Bent but not broken. It describes promotional products companies in the first few harrowing months of the pandemic, and their recovery since. Improving sales has distributors in hiring mode, with many in fact looking to fill the sales rep spots they had to cut loose when revenue plummeted.
These two past years, however, have given companies the chance to reassess their financial position and how they attract and engage employees. So in the aftermath of COVID’s arrival, have the priorities changed with sales rep compensation?
This year’s ASI Sales Compensation Survey shows that even as straight commission remains the preferred method of paying distributor sales reps, that percentage did decline slightly in 2021 to 36% compared with 40% in 2019, continuing a decade-long trend.
Throughout the industry, the only thing distributors can agree on is that there isn’t one singular way to compensate their reps. Take Peernet, an alliance of 17 distributors, including Signet Inc. (asi/326636). “Everyone does it differently,” says Signet CEO Elizabeth Tate.
“I don’t have a preference of which compensation model they choose, I just want the rep to succeed.” Bryan Goltzman, Liquid Screen Design
In fact, for many promo companies, the notion of “one size fits all” doesn’t even apply to members of the same sales team. Distributors are increasingly gearing compensation plans to the rep’s age and experience, and even giving reps a choice of the plan they prefer. It demonstrates supreme flexibility on the part of companies, which are increasingly coming up with alternative ways to incentivize their staff, meet individual reps’ needs, and attract new sales talent that might not have the years of experience or contacts to weather a period of time without a paycheck.
Whatever paths companies take with their compensation, the goal is the same: find reps, keep them and set up the structure for their long-term success.
Rules of Attraction
Got a little bit of moxie and a willingness to hustle? You can make it in sales!
That bromide still rings true, which means there should be millions of potential go-getters available to fill your sales ranks. In reality, finding good sales talent, both inside sales and outside sales, remains a top challenge.
“Retaining seems to be the easier part,” says Roger Remo, executive VP of sales for Creating Brand Legacy, a distributor with offices in San Diego and Mahwah, NJ. “We have a good team, everyone is secure in their positions and I don’t think any are looking to move elsewhere. Finding salespeople is a different story.”
Distributor Sales Rep Compensation Plans
Straight commission is still the predominant pay model but decreased for the third consecutive time, and now only accounts for slightly more than a third of all industry sales rep pay.
“Finding and hiring good sales reps is a huge challenge – everyone is looking for them,” adds Chance Castellucio, executive VP of sales at Promoleaf (asi/300534). In the last 13 months, Promoleaf worked on building its outside sales team, using employee referrals, LinkedIn and some other online sources, he notes.
That’s where compensation plans can be helpful. Castellucio says “we have an aggressive comp plan to incentivize reps” – 60% profit for outside reps, plus admins to process orders and artwork. The distributor also supplies leads every week to its reps, “which is a huge differentiator for us versus other distributors,” Castellucio says.
Sales can be scary for those without experience, and the prospect of working on straight commission can compound those fears. It works for Susan Hofield, senior account manager at Spartan Promotional Group (asi/331150). But then again, she’s been with Spartan for 11 years and in the industry for three decades. “Not everyone has the financial means to go to straight commission without a base, and that’s one of the reasons there’s such a high turnover of reps,” says Hofield. “There’s a high learning curve in our industry, and proper training is imperative for the success of all concerned – that takes time to learn without earning any money.”
Adds Hofield, “If I was recruiting and had a potential recruit that I believed in, I would offer a base plus commission to get them started.”
Indeed, distributors can gear their plans to the type of rep they want to attract. Top 40 distributor Boundless (asi/143717) targets established industry sales professionals who feel they’ve hit a ceiling running their business themselves or with their current distributor. Not surprisingly, sales reps are paid all commission. “Commission is attractive to that audience as there’s no cap in income,” says Boundless VP of Sales Pat Barry. However, Boundless has discussed bringing in less experienced salespeople, which Barry believes would involve offering salary/bonus compensation to that group, as well as a source of leads that they can pursue.
Salary vs. Commission
Salary-based plans account for half of all distributor rep compensation, while commission plans dropped even further.
Ideal Compensation Plan
While 36% of distributor reps make straight commission, only a quarter of all reps actually desire it as their ideal plan. Also noteworthy: 42% of reps want a bonus in some form, whether with salary, commission, or both.
One unique perk at Boundless that’s attractive to reps? An annual rebate based on an individual’s preferred supplier sales. Also, since the distributor’s best salespeople have come by way of referral, sales partners can receive a referral bonus that, based on the referral’s annual sales, tops out at $50,000. “That has our current sales team’s attention,” says Barry, “and we’ve seen an increase in referrals.”
Leaders should design sales compensation in concert with their talent development strategy, says Zack Ottenstein, president of Top 40 distributor The Image Group (asi/230069). “I believe that our sales talent today and going forward must center on developing reps who seek enterprise-based solutions versus product-based ones,” he says. Utilizing digital technology is crucial, he notes, particularly with large clients that rely heavily on data, and it will allow a smaller number of capable reps to carry larger books of business.
The Image Group (which hires outside reps and also grooms existing talent typically on a 3-5 year career path) has employed a hybrid compensation model consisting of salary, commission and bonus over the last five years, refining it during COVID. “We don’t necessarily have to pay more [to attract sales talent], we just have to pay differently,” says Ottenstein. It’s more than just dollars and cents. Specifically, Ottenstein says employees want more transparency in all facets of compensation and career growth planning.
Average Distributor Sales Rep Compensation
After years of increases, individual distributor rep compensation didn’t grow in 2021. Of course, that was to be expected. The good news is that, despite the adverse effects of the pandemic and major challenges with inventory and staffing, reps were able to maintain their compensation very close to 2019 levels.
“They want to know about all of the elements that make up their compensation package – they want to understand their salary, their performance bonus, where they are on the range from high to low, and how it leads into performance results,” he says. The feedback is “universally positive from reps we’ve hired, as well as from legacy team members who transitioned to this model, when we’re transparent,” he notes.
Pay is a crucial part, but it’s only a first step. For decades, both workers and companies pointed to compensation and benefits as employees’ most important priority. But a recent survey from Brainly showed that half of Gen Xers and millennials consider salary the most important aspect of a future job; for Gen Z, that figure drops to 37%. Studies across the board now point to a number of other qualities – company culture, time and flexibility, access to career growth – that matter more to worker satisfaction and longevity.
At Kore Group, a member of the Kaye-Smith family (asi/239444), job postings list “Happiness” as a benefit. “We sell culture, the right fit. The pay and benefits are the bare minimum,” says Mike Hatfield, the company’s sales manager. “We want the right vibe and personality. With the right person, we can train and evolve, improving them and ourselves.”
Consistency & Change
Distributor Reps Who Increased Their Compensation
Half of reps were able to grow their revenue compared to 2020, and nearly 40% were able to beat their 2019 figures.
2021 vs. 2020
2021 vs. 2019
Even in times of great change, many industry companies have stuck with their compensation model. But they’ve also been willing to alter them in subtle ways in a nod to the times.
Creating Brand Legacy hasn’t changed its sales compensation model, but that’s because “we have always been adaptable to the salesperson’s needs,” says Remo. The distributor has a few 1099 reps that are on a 50-50 split, while some younger reps get a base salary and a smaller commission rate, as well as benefits such as 401(k). “Margins are definitely getting tighter, and our guys are willing to work on less profit than before because they need the sales,” Remo notes, and adds “our saying is 10% of something is better than 25% of nothing.”
Signet, too, hasn’t changed its model in recent years. Reps make a salary plus commission split, which is a predetermined threshold of profit generated based on how much assistance they receive. But the company did lower its minimum threshold when it cut some sales support positions in the early days of COVID. Currently, says Tate, the company isn’t looking to add to its outside sales team, but it is looking to replenish its sales support staff. “We’ve had five sales reps for many years,” Tate says. “I know from past experience that when times are good, companies start cutting commissions plus add more salespeople. I prefer to add more support to the current salespeople so they can make more – and we, in turn, make more and retain great people.”
The percentage of distributor reps not thrilled with their job nearly doubled when compared to pre-pandemic.
Dissatisfied or Neither Satisfied/Dissatisfied
Distributors are increasingly offering the security of long-term retirement plans.
Percentage of companies that offer 401(k) or equivalent
Top 40 supplier Showdown Displays (asi/87188) includes base salary and commission in its sales compensation plan, and that’s remained consistent with what it was pre-pandemic. “We did ask our team to accept a reduced commission percentage in 2020 in the face of COVID uncertainty. That was returned to them beginning in January 2021,” says President Kevin Walsh. This year, the supplier has been expanding both its inside and outside sales teams, though for inside sales the company likes to develop from within. “We’ve not previously had success hiring inside sales reps from outside of our organization,” says Walsh. “Our greatest success has been mapping a career path that enables team members to progress into inside sales from other Success Team departments such as service, order management, support and resolutions.”
Adapt to Survive – and Thrive
While some distributors have stayed the course, others have aggressively changed their compensation models.
Building a Brand With Multi-Line Reps
Once a dominant presence in promotional products sales, multi-line reps have moved to the periphery over the last couple decades. But at least one company is using multi-line reps to great success.
Before Rich Corvalan joined supplier Zing Manufacturing (asi/99025) as senior VP of sales in 2021, the company never had outside sales reps. But when the company partnered with the S’well drinkware brand last year, “we needed feet on the street,” he says.
“We’ve been using multi-line reps at Zing and I’m a big believer in this model, especially when you’re not as well known and are building a brand,” Corvalan says. Established reps have contacts and know how to rep a variety of lines, which is a big advantage, adds Corvalan. “You get talked about or mentioned on every call,” he says.
Zing pays straight commission, which is a flat percentage, and also offers bonuses based on sales performance. “We pay commissions bi-weekly, which isn’t typical. The reps like this model, as it helps them offset some expenses during the month,” he explains. “Also, we help on regional shows and we don’t charge for samples.” So far so good: Zing’s revenue soared nearly 500% to $8.2 million in 2021 with expectations to double its revenue this year, and the company is looking to add reps in key territories and shore up its inside sales support.
During the first five months of the pandemic, Successories (asi/338635) was forced to furlough and cut pay, says Vincent Nero, VP/general manager of service and sales. However, by 2021 the full team was back together with full pay, and the company was looking to hire, he notes. “Right now, sales are strong for us, so for the reps, it’s like selling water in the desert,” Nero says.
Traditionally Successories compensated on a commission/draw structure while giving reps reach goals for additional bonuses, but Nero says they tightened up that model during the pandemic. “Our sales compensation model had been more complex, with tiers and based off of margins and category sales,” he explains. “We streamlined the model to be a flat rate commission regardless of the sale, and additional bonuses based on goals. It made it easier for everyone to focus on the important overall goal of keeping revenues and orders flowing.”
In addition, the company expanded bonuses and incentives to staff beyond the sales team to reward them for handling the increased volume as the company grows. “It wasn’t sustainable to just reward the sales team, when it was the rest of the workforce who ensures the success of customers’ orders, from art to customer service to purchasing and production,” Nero says, adding that it’s increased overall team effort.
Lasting Impressions Promotional Marketing (asi/249926) has changed its compensation strategies over the years in order to accommodate the requests of the potential rep, and now has a few compensation structures on its team, says Carla Dabiero Ejaz, owner/VP of sales. “In our old model, we offered reps to be compensated as a 1099 contract employee or as an employee receiving base salary plus commission. In the past two years, we’ve found people are looking for stability,” she says. “For us that means higher base salaries, health and dental insurance and lower commissions per order. The model of straight commission has seemed to phase out for incoming employees.”
Some distributors guard their compensation plan as closely as state secrets. Others, however, willingly share what has worked for them – and even collaborated with industry competitors to come up with alternative compensation plans, with results that have been very positive.
Before COVID hit, Liquid Screen Design (LSD, asi/254663) sales reps were 100% commission based, says owner Bryan Goltzman. “But then when the pandemic hit,” he says, “there were no sales so we had to lay off all our reps.” The reps moved on to other jobs like teaching and working in the nonprofit sector. Meanwhile, LSD pivoted to kitting and had revenues shoot up 300% in 2020, and an additional 100% in 2021.
Unsurprisingly, travel-related benefits offered by distributor firms such as PTO, trade show trips and auto expenses all decreased since 2019. Financial benefits – 401(k), dental and profit sharing – increased slightly.
Despite that success, the company shored up its backend first and didn’t begin hiring salespeople again until last fall. Goltzman researched and brainstormed with a competing distributor to come up with the best way to attract and pay new sales reps.
“I concluded that maybe it’s not a one-size-fits-all approach,” he says. “We did the math and offered incoming reps three options on compensation.” New hires could opt for a full commission model, with no base salary, or one of two salary/commission combinations: a lower salary base with a higher percentage commission on profit, or a higher salary base with a lower percentage commission on profit. New hires also received the option to change which compensation model they preferred once a year. Of the two reps hired, one chose the higher base and lower commission, and the other chose the lower base, higher commission.
“However, they both stated that their intention is to be 100% commission by the next year, because they feel they’ll make a lot more money – they felt having the security of a base salary limited their upside,” he adds.
“The tenured reps are typically all commission at a high rate, and they want to stay that way. Newer reps are different – they have much higher costs of living than 20-30 years ago and they’re more risk averse.”Mike Hatfield, Kore Group
“We’re taking a risk if a rep chooses a base. If they opt for 100% commission it’s less risk to us, but I also know they may have no income in the early months and may not be as invested in the position. If they opt for all commission and knock it out of the park, I may make less,” says Goltzman, who’s also using DiSC assessment personality tests to screen candidates. “I don’t have a preference of which business model they choose, I just want the rep to succeed.”
Kore Group modified its sales compensation plan prior to the pandemic, and it seems to be attracting both new and tenured reps, says Hatfield, the distributor’s sales manager. “The tenured reps are typically all commission at a high rate, and they want to stay that way,” he says. “Newer reps are different – they have much higher costs of living than 20-30 years ago and they’re more risk averse. I don’t blame them. Margins are consistent, and we’re basically paying the same as before. It’s just allocated differently in order to help new reps.”
Kore Group raised the base salary for new sales reps, and added the ability for the rep to make commission immediately, though at a lower rate than full commission reps. “We patterned the plan after conversations with a couple of our competitors,” Hatfield says. “It was a great example of collaboration; there are some amazing people in this industry that are willing to share ideas.”