The margin is in the reorder. The commission is on the first sale.

A commission plan is a theory of where profit comes from. In repeat-purchase businesses, that theory is usually wrong, and the discount outlives the payout.

By Steve 5 min read
Abstract bridge artwork for The margin is in the reorder. The commission is on the first sale.

Most sales compensation plans pay on the first order and nothing thereafter. Most repeat-purchase businesses make almost all of their money after the first order. Those two facts sit side by side in a lot of companies without ever being reconciled, and the cost of the mismatch shows up somewhere far from the sales team, in gross margin drift, in accounts that stall in month four, in a product mix nobody chose. The plan is not a payroll mechanism. It is the strategy document your commercial team actually reads. Whatever…

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