Your OTE or On-Target Earnings is the total amount of money you expect to get from your employer if you hit 100% of your targeted performance or quota. If your sales or marketing job posting says “$50,000 OTE” and you are thinking of it as your base salary, let me break your misunderstanding.
Having a clear understanding of OTE is essential if you are opting for a career in digital marketing and sales. I am here to guide you with a complete understanding of OTE and how you can calculate this compensation for your digital marketing designation.
Get started with this easy calculation and learn how different marketing and sales positions achieve their 100% OTE target!
Table of Contents
What is OTE?
OTE or On-Target Earnings is the maximum salary that you can earn if compensation is a part of your role. When you meet 100% of your targeted sales or performance in a year, you will get your OTE salary. It is the total of your guaranteed base salary + non-guaranteed commissions.
Depending on your role, responsibilities, and performance quota, the OTE is set by the employer. A well-designed OTE model and salary guidelines keep you and your team motivated.
Now that you know the OTE meaning, let’s find out its role in sales and marketing to keep your performance game at the top:
OTE Meaning in Sales & Marketing
In sales and marketing, OTE represents the total expected compensation of a sales and marketing person once they meet their performance goal within a year. This model helps the employees understand their income potential, offering a clear view of their target for sales and performance.
OTE can be earned by selling targeted products, reaching out to specific customers and successfully convincing them to get services, or driving targeted organic traffic to websites. It works as a motivator for digital marketers and SEO executives.
How OTE Is Calculated?
Calculating OTE is easier than you expect it to be. But first, let’s find two types of On-Target Earnings and how you can calculate each:
Capped OTE
- A limited On-Target Earnings is a decided or limited amount of compensation that is decided by the employer. It is ideal for digital marketing professionals.
Formula: Base Salary + (Sales Target * Commission Rate) + Bonus – [Excessive Earnings Cap]
| Breakdown: Base Salary- fixed and regular, Sales Target- minimum sales figure to earn commission, Commission Rate- percentage of sales, Bonus- additional performance compensation, Excessive Earnings Cap- maximum amount of earnings an employee can get even if they exceed the sales target. |
Uncapped OTE
- Unlimited On-Target Earnings can be earned by going beyond the projected compensation and earning more money. It is ideal for high-performing salespeople to strive for their personal best.
Formula: Annual Base Salary + Annual Commission Earned at 100% Quota Attainment
| Breakdown: Annual Base Salary- fixed and regular, Annual Commission Earned at 100% Quota- maximum potential commission that can be earned if the targeted sales rate is exceeded. |
- Quick Tips:
1. Determine your base pay
2. Establish a clear sales quotas and target
3. Set commissions in OTE
4. Add everything up
5. Calculate through the foumula
Digital Marketing Positions with OTE Compensation
Below are the common digital marketing positions that often get the benefits of OTE compensation. Here is a breakdown:
Marketing Director & Manager
How OTE Applies for These Roles: These roles may receive OTE compensation based on specific department performance metrics such as lead generation, ROI from campaigns, and revenue growth.
OTE Calculation: A base salary with bonuses based on KPIs hitting, like MQL targets, campaign ROI thresholds, or sales channel contributions.
Sales Directors & Managers
How OTE Applies to These Roles: OTE is most commonly used for sales directors and managers based on their leadership capabilities and sales team management.
OTE Calculation: The OTE is typically split into 50/50 or 60/40 between base and variable pay. They get commissions based on achieving quarterly or annual revenue quotas or team performance targets.
SEO Executives
How OTE Applies to This Role: Many brands set OTE for SEO executives as a motivator based on performance-driven environments where compensation directly links to organic traffic growth or ranking achievements.
OTE Calculation: Bonuses are based on metrics like keyword ranking improvements, organic traffic increases, or lead conversions from SEO channels.
Social Media Managers
How OTE Applies to This Role: Often gets OTE based on social media efforts and performance. Their roles are tied directly to measurable outcomes like conversions or lead generation.
OTE Calculation: OTE is calculated based on engagement rates, follower growth, campaign reach, or attributed revenue from social channels.
Email Marketing Specialists
How OTE Applies to This Role: Email marketers earn OTE when email campaigns are tied to sales funnels or direct revenue generation.
OTE Calculation: Bonuses and OTE calculation depend on open rates, click-through rates (CTR), conversions from email campaigns, or monthly email-driven revenue goals.
Tips to Set Up Your OTE Model
Now that you are sure about OTE model, here are some tips on how you can set up your OTE:
✔ Determine what your company’s current goal and what are they trying to achieve.
✔ Understand the sales cycle and the risk appetite to consider goals of your rep.
✔ Make sure that your OTE goals and sustainable for your reps and company.
✔ Lastly, stay informed about the market benchmarks to determined your OTE package.
Final Thoughts
Understadig the OTE meaning can be conusing. But actually it is not that hard. In simple words, it is the total earning of yours once you achieve 100% of targeted sales, including base salary.
Digital marketing agencies develop different OTE models based on each job responsibilities and performance. So, it is highly recommend to understand your job roles, sale cycle, and targets to calculate OTE.
To avoid the risk of losing out on your best talent, you can follow the above tips and set up your goals.
