Pam at KASL Radio AM 1240 writes,
I am interested in hearing from other radio professionals regarding contracts paid a year in advance. Does the Account Rep receive their commissions on the total amount paid in advance all at once, or do they receive them spread out over the life of the contract?
Our station has always given us the choice to take the commissions all at once, or spread them out over the year. However, our new sister stations spread the commissions out over the life of the contract as someone will need to manage the account should the Rep resign.
This makes sense, but it doesn't give the Rep any incentive to sell the annual contract paid in advance, which is always a nice big check for the station (and the Rep as well). We offer a 5% discount to our customers for annual contracts paid in advance.
How do other stations handle this? Looking forward to your responses, and Thank You!
I think you've looked at all the right areas to make a decision. I can see it working either way just fine depending on the type of people hired and the culture in the organization. You are vulnerable if a rep signs a bunch of key accounts one month picks up their check and heads to the new job. It might be wise to find a happy medium to keep the rep happy on big checks but not wait all year. Look at a six month payout with maybe 30% up front and the rest of 5 months.
Have a good day.
Rene Zamora
We pay the commission up front when the "pre-bill" is paid by the client. However, I have gotten stuck working on such accounts after the sales rep left and gotten zero commission.
Pam,
I have gone through this at stations I owned/managed in the past. My policy was to pay commission on the 15th of the month following the month it was collected. However...collection is only part of the job. As an incentive for clients to pre-pay, our stations would give a bonus in ads...10 or 15% free ads. Don't discount the dollar amount...give product/service instead. On prepays that covered more than one month, commission was paid only after the ads had run in the previous month. As an example, if a client bought and pre-paid an annual contract, the salesperson was paid commission on the 15th of the month following the month in which it was aired. If an incentive is needed for the salesperson, the station may consider a spiff or small additional commission for the prepay. One of the pitfalls of fully paying commission on long term prepaid orders is that there is always the possibility that the salesperson may leave the station before the contract had ended. If the full commission has been paid to him/her, what happens? It may be difficult to get the commission back from the salesperson. Plus, how is the replacement salesperson going to be paid for all the service work to be done for the balance of the contract. What happens if the client cancels, sells out or goes out of business? It happens.
No matter what a stations does in this matter, EVERY RADIO STATION SHOULD HAVE A PRINTED POLICY BOOK! This would clearly spell out how commissions are paid on all types of accounts, including pre-pays.
I once had a salesman sell and get paid a $5000 annual contract. A month later he resigned. He wanted full commission on the prepay. I refused as only 1/12 of the contract had been aired. I paid him for what had been aired WHILE HE WAS EMPLOYED AT THE STATION. He sued me in small claims court. In Court, I showed the Judge a copy of our station Policy, where it stated the policy on payment of commission on prepays. The Judge ruled in my favor as I had a written policy on the matter. (Don't just have a verbal policy...put it in writing). All employees are given a copy of the policy as part of the interview and job offer so they are aware of it going in. Each employee also signs a sheet that indicates they have received and read the station policy. It is important to include language in the policy that allows the station to change, amend, delete or add to any portion of the policy at any time and that printed copies of any such changes will be provided to all employees. Also very important, make sure the Policy clearly states that in no way does this Policy create any contract of employment between the station and employee....It is "Policy" and subject to changes from time to time by the station as it sees appropriate. If you don't have a written station Policy, sooner or later it will create a problem and may cost you money. The Policy should also cover: vacations; sick pay, leave of absence, pay periods, employee reviews; hours, chain of command, dress code, expense reimbursement requirements, and all other aspects of an employer-employee relationship. A written policy is very important.
Good luck!
Dale
The biggest advantage to annual contracts is on going advertising will bring better results for the customer. Getting them to pay in advance helps to cement their commitment. However, firstly I like having the ongoing billing for the next month. Secondly, if something happened where the contract had to be cancelled the refund check to the customer would be a hastle and I would hate to have it pulle dback from my next check. As an account rep, taking care of the account is the largest part of the job to help build the relationship towards keeping the door open for future advertising. It is rather an unhappy situation to work for a client on the balance of an annual contract when the commission has already been paid to a former employee. The current rep might find themselves putting more energy into those they are getting paid on and the station misses out on the future sale of an under serviced client.
I definatly agree that bonus ads are much better than dollar discounts. You dont cut your commission, your boss will smile just that much more at you, and unless you are in a totally sold out situation on all of your stations 24-7 the traffic and on-air like filling the log. the bonus ads can be weekends, overnights, a sister station that does not sell as well, and at the same time you are not messing with the value of your commercial time.
If this brings up the question of a rep resigning or not, there are deeper problems that need to be handled.
Our employee manual spells out how sales commission is earned: the presentation, the sale, the service, the collection. You also have to be employed at the station at the time commission is paid to receive the commission. So annuals paid in advance are paid month by month as the salesperson earns that commission by actively servicing the account.
It would be very short-sighted to pay a salesperson full commission for a year when (1) he/she could, for whatever reason, stop effective service on the account or a circumstance might arise with the account resulting in a reassignment to another salesperson, (2) leave their employment at the station - which then would require you to pay whatever salesperson who takes over the account commission a second time.
In the end, no account is the propriety of any salesperson - every account is the property of the station. Accounts can be reassigned at the discretion of management. This language needs to be in your employee handbook.
Believe me, there is not a manager in radio who would prefer bonus spots to cash up front. It's a business and it's all about cash flow.
I have more and more clients paying the total amount of the contract upfront - particularly small businesses. We offer 10% off for doing so or a 15% bonus in advertising. I never really "ask" the client which option they prefer. I make a point that anytime you can get more frequency that's fantastic. 95% of the time they choose the bonus.
The incentive for salespeople to sell an annual is that the airtime is presold, requiring only service. The incentive for salespeople to sell a prepaid annual is that the airtime is prepaid so the collection is never an issue and the resulting monthly commission is a 'given'.
We offer 10% off an annual either prepaid or paid on a fixed date monthly via ACH. We don't offer bonus spots in lieu because the client may take the lower frequency annual option (making up the difference in the bonus spots) and because the rates we provide for the annual packages are not something we want to run 15% more of.
I can certainly see your point Diane but I've never had a client lower the contracted amount and make it up with the pre-pay bonus ads. I get a lot more excited when it's a $10,000 rather than $10,000 minus 10%.
