside lead generation role. When considering incentive compensation arrangements for these roles, these tips may be helpful:
- Pay only for leads that close, not for all appointments/leads. If you pay for all leads, you’ll likely compromise lead quality and end up wasting the time of your sales people who will have to re-qualify them before investing more time.
- If the Lead Gen person has some ability to know which leads are likely to close as “large” deals/relationships (whatever that means in your world) and which ones could be smaller, then you may want to pay differently based on deal size – less for smaller deals and more for larger ones. If, however, they have little ability to anticipate eventual deal size then you might just pay a flat amount for leads that close.
- How much to pay for each lead goes back to the basics of how much you need to deliver in total comp, how much in the base vs. the incentive, and how many deals (or how much sales value or margin value) you expect to come out of their efforts. Then you do the math to figure out the rates. And if it’s not affordable, then you’ve got a selling model issue (means this may not work for your company).