Compensation Patterns for Sales Executives

Selling is often important to the success of a company, so it is not surprising that sales executives often command substantial compensation. The impor­tance of selling is reflected in the compensation of top marketing executives who often earn six-figure annual incomes. Top sales executives have com­pensations averaging 70 percent of those of top marketing executives in the same companies. In large companies, as much as one-third of the top sales executive’s compensation is in the form of bonuses. Financial rewards in smaller companies are less spectacular, but even here the top sales execu­tives ranks among the highest-paid four or five company officials.

Sales executives at lower levels are paid less than their chiefs. Higher-ranking subordinates, such as regional or district sales managers, have median earnings approximating 90 to 95 percent of those of the top sales executive. Field sales managers, those on the first step of the ladder in the sales force executive hierarchy, receive median earnings about two- thirds of those of the top sales executives. Salespeople earn about half as much as the top executive.

Commonly, sales executives receive some of their pay as bonuses, commissions, or other “incentive” payments. These payments at higher executive levels are based upon relative profit performances and at lower executive levels upon sales volumes achieved relative to sales potentials. The prevalence of incentive payments of sales executives causes their earn­ings to fluctuate from year to year.

Most studies show that more than half of the top sales executives have stock options (granting them the right to buy company stock on advanta­geous terms) and receive some compensation in the form of an incentive bonus, profit-sharing plan, stock purchase plan, deferred compensation plan, or some combination of these. Other fringe benefits, such as retire­ment funds, company-paid insurance policies, and annuities, are common.

Source: Richard R. Still, Edward W. Cundliff, Normal A. P Govoni, Sandeep Puri (2017), Sales and Distribution Management: Decisions, Strategies, and Cases, Pearson; Sixth edition.