This chapter presents the following content: What is motivation? reasons for motivating salespeople, what goals are most important? how successful were you at reaching your goals? maslow’s hierarchy of needs, an exercise to determine your motivational needs,...
Trang 1SALES FORCE LEADERSHIP
Chapter 12:
Compensating Salespeople
Trang 2 Acceptable ratio of costs to sales force output
in volume, profit, or other objectives
overall, marketing, and sales force objectives and strategies
thereby enhancing longterm customer
relationships
adjustments that facilitate administration
Goals of a Sales Force
Reward System
Trang 3Convergence Selling
Account Management Leverage Selling
New Business Development
New
Current
CUSTOMERS
PRODUCTS
Figure 141: The CustomerProduct Matrix
The CustomerProduct Matrix
Trang 4SALARY Motivate effort on nonselling activities
Adjust for differences in territory potential
Reward experience and competence
COMMISSIONS Motivate a high level of selling effort
Encourage sales success
INCENTIVE
PAYMENTS
Direct effort toward strategic objectives
Provide additional rewards for top (Bonus) performers
Encourage sales success
SALES
CONTESTS
Stimulate additional effort targeted at specific short term objectives
PERSONAL
BENEFITS
Satisfy salespeople’s security needs
Match competitive offers
Trang 5 Government Computer Sales, Inc.’s compensation plan ties a portion of reps' pay to the information they obtain from their clients.
Mandates reps to dig deeper and put GCS in the minds of the government agencies and educational institutions that use its products.
If a rep has $15,000 of available commission for the first ½
of the year the plan would work as follows:
40% ($6,000) is tied to account management (i.e., customer information)
60% ($9,000) is tied to a profit dollar quota Reps who meet the documentation requirements receive all
$6,000; those who meet less than 85% do not receive the $6,000
Trang 6Percentage of Companies Using
Straight Salary 18
Straight Commission 19
Combinations Plans (63%)
Salary Plus Bonus 24
Salary Plus Commission 20
Salary Plus Bonus Plus Commission 18
Commission Plus Bonus 1
Trang 7Compensation Plan Advantage Disadvantage
Salary No motivation
Favors unproductive sales people
High costs when sales are low
Trang 8Compensation Plan Advantage Disadvantage
Salary Reduced turnover
Simple
Easy to administer
Good when difficult to determine who made the sale
Good when service is required
Promotes longterm goals
Good during drastic business swings
Easier to transfer salespeople
No motivation
Favors unproductive sales people
High costs when sales are low
Trang 9Compensation Plan Advantage Disadvantage
Commissions Motivational
Relates directly to performance
Unlimited income (assuming no cap)
Good for saving money
on unproductive salespeople
Perceived fair
Trang 10Compensation Plan Advantage Disadvantage
Commissions Motivational
Relates directly to performance
Unlimited income (assuming no cap)
Good for saving money
on unproductive salespeople
Perceived fair
No loyalty
Little security
Short range view
High turnover
Management has less control
Trang 1110,000 20,000 30,000 40,000
10 %
Co mm
iss ion
Sales Per Person in Thousands
50,000
Comparing Salary and Commission Plans
Use of Compensation Plans
0 100 200 300 400 500
Straight Salary
Trang 12Infrequent Incentive Payments
Frequent Payment Advantages
Salespeople receive frequent
feedback and rewards when selling
cycle is short
Rewards are close in time proximity
to the successes that provided the
reward
Strong link between successful
behavior and reward – motivation
increased
Payments at bonus time are larger and have greater impact
Performance is more stable because shortterm sales variations are smoothed over the longer time horizon
Incentives are not paid till end of year – smoother cash flow
Trang 13Compensation
satisfaction.
the competition
Trang 14Commission Problem
Assume the following:
The salesperson makes 20% commission on the gross margin
It costs $80 to make the product.
Overhead is $10.
Marketing
Selling Price $100 $92 8%
Trang 15Commission Problem
Marketing
Selling Price $100 8%
Cost of Goods Sold (80)
Gross Margin $ 20
GM% Commission x 20%
$ Commission $ 4.00
Contribution 16.00
Overhead Costs (10.00)
Net Profit (Loss) $ 6.00
Trang 16Commission Problem
Marketing
Selling Price $100.00 $ 92.00 8%
Cost of Goods Sold 80.00 80.00
Gross Margin $ 20.00 $ 12.00
GM% Commission x 20% x 20%
$ Commission $ 4.00 $ 2.40 40%
Contribution 16.00 9.60
Overhead Costs 10.00 10.00
Net Profit (Loss) $ 6.00 $ (0.40) 106%
Trang 17Research on Pricing and Profits
Trang 18Average Sales Rep
Poorly Performing Rep
Midlevel Performing Rep
Top Performing Rep
Sales Executive
$119,600
$71,000
$94,800
$161,500
$147,800
Compensation Levels for Firms
Using Salary Plus Incentives
Trang 19Selecting Benefits