Sales Compensation Glossary

CRM stands for Customer Relationship Management. It refers to a set of practices, strategies, and technologies that companies use to manage and analyze customer interactions and data throughout the customer lifecycle, with the goal of improving customer satisfaction and retention, as well as driving sales growth. CRM systems typically include tools for managing customer data, tracking customer interactions and communication, automating sales and marketing processes, and analyzing customer behavior and preferences to better target sales and marketing efforts.

The monetary spending limit or restriction is known as the cap. In sales, it is the most money an employee may earn in a certain period.

Capped commissions are a form of compensation structure that limits an employee's or salesperson's earnings to a maximum amount, regardless of how much revenue they generate. This is often used to control costs or prevent excessive commissions, but it may also discourage high-performing employees from putting in extra effort if there is no financial incentive beyond the capped amount.

A sales channel serves as a conduit for the distribution and sale of goods and services on the market. Using direct (website, salesforce, etc.) or indirect (brokers/agents, partners, etc.) channels, a firm may distribute or sell its products or services.

When a business reverses or recovers a previously paid incentive, this is known as a clawback. Typically, clawbacks occur when a consumer returns a product or cancels a contract for which a sales representative has been compensated. Yet, they can also occur if the initial calculation contained flaws (e.g. the sales amount was entered incorrectly).

Performance management relies heavily on coaching or sales coaching. It is the process of enhancing the performance of a team or an individual salesperson by inspiring, training, and coaching them to attain their goals. The ultimate goal is to boost the KPIs (key performance indicators) like revenue growth, customer satisfaction, etc.

Commission tracking software is a tool used by companies to manage and automate the process of tracking and calculating sales commissions for their employees. This software typically integrates with the company's sales data and CRM systems to accurately calculate commissions based on predefined commission structures and rules. Commission tracking software helps to eliminate manual errors and disputes, improves transparency, and provides real-time visibility into sales performance and compensation. It can also generate reports, provide analytics, and offer insights to help organizations optimize their sales compensation strategies.

Sales commission metrics are the Key Performance Indicators (KPIs) of an organization that measures a salesperson's success with the organization's goals and objectives.

The commission per sale is a form of compensation where an employee or salesperson is paid a percentage or fixed amount of money for each product or service they sell. This commission is typically a percentage of the total sale amount, and it serves as an incentive for the salesperson to sell more and generate more revenue for the company. The commission rate may vary depending on the product or service being sold and the company's policies. The commission per sale is a common method of compensation in industries such as real estate, retail, and financial services.

A sales commission rate links the performance of the salesperson to their monetary reward. Often, it is a fixed percentage expressed as a percentage. For instance, if you establish a 20% sales commission rate and a salesperson sells $10,000 worth of products in a month, you must pay him/her a fee of $2,000.

Commissions are a type of payment. Individuals are paid "variable" incentives since they are contingent on performance. Often, commissions represent a proportion of sale volume, revenue, gross margin, or other variables. Commissions are paid in addition to pay and other forms of compensation.

Commissions expense is the cost of compensating sales representatives or agents for their efforts in generating revenue for a company. It is recognized as an expense on the company's income statement and is usually calculated as a percentage of the sales revenue. It can be a significant expense for companies with large sales teams.

Compensation Management Software is a tool for viewing and modifying compensation policies, planning bonuses and commission components, and recommending pay modifications.

A compensation strategy is a comprehensive plan for aligning a company's rewards, benefits, pay, and other forms of remuneration with its goals.

Compensation administration refers to the management of an organization's compensation programs, policies, and practices. This includes the design, implementation, and evaluation of salary, bonuses, benefits, and other forms of compensation offered to employees. The goal of compensation administration is to attract, retain, and motivate employees while aligning compensation with the organization's objectives and budget. Effective compensation administration requires consideration of internal and external factors such as the job market, industry norms, legal requirements, and the organization's financial resources. Sales management has access to three main compensation plans: salary, commission, and combination (salary + incentive) plans.