alternative compensation

2009 GHTA Conference

PAY FOR PERFORMANCE

(PHASE 2)

ALTERNATIVE

COMPENSATION MODELS

Alternative Commission Models

Pay for Performance Phase 2

2008 SummaryRecommendations

Examples of Alternative Models

-Leaninrsquo Tree

-History amp Heraldry

-Special Thoughts

-Lang

Rep Commission Incentive Payout

Closeout Commission Payout



Issues

Gift Venues down 25+

Vendors cannot accept (-25)

Agency reps need to earn more

Trade Shows

Impact of Discounts

Incentive Programs



Recommendations

Agencies amp Vendors Collaborate

Jointly establish goalsobjectives

Define Exclusivity

Create a mutual compensation strategy

Shows

Be selective

Be effective



-Leaninrsquo Tree


-Special Thoughts

-Lang


Leaninrsquo Tree

COMMISSION STRUCTURE

25 Initial Order

20 Field Reorders

90 Day telemarketing window

INCENTIVE TO AGENCY

10 growth 2

16 growth 3

22 growth 4


Leaninrsquo Tree

INCENTIVEMARGIN

$100000 BASE 40GM (this is fictional)

INCENTIVE TO AGENCY

10 growth 2---$110k---$2200$4000

16 growth 3---$116k---$3480$6400

22 growth 4---$122K---$4880$8800


Leaninrsquo Tree

INCENTIVEMARGIN

$100000 BASE 40GM

(this is fictional)

INCENTIVE TO AGENCY

10 growth 2---$110k---

$2200$4000

16 growth 3---$116k---

$3480$6400

22 growth 4---$122K---

$4880$8800


HISTORY amp HERALDRY

BUSINESS FOCUS----RACK SALES

COMMISSION

15 Initial Order

20 All Reorders

FEES

H amp H accepts NO agency or show fees



COMMISSION EARNINGS-- $200000 SALEShellip

3070

Comm $ 9000 + $28000 = $37000

2080

Comm $ 6000 + $32000 = $38000

15 straight

Comm $30000 + agency fees




SPECIAL THOUGHTS

ALWAYS CHANGING

1 6 Monthsmdash15 base

$ 5k +4

$ 6k +5

$10k +9

2 6 WeeksmdashDisplay Objmdash15 base

3 displays +$ 50

6 displays +$100

9 displays +$500

3 3 month---order sizemdash15 base

Any order gt$100 +10

SPECIAL THOUGHTS


LANG

REGIONAL SALES MODEL amp 60 Calendars

47= Ivystone Raymond Bates Ned Stack

7 telemarketing

Assessed 8 modelshellipgoal is to broaden appeal

Old Model

Collaborate wAgency accts

Agree which accts covered best (rep vs tele)

Periodically assess the coverage amp adjust

LANG

LANG


INCENTIVE PAYOUTS

IS IT MORE OR LESS PROFITABLE

TRADITIONAL SALES

CLOSEOUTS

Alternative Commission Models INCENTIVE ON REGULAR SALES

COMMISSION INCENTIVE

CRITICAL to ESTABLISH GOALS UPFRONT

Sales Profit40 Comm Net Gain

$10000 $4000 15 $1500 $2500 25

$11000 $4400 16 $1760 $2640 24

$12000 $4880 17 $2040 $2760 23

$13000 $5200 18 $2340 $2860 22

$15000 $6000 20 $3000 $3000 20

Alternative Commission Models INCENTIVE CLOSEOUTS


$100000 IN CLOSEOUT MERCHANDISE

(ASSUMES A 40 GROSS MARGIN $60000 COST)

IF 50 OFF PRICE = ($10000 loss)

$50000 sales less $60000 cog

IF 20 COMMISSION amp 25 DISCOUNT

$75000 ndash 60000 = $15000

$15000 comm

--$0ndash breakeven

Alternative Commission Models PAY for PERFORMANCEmdashPART 2

Recommendations

1 CRITICAL STEP

---Collaborate on goals---

Vendors amp Agencies

-Go through the math

-Be sure the incentive is one that will

CHANGE BEHAVIOR

Increase vendor profits

Increase agency rep commission

-Be realistic hellip Share goals with reps


Pay for Performance Phase 2



-Leaninrsquo Tree


-Special Thoughts

-Lang

Rep Commission Incentive Payout

Closeout Commission Payout



Issues




Trade Shows

Impact of Discounts

Incentive Programs



Recommendations



Define Exclusivity


Shows

Be selective

Be effective



-Leaninrsquo Tree


-Special Thoughts

-Lang


Leaninrsquo Tree


25 Initial Order

20 Field Reorders


INCENTIVE TO AGENCY

10 growth 2

16 growth 3

22 growth 4


Leaninrsquo Tree

INCENTIVEMARGIN


INCENTIVE TO AGENCY

10 growth 2---$110k---$2200$4000

16 growth 3---$116k---$3480$6400

22 growth 4---$122K---$4880$8800


Leaninrsquo Tree

INCENTIVEMARGIN

$100000 BASE 40GM

(this is fictional)

INCENTIVE TO AGENCY

10 growth 2---$110k---

$2200$4000

16 growth 3---$116k---

$3480$6400

22 growth 4---$122K---

$4880$8800




COMMISSION

15 Initial Order

20 All Reorders

FEES





3070

Comm $ 9000 + $28000 = $37000

2080

Comm $ 6000 + $32000 = $38000

15 straight





SPECIAL THOUGHTS

ALWAYS CHANGING


$ 5k +4

$ 6k +5

$10k +9


3 displays +$ 50

6 displays +$100

9 displays +$500



SPECIAL THOUGHTS


LANG



7 telemarketing


Old Model




LANG

LANG


INCENTIVE PAYOUTS


TRADITIONAL SALES

CLOSEOUTS





$10000 $4000 15 $1500 $2500 25

$11000 $4400 16 $1760 $2640 24

$12000 $4880 17 $2040 $2760 23

$13000 $5200 18 $2340 $2860 22

$15000 $6000 20 $3000 $3000 20








$75000 ndash 60000 = $15000

$15000 comm

--$0ndash breakeven


Recommendations

1 CRITICAL STEP





CHANGE BEHAVIOR






Issues




Trade Shows

Impact of Discounts

Incentive Programs



Recommendations



Define Exclusivity


Shows

Be selective

Be effective



-Leaninrsquo Tree


-Special Thoughts

-Lang


Leaninrsquo Tree


25 Initial Order

20 Field Reorders


INCENTIVE TO AGENCY

10 growth 2

16 growth 3

22 growth 4


Leaninrsquo Tree

INCENTIVEMARGIN


INCENTIVE TO AGENCY

10 growth 2---$110k---$2200$4000

16 growth 3---$116k---$3480$6400

22 growth 4---$122K---$4880$8800


Leaninrsquo Tree

INCENTIVEMARGIN

$100000 BASE 40GM

(this is fictional)

INCENTIVE TO AGENCY

10 growth 2---$110k---

$2200$4000

16 growth 3---$116k---

$3480$6400

22 growth 4---$122K---

$4880$8800




COMMISSION

15 Initial Order

20 All Reorders

FEES





3070

Comm $ 9000 + $28000 = $37000

2080

Comm $ 6000 + $32000 = $38000

15 straight





SPECIAL THOUGHTS

ALWAYS CHANGING


$ 5k +4

$ 6k +5

$10k +9


3 displays +$ 50

6 displays +$100

9 displays +$500



SPECIAL THOUGHTS


LANG



7 telemarketing


Old Model




LANG

LANG


INCENTIVE PAYOUTS


TRADITIONAL SALES

CLOSEOUTS





$10000 $4000 15 $1500 $2500 25

$11000 $4400 16 $1760 $2640 24

$12000 $4880 17 $2040 $2760 23

$13000 $5200 18 $2340 $2860 22

$15000 $6000 20 $3000 $3000 20








$75000 ndash 60000 = $15000

$15000 comm

--$0ndash breakeven


Recommendations

1 CRITICAL STEP





CHANGE BEHAVIOR






Recommendations



Define Exclusivity


Shows

Be selective

Be effective



-Leaninrsquo Tree


-Special Thoughts

-Lang


Leaninrsquo Tree


25 Initial Order

20 Field Reorders


INCENTIVE TO AGENCY

10 growth 2

16 growth 3

22 growth 4


Leaninrsquo Tree

INCENTIVEMARGIN


INCENTIVE TO AGENCY

10 growth 2---$110k---$2200$4000

16 growth 3---$116k---$3480$6400

22 growth 4---$122K---$4880$8800


Leaninrsquo Tree

INCENTIVEMARGIN

$100000 BASE 40GM

(this is fictional)

INCENTIVE TO AGENCY

10 growth 2---$110k---

$2200$4000

16 growth 3---$116k---

$3480$6400

22 growth 4---$122K---

$4880$8800




COMMISSION

15 Initial Order

20 All Reorders

FEES





3070

Comm $ 9000 + $28000 = $37000

2080

Comm $ 6000 + $32000 = $38000

15 straight





SPECIAL THOUGHTS

ALWAYS CHANGING


$ 5k +4

$ 6k +5

$10k +9


3 displays +$ 50

6 displays +$100

9 displays +$500



SPECIAL THOUGHTS


LANG



7 telemarketing


Old Model




LANG

LANG


INCENTIVE PAYOUTS


TRADITIONAL SALES

CLOSEOUTS





$10000 $4000 15 $1500 $2500 25

$11000 $4400 16 $1760 $2640 24

$12000 $4880 17 $2040 $2760 23

$13000 $5200 18 $2340 $2860 22

$15000 $6000 20 $3000 $3000 20








$75000 ndash 60000 = $15000

$15000 comm

--$0ndash breakeven


Recommendations

1 CRITICAL STEP





CHANGE BEHAVIOR






-Leaninrsquo Tree


-Special Thoughts

-Lang


Leaninrsquo Tree


25 Initial Order

20 Field Reorders


INCENTIVE TO AGENCY

10 growth 2

16 growth 3

22 growth 4


Leaninrsquo Tree

INCENTIVEMARGIN


INCENTIVE TO AGENCY

10 growth 2---$110k---$2200$4000

16 growth 3---$116k---$3480$6400

22 growth 4---$122K---$4880$8800


Leaninrsquo Tree

INCENTIVEMARGIN

$100000 BASE 40GM

(this is fictional)

INCENTIVE TO AGENCY

10 growth 2---$110k---

$2200$4000

16 growth 3---$116k---

$3480$6400

22 growth 4---$122K---

$4880$8800




COMMISSION

15 Initial Order

20 All Reorders

FEES





3070

Comm $ 9000 + $28000 = $37000

2080

Comm $ 6000 + $32000 = $38000

15 straight





SPECIAL THOUGHTS

ALWAYS CHANGING


$ 5k +4

$ 6k +5

$10k +9


3 displays +$ 50

6 displays +$100

9 displays +$500



SPECIAL THOUGHTS


LANG



7 telemarketing


Old Model




LANG

LANG


INCENTIVE PAYOUTS


TRADITIONAL SALES

CLOSEOUTS





$10000 $4000 15 $1500 $2500 25

$11000 $4400 16 $1760 $2640 24

$12000 $4880 17 $2040 $2760 23

$13000 $5200 18 $2340 $2860 22

$15000 $6000 20 $3000 $3000 20








$75000 ndash 60000 = $15000

$15000 comm

--$0ndash breakeven


Recommendations

1 CRITICAL STEP





CHANGE BEHAVIOR





Leaninrsquo Tree


25 Initial Order

20 Field Reorders


INCENTIVE TO AGENCY

10 growth 2

16 growth 3

22 growth 4


Leaninrsquo Tree

INCENTIVEMARGIN


INCENTIVE TO AGENCY

10 growth 2---$110k---$2200$4000

16 growth 3---$116k---$3480$6400

22 growth 4---$122K---$4880$8800


Leaninrsquo Tree

INCENTIVEMARGIN

$100000 BASE 40GM

(this is fictional)

INCENTIVE TO AGENCY

10 growth 2---$110k---

$2200$4000

16 growth 3---$116k---

$3480$6400

22 growth 4---$122K---

$4880$8800




COMMISSION

15 Initial Order

20 All Reorders

FEES





3070

Comm $ 9000 + $28000 = $37000

2080

Comm $ 6000 + $32000 = $38000

15 straight





SPECIAL THOUGHTS

ALWAYS CHANGING


$ 5k +4

$ 6k +5

$10k +9


3 displays +$ 50

6 displays +$100

9 displays +$500



SPECIAL THOUGHTS


LANG



7 telemarketing


Old Model




LANG

LANG


INCENTIVE PAYOUTS


TRADITIONAL SALES

CLOSEOUTS





$10000 $4000 15 $1500 $2500 25

$11000 $4400 16 $1760 $2640 24

$12000 $4880 17 $2040 $2760 23

$13000 $5200 18 $2340 $2860 22

$15000 $6000 20 $3000 $3000 20








$75000 ndash 60000 = $15000

$15000 comm

--$0ndash breakeven


Recommendations

1 CRITICAL STEP





CHANGE BEHAVIOR





Leaninrsquo Tree

INCENTIVEMARGIN


INCENTIVE TO AGENCY

10 growth 2---$110k---$2200$4000

16 growth 3---$116k---$3480$6400

22 growth 4---$122K---$4880$8800


Leaninrsquo Tree

INCENTIVEMARGIN

$100000 BASE 40GM

(this is fictional)

INCENTIVE TO AGENCY

10 growth 2---$110k---

$2200$4000

16 growth 3---$116k---

$3480$6400

22 growth 4---$122K---

$4880$8800




COMMISSION

15 Initial Order

20 All Reorders

FEES





3070

Comm $ 9000 + $28000 = $37000

2080

Comm $ 6000 + $32000 = $38000

15 straight





SPECIAL THOUGHTS

ALWAYS CHANGING


$ 5k +4

$ 6k +5

$10k +9


3 displays +$ 50

6 displays +$100

9 displays +$500



SPECIAL THOUGHTS


LANG



7 telemarketing


Old Model




LANG

LANG


INCENTIVE PAYOUTS


TRADITIONAL SALES

CLOSEOUTS





$10000 $4000 15 $1500 $2500 25

$11000 $4400 16 $1760 $2640 24

$12000 $4880 17 $2040 $2760 23

$13000 $5200 18 $2340 $2860 22

$15000 $6000 20 $3000 $3000 20








$75000 ndash 60000 = $15000

$15000 comm

--$0ndash breakeven


Recommendations

1 CRITICAL STEP





CHANGE BEHAVIOR





Leaninrsquo Tree

INCENTIVEMARGIN

$100000 BASE 40GM

(this is fictional)

INCENTIVE TO AGENCY

10 growth 2---$110k---

$2200$4000

16 growth 3---$116k---

$3480$6400

22 growth 4---$122K---

$4880$8800




COMMISSION

15 Initial Order

20 All Reorders

FEES





3070

Comm $ 9000 + $28000 = $37000

2080

Comm $ 6000 + $32000 = $38000

15 straight





SPECIAL THOUGHTS

ALWAYS CHANGING


$ 5k +4

$ 6k +5

$10k +9


3 displays +$ 50

6 displays +$100

9 displays +$500



SPECIAL THOUGHTS


LANG



7 telemarketing


Old Model




LANG

LANG


INCENTIVE PAYOUTS


TRADITIONAL SALES

CLOSEOUTS





$10000 $4000 15 $1500 $2500 25

$11000 $4400 16 $1760 $2640 24

$12000 $4880 17 $2040 $2760 23

$13000 $5200 18 $2340 $2860 22

$15000 $6000 20 $3000 $3000 20








$75000 ndash 60000 = $15000

$15000 comm

--$0ndash breakeven


Recommendations

1 CRITICAL STEP





CHANGE BEHAVIOR







COMMISSION

15 Initial Order

20 All Reorders

FEES





3070

Comm $ 9000 + $28000 = $37000

2080

Comm $ 6000 + $32000 = $38000

15 straight





SPECIAL THOUGHTS

ALWAYS CHANGING


$ 5k +4

$ 6k +5

$10k +9


3 displays +$ 50

6 displays +$100

9 displays +$500



SPECIAL THOUGHTS


LANG



7 telemarketing


Old Model




LANG

LANG


INCENTIVE PAYOUTS


TRADITIONAL SALES

CLOSEOUTS





$10000 $4000 15 $1500 $2500 25

$11000 $4400 16 $1760 $2640 24

$12000 $4880 17 $2040 $2760 23

$13000 $5200 18 $2340 $2860 22

$15000 $6000 20 $3000 $3000 20








$75000 ndash 60000 = $15000

$15000 comm

--$0ndash breakeven


Recommendations

1 CRITICAL STEP





CHANGE BEHAVIOR







3070

Comm $ 9000 + $28000 = $37000

2080

Comm $ 6000 + $32000 = $38000

15 straight





SPECIAL THOUGHTS

ALWAYS CHANGING


$ 5k +4

$ 6k +5

$10k +9


3 displays +$ 50

6 displays +$100

9 displays +$500



SPECIAL THOUGHTS


LANG



7 telemarketing


Old Model




LANG

LANG


INCENTIVE PAYOUTS


TRADITIONAL SALES

CLOSEOUTS





$10000 $4000 15 $1500 $2500 25

$11000 $4400 16 $1760 $2640 24

$12000 $4880 17 $2040 $2760 23

$13000 $5200 18 $2340 $2860 22

$15000 $6000 20 $3000 $3000 20








$75000 ndash 60000 = $15000

$15000 comm

--$0ndash breakeven


Recommendations

1 CRITICAL STEP





CHANGE BEHAVIOR







SPECIAL THOUGHTS

ALWAYS CHANGING


$ 5k +4

$ 6k +5

$10k +9


3 displays +$ 50

6 displays +$100

9 displays +$500



SPECIAL THOUGHTS


LANG



7 telemarketing


Old Model




LANG

LANG


INCENTIVE PAYOUTS


TRADITIONAL SALES

CLOSEOUTS





$10000 $4000 15 $1500 $2500 25

$11000 $4400 16 $1760 $2640 24

$12000 $4880 17 $2040 $2760 23

$13000 $5200 18 $2340 $2860 22

$15000 $6000 20 $3000 $3000 20








$75000 ndash 60000 = $15000

$15000 comm

--$0ndash breakeven


Recommendations

1 CRITICAL STEP





CHANGE BEHAVIOR




SPECIAL THOUGHTS


LANG



7 telemarketing


Old Model




LANG

LANG


INCENTIVE PAYOUTS


TRADITIONAL SALES

CLOSEOUTS





$10000 $4000 15 $1500 $2500 25

$11000 $4400 16 $1760 $2640 24

$12000 $4880 17 $2040 $2760 23

$13000 $5200 18 $2340 $2860 22

$15000 $6000 20 $3000 $3000 20








$75000 ndash 60000 = $15000

$15000 comm

--$0ndash breakeven


Recommendations

1 CRITICAL STEP





CHANGE BEHAVIOR





LANG



7 telemarketing


Old Model




LANG

LANG


INCENTIVE PAYOUTS


TRADITIONAL SALES

CLOSEOUTS





$10000 $4000 15 $1500 $2500 25

$11000 $4400 16 $1760 $2640 24

$12000 $4880 17 $2040 $2760 23

$13000 $5200 18 $2340 $2860 22

$15000 $6000 20 $3000 $3000 20








$75000 ndash 60000 = $15000

$15000 comm

--$0ndash breakeven


Recommendations

1 CRITICAL STEP





CHANGE BEHAVIOR




LANG

LANG


INCENTIVE PAYOUTS


TRADITIONAL SALES

CLOSEOUTS





$10000 $4000 15 $1500 $2500 25

$11000 $4400 16 $1760 $2640 24

$12000 $4880 17 $2040 $2760 23

$13000 $5200 18 $2340 $2860 22

$15000 $6000 20 $3000 $3000 20








$75000 ndash 60000 = $15000

$15000 comm

--$0ndash breakeven


Recommendations

1 CRITICAL STEP





CHANGE BEHAVIOR




LANG


INCENTIVE PAYOUTS


TRADITIONAL SALES

CLOSEOUTS





$10000 $4000 15 $1500 $2500 25

$11000 $4400 16 $1760 $2640 24

$12000 $4880 17 $2040 $2760 23

$13000 $5200 18 $2340 $2860 22

$15000 $6000 20 $3000 $3000 20








$75000 ndash 60000 = $15000

$15000 comm

--$0ndash breakeven


Recommendations

1 CRITICAL STEP





CHANGE BEHAVIOR





INCENTIVE PAYOUTS


TRADITIONAL SALES

CLOSEOUTS





$10000 $4000 15 $1500 $2500 25

$11000 $4400 16 $1760 $2640 24

$12000 $4880 17 $2040 $2760 23

$13000 $5200 18 $2340 $2860 22

$15000 $6000 20 $3000 $3000 20








$75000 ndash 60000 = $15000

$15000 comm

--$0ndash breakeven


Recommendations

1 CRITICAL STEP





CHANGE BEHAVIOR








$10000 $4000 15 $1500 $2500 25

$11000 $4400 16 $1760 $2640 24

$12000 $4880 17 $2040 $2760 23

$13000 $5200 18 $2340 $2860 22

$15000 $6000 20 $3000 $3000 20








$75000 ndash 60000 = $15000

$15000 comm

--$0ndash breakeven


Recommendations

1 CRITICAL STEP





CHANGE BEHAVIOR











$75000 ndash 60000 = $15000

$15000 comm

--$0ndash breakeven


Recommendations

1 CRITICAL STEP





CHANGE BEHAVIOR





Recommendations

1 CRITICAL STEP





CHANGE BEHAVIOR




alternative compensation

Business

agency rep commission

agency fees

agency reps

fictional incentive

initial order

vendors agencies

goals upfront sales

order size15