CH 12: Sales Force Compensation
Combination plan disadvantages
-can be complex and difficult to understand -can be expensive to administer -likely to fail if not carefully developed
Features of good compensation plans
-control over how sales ppl allocate their time -economic balancing of sales costs and sales results -motivational for sales ppl to inc effort -simple to administer and explain, and flexible to adjust -income regularity -reward for superior performance -fairness
Unlimited reimbursement plans
-cover all selling and travel expenses with no limit being put on total expenses, but sales reps must regularly submit itemized records of their expenditures
Salary plus bonus
-for achieving long-run obj, such as selling large installations or product systems or achieving a desired customer mix
Salary plus commission plus bonus
-for seasonal sales and frequent inventory imbalances -when management wants to focus son certain products for customers
Commission plus bonus
-for team-based efforts in which some sales ppl call on central buyers or buying committees
Combination plan advantages
-greatest flexibility and control -provides security plus incentive -allows frequent, immediate reinforcement of desired behaviors
Establishing specific objectives
-larger mkt share -higher profit margins -introducing new products or services -winning new accounts -reducing selling costs
Types of sales compensation plans
-non-incentive based - hourly wage, straight salary -incentive based - straight commission, performance bonuses, merit pay, profit sharing, pay-for-knowledge, stock options, flexible pay compensation, combination -benefits based - health insurance, dental insurance, pension plans, social security
Limited reimbursement plans
-offer flat dollar amounts for food, hotel, travel for a given time period (usually a day or week), or an allowable cost per item
Developing the compensation plan
-prepare job description -est. specific objectives -determine general levels of compensation -develop the compensation mix -evaluate the plan -administer the plan -pretest the plan
When to use different combination plans
-salary plus commission -salary plus bonus -salary plus commission plus bonus -commission plus bonus
Combo reimbursement plans
-set limites on certain items such as food and lodging but not on transportation
Methods of compensation - 3
-straight salary -straight commission -combination - mix of salary and commission
When straight commission is best...
-strong incentives needed -selling costs need close control -service is less important -long-term relationships are less important
When straight salary is best...
-team selling -long negotiating periods -mixed promotional situations -during learning periods -missionary selling -special conditions (intro. new line of prods, opening new territories)
Trends in sales compensation
-tying sales compensation plan to productivity and retention -including customer satisfaction in the sales compensation plan (more common) -adjusting int'l sales compensation plans to meed local conditions - euro -commission for sales managers
Expense reimbursement plans
-unlimited reimbursement plans -limited reimbursement plans -combo reimbursement plans
Salary plus commission
-when management wants to get high sales without sacrificing customer service -for new sales ppl, since it provides more security than straight commission
Compensation
all monetary payments and benefits used to remunerate employees fro their performance compensation plans ad financial packages are recognized as the greatest motivator of sales ppl