Sales Lingo vs. Rhetoric —DeWese
A very rough range of commission rates is from 1.5 percent of sales to as much as 12.5 percent of sales. For example, long-run, low-margin, low value-added print jobs, usually web or gravure, might be commissioned at the minimum of 1.5 percent. On the other hand, short-run, high-margin, high value-added work might be compensated at 10 percent or more.
Many companies prefer to compensate their salespeople at rates based on value-added vs. sales. If, for example, a four-color commercial sheetfed job has value-added of 65 percent, then the commission rate is applied to the value-added amount. So, for a $10,000 sale, 10 percent of sales ($1,000) is much greater than 10 percent of 65 percent value-added ($650). Companies that use value-added as the base for their commissions adjust the rate to make their compensation competitive with other companies in their market.
On the other hand, many companies permit salespeople to reduce the target price to “get the work” and reduce the commission, using a published schedule or through an ad hoc negotiation process with the salesperson.