Sales incentive design has become a specialised discipline—and for good reason. In a world where many companies struggle with performance, misalignment, and failing systems, designing incentives “by intuition” is no longer enough. A well-structured incentive plan can motivate salespeople, reinforce company objectives, and drive predictable revenue growth.
But how exactly does an effective incentive system work?
And what makes ramped commissions one of the most powerful models?
This guide breaks it all down.
Key Takeaways
- Ramped commissions drive behaviour, not just earnings.
- The right rate structure is both psychological and strategic.
- A poor incentive design costs far more than a generous one.
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Why Incentive Design Matters Now More Than Ever
A modern sales organisation cannot rely on outdated compensation systems. Incentives must:
- Motivate salespeople to achieve (and exceed) targets
- Direct sales behaviour toward company objectives
- Support strategic priorities (new product penetration, upselling, market expansion)
- Stay fair, transparent, and aligned with performance
- Support long-term sales culture—not just short-term wins
At its core, an incentive system serves two purposes:
- Reward hard work and performance, and
- Maintain strong relationships between salespeople, leadership, and stakeholders
To achieve this, the incentive plan must clearly define:
- Total Target Compensation (TTC)
- Salary vs. variable compensation split
- Bonus or commission mechanics
- Performance thresholds and payout conditions
- Rules for payment, clawbacks, accelerators, and caps
Commission Plans Explained
What Is a Commission Plan?
A commission plan pays salespeople a percentage of revenue, margin, or units sold. The company sets:
- The commission rates
- The performance thresholds
- The payout rules
This system is transparent, easy to understand, and widely used—especially when sales outputs are measurable.
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What Is a Ramped Commission?
A ramped commission pays different commission rates depending on the performance level achieved. Instead of one flat rate, salespeople earn more as they hit higher levels of their target.
Example Scenario
- Annual target: $1,000,000
- Minimum acceptable performance: 40%
- Commission rates:
This ensures:
- Salespeople always earn something
- Higher performance unlocks higher rewards
- Companies can strategically push behaviour at different stages
How Commission Rates Change Across Performance Levels
Commission ramps usually consist of multiple “tiers.” Each tier represents a performance band with its own rate.
Typical Structure
- Threshold (0–30% or 0–40%)
- Core Performance (40–100%)
- Accelerator Zone (100%+)
Companies choose thresholds depending on:
- Sales cycle
- Market conditions
- Role type
- Profit margins
- Strategic goals
Why Most Companies Use Ramped Commissions
Q: Why use a ramped commission instead of a flat rate?
A: Because ramped commissions use psychology to drive motivation.
Salespeople naturally want to reach the next tier. They understand exactly what they stand to gain if they push a bit harder. This creates urgency, effort, and focus.
Main reasons ramped commissions work so well:
- They motivate different behaviours at different stages of the sales cycle
- They reward overachievement—critical for high-growth companies
- They help steer effort toward key products, segments, or priorities
- They can be used to encourage or discourage certain behaviours (progressive vs. regressive ramps)
Choosing the Best Commission Rate: A Practical Guide
Designing the right ramp requires a balance of data, psychology, and financial modelling.
Key Rules When Choosing Commission Rates
- Analyse the total payout at each level
- Choose the right milestones
- Understand human motivation
- Use the right ramp type
Q: When should a progressive ramp be used?
Use a progressive ramp when:
- Sales are hard to achieve
- The company wants to push higher performance
- Overachievement is highly valuable
- You want to differentiate top performers
Q: When should a regressive ramp be used?
Use a regressive ramp when:
- Extra sales require less effort at higher volumes
- Margins shrink for large deals
- The business wants to avoid over-discounting
- The company is not profitable beyond certain volumes
What Happens If You Design the Incentive Plan Incorrectly?
A poorly designed incentive plan can cause serious damage.
Negative Consequences of Wrong Levels or Rates
- Misaligned behaviour — salespeople sell the wrong products
- Low motivation — reps stop trying after a certain point
- Reduced revenue — sales stagnate because reps avoid difficult tiers
- Attrition of top performers — who leave because “the plan doesn’t reward effort”
- High replacement costs — as good people walk away
- Failure to meet strategic goals — because incentives push behaviour in the wrong direction
If the plan is not rewarding enough, salespeople:
- Work less
- Sell less
- Make less
- And the company misses targets
Q&A: Common Questions About Ramped Commissions
Q1: Should all roles have ramped commissions?
Not necessarily.
Roles with clear, measurable output benefit most (e.g., hunters).
Account managers or pre-sales specialists may require bonuses instead.
Q2: Should companies cap commissions?
Usually no—caps discourage top performers.
But in low-margin industries, a soft cap or regressive ramp may be necessary.
Q3: Should accelerators start exactly at 100%?
Not always.
Some companies start accelerators at 80–90% to build momentum.
Conclusion: A Well-Designed Ramped Commission Can Transform Sales Performance
When structured correctly, ramped commissions:
- Motivate the right sales behaviours
- Inspire high performance
- Drive better revenue outcomes
- Support strategic company goals
- Reinforce fairness and transparency
But when done wrong, they create frustration, misalignment, demotivation, and lost revenue.
The key is thoughtful, data-driven design with clear psychology, financial modelling, and strategic alignment.
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