Contribution margin commission

Contribution margin commission - The assessment basis for this form of commission is the contribution margin per period. The commission rates can be linear, progressive and / or degressive, they can be uniform for the entire contribution margin of the seller or staggered according to products or customers.

Advantages of the contribution margin:

  • The contribution margin is a relatively good measure of performance because it corresponds to the profit target.
  • This prompts employees to promote products with high profit margins and court lucrative customers.

Disadvantages of the contribution margin:

  • Determining the contribution margin is relatively difficult and time-consuming
  • The contribution margin is based on a partial cost calculation. It must be disclosed which costs are taken into account and which are not included. Otherwise, the contribution margin becomes an object of manipulation and the sellers cannot be expected to accept such a remuneration basis.
  • The employees neglect the sale of the entire product range and the processing of small customers with high potential.
  • The contribution margins of individual products can be zero (SLO) or negative (equalizer).
  • The later the customers pay, the lower the contribution margins of the individual products. If the sellers allow or tolerate payment periods that are too long, the contribution margins are consumed by corresponding interest costs.
  • The individual seller can only influence the contribution margin to a small extent.
  • The remuneration based on the contribution margin achieved requires relatively high commission rates, which can be undesirable for visual reasons.
  • The sales force must be informed of the contribution margins of the individual products. There is a risk that this sensitive information could end up in the hands of competitors and / or customers.
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