There is nothing new about distributor compensation issues. As far back as the 1960s, wholesalers have been concerned about innovative approaches to motivating salespeople. The environment back then was different; warehouses were smaller, inside sales were untrained, and phone systems were inefficient. Clearly, an “ACE” Attitude, Confidence and Enthusiastm seller could create major financial benefits. Feeling that salespeople needed to be compensated differently from the rest of their staff, distributors looked for a way to capture what was referred to at the time as “the natural born salesman.” Somewhere along the way, the industry established, adopted, and embraced the sales commission model. And, based on interviews with a few industry pioneers, the commissions were mostly based on sales volume. But, we put a man on the moon, saw the summer of love and Woodstock, and business changed.
Now fast foward a couple of decades to the mid-1980s. The first round of margin pressure hit. Computer systems allowed even counter salespeople to see the cost, while cost plus pricing expanded. Additionally, a new generation hit the workplace, and we had a recession. Adapting to the business environment, distributors tweaked commission programs, shifting from gross sales to gross margin-centric plans.