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April 15, 2022

As an account manager, you want to make sure that you are getting the most out of your account manager commission percentage. Here is the truth about what you can expect to earn in terms of commission: the average account manager earns a base salary of $50,000 per year.

However, depending on their experience and skillset, some may earn closer to $70,000 annually. In addition to a base salary, many companies offer an account manager commission percentage as an incentive for employees to generate new business.

A salesperson’s role is to sell the company’s products and services to existing and new customers. Each salesperson is given a territory and a quota. Then they just go forth to sell, right?

Wrong. Organizations are more complex than ever before. they sell through multiple channels, have complex coverage models, and have a network of sales roles to help them sell their products, solutions, and services.

This group includes the Strategic Account Manager. This position is one of the most difficult sales roles to compensate for.

What is a Strategic Account Manager?

The largest accounts are usually assigned a Strategic Account Manager. This position is sometimes called a Key Account Manager or Corporate Account Manager. A Strategic Account Manager typically has one to two accounts. Click To Tweet

The Strategic Account Manager is the “quarterback” who manages all internal support for large organizations that need multiple resources, such as customer service and pre-sales.

Account manager commission percentage

Account managers should not receive a commission for maintaining current order volumes. It is more beneficial for account managers to be paid commission on:

  • Account growth (incremental volume)
  • New products added to the account
  • Upsell and cross-sell opportunities

Account managers may receive commissions for changing the mix of orders, but this is less common. If, for example, the total volume is equal, an account manager may receive a commission if they increase the volume of higher-margin products while decreasing the volume of lower-margin products.

How a compensation structure looks like

What are the best methods for compensating a strategic accounts manager? These are the steps to follow:

  • Define the sales compensation philosophy
  • Set the Total Target Cash Compensation
  • Define the pay mix
  • Revisit the incentive plan design

For example, we completed an audit of a Sales Compensation plan for a telecommunications company. The company was approaching the penetration phase of the business maturity spectrum. because it was a complex, large organization.

Launch

  • Close the sale
  • Start-up mode or new mode
  • Influence is high

Rapid Growth

  • Expand customer base
  • Profitability emerging
  • Keep existing customers happy
  • Influence is moderate

Penetration

  • Shift from revenues to profit
  • Pricing changes
  • Influence is low

Saturation

  • Expand markets
  • Fully matured
  • Customer maintenance
  • Influence is low

They had a Strategic Account Manager for each account, as well as other resources such as Solution Architects or Sales Engineers. Although Their business strategy and objectives were clear, they faced many challenges including resourcing, market coverage, and “juggling” multiple products.

The biggest challenge these businesses faced was how to compensate their Strategic Account Managers for their sales performance management planning.

The account manager’s compensation plan had different commission rates for profit on new business, delivery and managed services, renewal commissions, and bonuses for a variety of other activities. each Strategic Account Manager was also assigned a quota.

The organization also had no defined Sales Compensation Philosophy, no Target Total Cash Compensation \(TTCC), or varying pay mix for the role. As a result, the company was not able to properly compensate its sales staff, which led to many problems.

Define the sales compensation philosophy

When creating a Sales Compensation Philosophy, there are eight principles to consider.

  • Competitive position
  • Cost of labor vs. cost of sale
  • Non-sales alignment
  • Eligibility inclusiveness
  • Rewards prominence
  • Risk/reward trade-off
  • Individual differentiation
  • Approach to governance

What is your organization’s philosophy on performance? Do you use specific numbers such as percentiles or targets?

“Company A” pays its employees at the 50th percentile of the regional wage market.

Some people prefer to detail what is included in the total compensation package.

Company B’s total rewards provide our employees comprehensive and competitive programs.  At Company B, total rewards include base pay, variable pay, health and welfare benefits, retirement benefits, PTO, education, training and other rewards such as career and job development.

Many companies focus on the principles that will guide how the company will pay its employees, rather than paying attention to the details.

Company C provides rewards designed to motivate employees to achieve individual and company goals, with the opportunity to earn more for top performance.

Set the total target cash compensation

The Target Total Cash Compensation for this role should be established next. The Total Target Cash Compensation is the sum of base salary and sales compensation, excluding benefits, contestsSPIFs, and other recognition events. Click To Tweet

Management determines the TTCC for this role by surveying data and taking into account internal equity across all sales jobs. Some companies are more assertive than others, while others prefer to be conservative. management should review and manage TTCC annually in all cases.

Define the pay mix

We also looked at the pay mix. This divides TTCC into two components, base salary, and target incentive. The pay mix is expressed as percentages, with the first number representing the base salary and the second number representing the target incentive amount. The sum of these two percentage amounts equals 100 percent. For example, a 9010 pay mix would reflect a base salary equal to 90% of TTCC and a target reward amount equal to 10% of TTCC.

The company offers different pay mixes for the same job, depending on the job content. as a general rule, if a Salesperson has more influence, the base salary should decrease and the target incentive should increase. Strategic Account Managers have “low influence” – they manage the largest company accounts and manage resources that meet customer needs. Therefore, their pay mix should not be less than 8020 or 7525.

Revisit the incentive plan design

We also provided high-level recommendations on the design of incentive compensation plans, including:

account manager commission percentage

  • Keep it simple – no more than three components/plan metrics
  • No formal quota – each major account has its account circumstances
  • Plan components – revenue growth, churn, and sales initiatives (i.e. increase utilization, penetration or cross-sell) and account sales planning/outcomes

Sales compensation plans and performance measures for most sales roles are typically straightforward and easily assigned. However, this has not been the case for the Strategic Account Manager role – a problem that compensation professionals have faced for many years.

It is recommended that you review your sales incentive compensation plan design, regardless of whether your company is restructuring its salesforce or moving towards a new phase in the business maturity spectrum. This will ensure that your company’s goals are aligned with its compensation strategy.

Conclusion

The account manager is a key member of the company. His primary responsibility is to maintain good customer relationships and oversee sales. Account manager commission percentage ranges from $50,000 to $70,000 depending upon their skills, experience, and industry.

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