Ch 11

12. (p. 342) When deciding which form of expense reimbursement to use, sales managers must make trade-offs between tight control aimed at holding down total expenses and the financial well-being of salespeople.

t

2. (p. 331) The foundation of most compensation plans is a package of benefits that is designed to satisfy the individual salesperson's need for security.

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3. (p. 332) One of the disadvantages of a combination compensation plan is that with this system selling expenses are not as predictable as with the other two forms of compensation plans.

t

7. (p. 337) Shorter time intervals between performance and the receipt of rewards increase the motivation power of a compensation plan.

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8. (p. 336) One of the problems in team selling is effective reward for the sales person effort.

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9. (p. 337) Sales contests provide salespeople with an opportunity to earn both extrinsic and intrinsic rewards.

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16. (p. 330) The core of a salary compensation plan is A. Salary and incentive payments B. Straight salary C. Benefits and draw D. Perks and expense accounts E. Quotas and bonuses

a

24. (p. 330) Arlene wants to motivate a high level of sales effort among her sales representatives. She will likely use __________ to motivate her salespeople. A. Commissions B. Draws C. Perks D. Benefits E. Expense accounts

a

29. (p. 333) Valerie wants her salespeople to focus on customer relationships not short-run sales volume. She will likely use a ________________ compensation plan. A. Straight salary B. Draws C. Combination D. Benefits E. Commission

a

31. (p. 333) Which of the following statements does NOT describe an advantage inherent in the straight salary compensation plan? A. It directly relates selling expenses to sales resources B. It provides sales reps with the maximum amount of security C. It is easy to administer D. It yields more predictable selling expenses E. It gives sales managers a large amount of control over sales reps

a

50. (p. 336) Most compensation plans credit a salesperson with a sale: A. When the order is accepted by the company, less any returns and allowances B. After payment is received from the customer C. Only after the goods have been shipped D. In a combined manner, where one-half of the sale is assigned when the order is received and the other half when the customer pays E. In a variety of ways with no one way being more popular than any other

a

55. (p. 338) Which of the following sales activities could be enhanced by the planning and implementing of a sales contest? A. Finding new accounts B. Providing service assistance C. Setting up point-of-purchase displays D. Keeping up with technical developments in the industry E. All of the above

a

63. (p. 347) Which of the following statements about compensation levels for salespeople is true? A. Many small firms cannot offer training programs, so they provide their sales force with above-average compensation B. Most firms consciously pay their salespeople at a rate slightly below the industry average C. Large firms with large sales forces tend to offer above average compensation D. The starting point for deciding on a compensation level should be the gross amount of compensation that is necessary to attract the right level of selling talent E. None of the above statements about the compensation levels for salespeople is true

a

13. (p. 329) Candice is developing a compensation plan for the salespeople in her new company. In order to have a successful compensation plan, a basic question she will need to address is A. How many salespeople to hire? B. What mix of financial and nonfinancial compensation and incentives to use for motivating the sales force? C. When to involve the clerical staff in the compensation plan? D. How often to change the compensation plan? E. Where to find bonus/quota ratios appropriate for international sales reps?

b

17. (p. 330) How does a bonus differ from a commission? A. Bonuses are typically made for each sale made; commissions are not paid until the salesperson surpasses some level of total sales B. Commissions are part of the basic compensation plan; bonuses are additional incentives C. Bonuses satisfy the salesperson's need for esteem; commissions satisfy the physiological and security needs only D. Bonuses are always used as a tactical motivational tool; commissions are a strategic motivational tool E. There are no real differences between bonuses and commissions

b

35. (p. 333) Boris is graduating from college and looking at a career in sales. His career counselor advises him to look at __________________ positions in order to have time to learn the ropes and develop his selling skills. A. Market research B. Relationship selling C. Product stocking D. Nonfinancial selling E. Straight commission

b

36. (p. 333) Which of the following statements about a straight salary compensation plan is true? A. Straight salary compensation is more commonly used with experienced salespeople than with new sales recruits B. The major limitation of straight salary compensation is that financial rewards are not tied directly to any specific aspect of job performance C. Straight salary compensation plans do not give sales managers the flexibility they have with commission plans D. Straight salary compensation plans are most useful when management wants to motivate its salespeople to achieve short-run sales volume increases E. Straight salary compensation is inappropriate for industries where missionary selling is commonplace

b

39. (p. 334-335) Foster offers his salespeople a variable commission rate. He pays his salespeople based on A. Straight salary B. Sales of the most profitable items C. Sales volume minus the expense account draws D. Contests and bonuses E. None of the above

b

42. (p. 334) Which of the following statements about straight commission compensation plans is true? A. Compensation cost per unit is always lower under a straight commission plan B. Many firms, especially those engaged in relationship selling have abandoned straight commission plans C. Straight commission plans increase management's control over the sales force D. Companies operating with straight commission plans tend to have lower turnover rates when business conditions are poor than do companies with a straight salary plan E. Firms that are short on working capital should never use the straight commission plan

b

57. (p. 341) Which of the following statements is NOT an appropriate guideline for designing an effective formal recognition program? A. The program should be balanced in terms of appearing as if everyone has a chance to win while allowing only a few people to actually be recognized B. The program should have both subjective and objective selection processes C. There must be adequate publicity of the winners D. Winners should be recognized in a formal ceremony E. The recognition program must be in good taste

b

61. (p. 343) Assessing the firm's relationship selling objectives and determining which aspects of job performance to reward are key issues when A. Deciding on the most appropriate level of compensation B. Monitoring sales motivation programs for fairness and effectiveness C. Hiring young sales representatives D. Paying straight commission E. None of the above

b

62. (p. 345) One negative outcome of complex compensation and incentive programs is they may lead to ____________ among salespeople. A. Reduced benefits B. Confusion C. Increased perks D. Vertical salary compression E. Alternative contest complaints

b

8. (p. 335) Roger's company uses a combination salary compensation plan. The incentive portion of the plan will likely be small if A. All of the salespeople want it that way B. The company's products are largely presold through advertising C. The salary component is also small D. Selling skill in an important component to overall success E. All of the above

b

14. (p. 330) Studies of sales force compensation indicate A. Straight commissions works best B. Straight salary plus bonuses is most effective C. Everything from salary to commission to various nonfinancial factors motivate salespeople D. Carefully designed sales compensation plans requires years to develop but once designed will work indefinitely E. When people want to work the compensation does not matter

c

18. (p. 330) Bonuses are almost always tied to A. Commissions B. Draws C. Quotas D. Benefits E. Expense accounts

c

19. (p. 330) Natalie wants to motivate her salespeople to toward meeting the quarterly sales volume and profit quotas. She will likely use __________ to motivate her salespeople. A. Commissions B. Draws C. Bonuses D. Benefits E. Expense accounts

c

21. (p. 331) In terms of Maslow's hierarchy of needs, benefit packages as a part of a compensation plan are intended to satisfy a salesperson's need for: A. Self-esteem B. Belonging C. Security D. Self-actualization E. Style

c

26. (p. 332) The three primary methods of compensating salespeople are A. Commissions, bonuses and expense accounts B. Draws, prerequisites and contests C. Straight salary, straight commission and combination plans D. Straight nonfinancial incentives, bonuses and contests E. Straight commissions, straight contests and variable benefits

c

27. (p. 332) In recent years, a steady trend has developed toward ____________ compensation plans. A. Salary B. Draws C. Combination D. Benefits E. Commission

c

34. (p. 334) Which of the following statements describes an advantage inherent in the straight commission compensation plan? A. It gives sales reps little financial security B. It provides sales managers with minimal control over their sales forces C. It allows sales managers to relate selling expenses directly to sales resources D. It makes selling expenses less predictable E. All of the above statements describe disadvantages inherent in the straight commission compensation plan

c

38. (p. 334) Which of the following statements about the straight commission compensation plan is true? A. Financial administrators believe that commission compensation plans are anxiety producing and often try to dissuade organizations from implementing such a plan B. Straight commission compensation is appropriate for companies that require its sales force to engage in missionary selling C. Commission compensation plans are especially advantageous for companies that are short of working capital D. Salespeople on a straight commission plan are more likely to engage in making cold calls than salespeople on a straight salary plan E. Straight commission compensation plans are inherently unfair

c

41. (p. 334) Commission plans are fair if A. Salaries are equivalent B. Team selling is modified to meet the customer's needs C. Territories have equal potential D. Commission rates vary with the time of year E. Commission plans are never fair

c

44. (p. 334) Which of the following statements about the combination compensation plan is true? A. Combination compensation plans are found more frequently in large firms than smaller ones B. When the salesperson's selling skill is the key to sales success, the incentive portion of his or her compensation should be relatively small C. The most popular combination compensation plan offers a base salary plus some proportion of incentive pay D. Commission rates are more often found in companies that use combination plans than in a company that simply uses a straight commission plan E. Combination compensation plans have all the limitations associated with straight salary and straight commission plans

c

46. (p. 335) Which of the following questions must a sales manager answer when designing an effective combination compensation plan? A. What size sales territory will yield the appropriate sales volume for providing equitable commissions and bonuses? B. How can the most people be rewarded with the least expense? C. Should there be a ceiling on incentive earnings? D. How does the compensation plan support the company's mission? E. All of the above are questions that a sales manager must answer when designing an effective combination compensation plan

c

51. (p. 337) When considering incentive plans, A. All plans should be the same B. Big companies do not need incentive plans while small companies need them C. Shorter intervals between performance and receipt of rewards motivates salespeople D. Team incentive plans should always be based on team performance E. Bonuses should always be paid annually

c

9. (p. 343) A limited reimbursement expense account plan can A. Motivate salespeople to spend their own money B. Lead to uncontrollable spending C. Hurt motivation of salespeople D. Be used to control production financing E. Stimulate bonus/quota attainment

c

15. (p. 330) In most sales organizations, the total compensation comprises several components, A. All focused on either sales volume or gross profit margin B. Each coordinated to minimize bonuses while maximizing sales C. With draw the most important and benefits the least important D. Each designed to achieve a different objective E. All of the above

d

20. (p. 330) To be effective, quotas need to be A. Specific B. Measurable C. Realistically attainable D. All of the above E. None of the above

d

22. (p. 337) The primary objective of a sales contest is to: A. Encourage the development of a long-term emphasis on nonselling activities B. Adjust differences in territory potential C. Satisfy salespeople's security needs D. Stimulate additional effort targeted at achieving specific short-term goals E. Reward experience and competenc

d

25. (p. 331) Gerald is having a difficult time recruiting salespeople. He learns competing firms are offering better _________ to meet the security needs of salespeople. A. Commissions B. Draws C. Territories D. Benefits E. Expense accounts

d

28. (p. 332) The goal in developing a salary compensation plan is to create A. Security B. Cooperation C. Loyalty D. Pay for performance E. Variable defined compensatory valences

d

45. (p. 335) All of the following are questions that a sales manager must answer when designing effective combination compensation plans EXCEPT: A. When should the salesperson be credited with the sale? B. How often should the salesperson receive incentive payments? C. What is the appropriate size of the incentive relative to the base salary? D. What size sales territory will yield the appropriate sales volume for providing equitable commissions and bonuses? E. Should there be a ceiling on incentive earnings?

d

47. (p. 335) Warren is deciding what proportion of his salespeople's compensation should be incentive pay. He should base his decision on A. The financial needs of his salespeople B. When the company wants to expand C. Which salespeople he wants to retain D. The degree of relationship selling involved in the job E. Who his salespeople call on

d

56. (p. 338) Which of the following statements about sales contests is true? A. Sales contests should be considered as a part of a firm's ongoing compensation plan B. Most sales contests should be held for a relatively long period of time in order to maximize benefits and participation C. Sales contests should have generalized objectives to allow for unexpected benefits D. It is more desirable to have a high percentage of winners in a sales contest than a low percentage E. The sales contest in which all the members of the sales force compete against each other is the most popular format 

d

58. (p. 342) The primary advantage of the ________________ expense reimbursement plan is it gives the sales manager some control over the magnitude and kinds of activities salespeople will be motivated to engage in. A. Limited reimbursement B. Advanced lump-sum C. Fixed cost drawing account D. Direct reimbursement E. Computerized reimbursement

d

Halkco sells floor systems for semi-trailers and train cars. The objective of the company is to increase its sales of its replacement flooring systems by 10 percent during the upcoming fiscal year. At its national sales conference (the theme this year was Mining for Prospects), its 124 salespeople were told about a sales contest for the upcoming year, "The Klondike Gold Rush". For the contest announcement, top Halkco management was dressed like 19th century prospectors. The ten winners will be formally recognized at next year's sales convention and receive a half pound gold bar. The salesperson who sells the most replacement flooring will also receive a two-week vacation to British Columbia in Canada. Another 40 salespeople will also be recognized and given a Canadian gold dollar. 54. (p. 339) Critics of sales contest would warn Halkco's executives that: A. Making the salespeople excited about selling can create a problem with the sales reps' internal locus of control B. Too many rewards can make winning seem not worth the effort C. Sales contests circumvent the reasons for using normal compensation plans D. Such contests may produce largely illusionary sales, with no lasting improvement in market share E. All of the above could occur as a result of the contest

d

23. (p. 332) In designing a compensation plan, the primary objective of a salary is to: A. Stimulate additional effort targeted at achieving specific short-term goals B. Motivate salespeople to a higher level of selling effort C. Encourage sales success D. Satisfy salespeople's security needs E. Do none of the above

e

30. (p. 333) Brett is part of a sales team. His task is to address existing and potential customers' technical questions. He rarely is involved in prospecting or closing sales. Brett will likely be paid A. Commission B. Draws C. Combination D. Benefits E. Straight salary

e

32. (p. 333) Salespeople who are primarily engaged in ___________ will likely be paid straight salary. A. Market research B. Customer problem analysis C. Product stocking D. Customer education E. All of the above

e

33. (p. 334) Which of the following statements describes a disadvantage inherent in the straight commission compensation plan? A. It gives sales reps little financial security B. It provides sales managers with minimal control over their sales forces C. It can cause sales reps to provide inadequate service to smaller accounts D. It makes selling expenses less predictable E. All of the above statements describe disadvantages inherent in the straight commission compensation plan

e

37. (p. 333) Which of the following sales activities would NOT be enhanced through the implementation of a straight salary compensation plan by a company that sells customized retail stock display units? A. Cold calling B. Designing a product demonstration C. Keeping current with technical developments in the inventory management field D. Training on a new type of database software E. Selling the inventory system

e

40. (p. 333) Usually commissions are based on ___________ but it is becoming more popular to base commissions on ______________. A. Straight salary; profit B. Expenses; volume C. Sales volume; expense account draws D. Contests; volume E. Sales volume; profitability

e

43. (p. 334) To offset the problem of income instability associated with straight commission plans, many companies offer their salespeople a __________ against commissions. A. Straight salary B. Quota C. Perk D. Contest E. Draw

e

49. (p. 336) Which of the following statements about incentive pay ceilings is true? A. Incentive ceilings can be used to protect against windfalls B. Incentive ceilings make a firm's maximum potential sales compensation expense more predictable and controllable C. Firms in relatively low paying industries are more likely to impose incentive ceilings than those in high-paying industries D. Incentive ceilings are used to ensure that top-performing salespeople will not make such high earnings that other employees suffer resentment and low morale E. All of the above statements about incentive ceilings are true

e

52. (p. 339) In order to generate interest and enthusiasm for a sales contest, companies should: A. Launch the contest with fanfare advertising for it B. Recognize and publicize the winners after the contest C. Give each salesperson frequent feedback on his or her progress D. Have an exciting theme to build enthusiasm E. Do all of the above

e

60. (p. 342) Which of the following statements about limited reimbursement plans is true? A. Firms on a limited reimbursement plan minimize the total amount of expense reimbursements by setting maximum limits for each expense item B. Firms on a limited reimbursement plan minimize the total amount of expense reimbursements by providing lump-sum payments to cover total expenses C. Of all the reimbursement plans, the limited plan is the best motivator D. When on a limited reimbursement plan, the typical salesperson pays his or her expenses out of pocket rather than doing without E.Both A and B

e

Halkco sells floor systems for semi-trailers and train cars. The objective of the company is to increase its sales of its replacement flooring systems by 10 percent during the upcoming fiscal year. At its national sales conference (the theme this year was Mining for Prospects), its 124 salespeople were told about a sales contest for the upcoming year, "The Klondike Gold Rush". For the contest announcement, top Halkco management was dressed like 19th century prospectors. The ten winners will be formally recognized at next year's sales convention and receive a half pound gold bar. The salesperson who sells the most replacement flooring will also receive a two-week vacation to British Columbia in Canada. Another 40 salespeople will also be recognized and given a Canadian gold dollar. 53. (p. 337-338) Why is this sales contest doomed to fail? A. The company does not have a clearly defined sales objective for the contest B. The contest features will produce anxiety among the sales force because they are too exciting C. The rewards are likely to be more demotivating than motivating D. The company over-sold the sales contest E. Nothing is wrong with this contest; it has every reason to succeed

e

10. (p. 340) One of the advantages of sales contests is the way they always create employee cohesiveness and improve employee morale.

f

4. (p. 334) Drawing accounts are provided to salespeople on a straight commission plan as added incentive pay.

f

5. (p. 336) Incentive payments are always awarded to the salesperson when the company receives the sales order.

f

6. (p. 335) Incentive programs should never have ceilings.

f

1. (p. 330) A sales contest can be designed to encourage extra effort aimed at specific short-term objectives.

t

11. (p. 340) Most sales managers consider opportunities for promotion and advancement second only to financial incentives as an effective sales force motivator.

t