At Sales Cookie, we automate sales commissions. We’ve analyzed thousands of commission structures, and have learned to identify common patterns within those structures. In general, about a third of organizations offer sales commissions to their Sales Engineers. This blog post describes the types of commission structures typically offered to Sales Engineers, and some recommendations to implement a successful incentive program.
What Sales Engineers Do?
Sales Engineers are responsible for facilitating sales during the discovery phase. They are most active when a client evaluates a product’s fit or capabilities from a technology perspective. At times, they work behind the scenes, answering questions from the sales team about technical capabilities, limitations, or scenarios. Sometimes, they actively engage with customers. For example, they may actively present technical capabilities, create a deployment roadmap, or describe a technical architecture to customers. In short, Sales Engineers are responsible for describing the technical and functional aspects of a solution, discovering potential issues, and offering technical recommendations. Let’s say your company is selling propellers for submarines. A Sales Engineer may answer questions (from the sales team and from clients) about material durability, power consumption, etc. They might propose a solution to assemble 3 propeller components to fit a new type of submarine, and bundle those 3 components as a package.
The Data Tracking Problem
Ideally, one would pay commissions based on an accurate measurement of each Sales Engineer’s impact. However, this implies it is possible to accurately measure and track their contribution for each sale. However, their degree of involvement often varies based on need. For example, a Sales Engineer may answer a quick question for one client, but spend long hours doing some technical research for another client. Their impact on each sale also varies. A Sales Engineer could be instrumental to a sale (for example finding a technical solution when things looked “stuck”). Or they might just answer routine technical questions when the sale was already virtually guaranteed. Therefore, tracking each SE’s exact contribution per sale can be difficult and it requires more tracking discipline than most organizations tolerate.
This is why many organizations:
- Use team / territory based commission plans for their SEs
- Limit the variable component of on-target earnings for their SEs
- Create clear career paths and seniority ladders for their SEs
Typical Sales Engineer Commissions
Many sales engineers have 70% or more of their compensation fixed (i.e. based on a salary), and 30% or less variable (i.e. based on commissions and bonuses). Often, the variable component is lower (ex: 10%) because it’s so difficult to measure their performance on a per-deal basis. However, Sales Engineers often have more structured career paths than other sales roles, with titles such as “Senior SE”, “Principal SE”, etc., where each ladder level includes additional compensation. Their managers are responsible for measuring true performance and granting promotions.
Typically, Sales Engineer commission plans (when offered) are based on territory or team performance. Sales engineers often receive low commission rates such as 0.5% or 1% of revenue over their territory. Sometimes, only specific types of deals (ex: strategic deals) are included in the territory’s total. Also, some organizations prefer to pay a cash bonus to Sales Engineers based on their territory reaching specific goals. This is more in line with the philosophy of offering a stronger base and lower variable.
As an alternative, some organizations compensate Sales Engineers based on client satisfaction or related metrics (ex: time to onboard, time to deploy, etc.). Other organizations choose to compensate Sales Engineers based on ratings from their internal sales team. Using those metrics often makes more sense than paying a percent of revenue because they better capture what is expected of Sales Engineers.
A Brief Look At Sales Engineer Compensation
There are plenty of surveys and job offers available online for you to analyze. As an example, below is sample SE compensation in a mid-sized organization with over 100 Sales Engineers. As you can see, the fixed component represents 75% of total compensation, while the variable component represents 25% – this is very typical. For comparison, an Account Executive would have a much larger proportion of their OTE allocated to variable pay. This makes sense – the more difficult the sale (ex: requiring more aggressive sales tactics), the higher the variable component should be to provide some upside to reward risk.
If you’re selling complex solutions, Sales Engineers are instrumental to the sale process. Because Sales Engineers typically have career ladder levels and greater opportunities for promotions, their variable component should be lower than other sales roles. To incentivize your Sales Engineers, you could:
- Attempt to track their contribution to each sale and individualize commissions
- Measure performance at the territory level and pay a percentage of revenue
- Offer pre-determined bonuses when a territory achieves specific goals
- Pay commissions based on metrics such as average time to onboard
Visit us online to learn more about automating your commissions.