How to design a commission table?

operations cases
New answer on Jan 12, 2021
3 Answers
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Dan asked on Jan 10, 2021
Looking to practice TMT cases (primarily telecom)

Hello.

I'm thinking about a business problem. Could you please help a bit?

Say we are a curated well-established B2C marketplace. What are the key factors that would define our commission collected from partners' orders on the marketplace?

I would think about rewarding (with lower commission) the partners with:

  • larger gross merchandise volume
  • more extensive product range
  • larger geography of sales (in terms of countries)
  • partners who use our additional services to promote their products on our marketplace

Cheers!

(edited)

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Ian
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replied on Jan 11, 2021
MBB | 100% personal interview success rate (8/8) and 95% candidate success rate | Personalized interview prep

Hi Dan,

Fundamentally, you have to say:

a) What matters (to our business)

b) What commission strructures change behavior to impact what matters

We need to determine the above before going any further! Then, the scale needs to also incentivize and "stretch" sales

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Vlad
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replied on Jan 10, 2021
McKinsey / Accenture Alum / Got all BIG3 offers / Harvard Business School

Hi,

The most common issue with the marketplace is the lack of supply.

Thus, you should incentivize the supply to accept certain orders by lowering commissions / increasing pricing for customers

Best

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Clara
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replied on Jan 12, 2021
McKinsey | Awarded professor at Master in Management @ IE | MBA at MIT |+180 students coached | Integrated FIT Guide aut

Hello!

On top of what has been shared beofre, I would advise you to look at retail and ecommerce cases. If you don´t have any, feel free to PM and I will share with you

Hope it helps!

Cheers,

Clara

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Ian gave the best answer

Ian

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