Chapter 12 compensating salespeople. Compensation objective _ compensation is one of the most...
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Transcript of Chapter 12 compensating salespeople. Compensation objective _ compensation is one of the most...
Compensation objective
_ compensation is one of the most important motivating and retaining field salesperson
_ sales force compensation is a cost that can be quickly spiral out of control if the compensation plan is design improperly
Compensation objective
So the useful tool to translate company objectives and desires of salespeople into an appropriate compensation plan is to consider the customer product matrix
The Customer-Product MatrixThe Customer-Product Matrix
CustomerConvergenceConvergence
SellingSelling
AccountAccountManagementManagement
LeverageLeverageSellingSelling
New BusinessNew BusinessDevelopmentDevelopment
New
Current
Current New
PRODUCTSPRODUCTS
Compensation methods
combination plan : combine salary with some types of incentives (like bonus and commission ) managers used these incentives for intermediate level of salespeople
Straight salary
_ Involves paying a fixed amount each pay period .
Advantages :1. More control over wages level 2. Allow maximum control over sales
people activities Limitations :1. Salary don’t provide strong incentives for
extra effort.
Straight salary
2. Salaried employees required supervision
3. This method overpay the least productive members of sales team
Application :
1. In competitive environment
2. when team selling is important
3. sales of complex products
4. When product are resold through advertisements
Straight commission
_ salespeople on commission are paid a percentages of the sales or gross profit they generate
Advantages :
1. Foster independence of actions
2. Maximum incentives
Straight commission
Limitations :
1. Little control over commission people
2. Turn over when business conditions are too bad
Application :
1. When maximum incentives is needed and minimum post sale service
Salary +Bonus
- Used to provide representatives with income security while the bonus gives added incentives to meet company objectives .
_ Bonus : are discretionary payment for reaching specific goals and are paid annually
Salary +Bonus
Advantage:1. Balance the need to control selling
expense and provide extra rewards 2. lower turnover Limitations : 1. In some firm the size of bonus is so
arbitrary 2. Deals with the relation between
performance and rewards
Salary + commission
_ to give a salespeople a push needed to sell complex products and services
Advantages :-
1. Commission rate can be adjusted to promote the sale of individual products
2. Paid monthly
3. Discourage salespeople to leave the company
Salary + commission
Limitations :
Expensive and costly to administer
Application :
In industries where business fluctuate with seasonal or economical cycles
Salary + commission +Bonus
_ the most comprehensive plan combine the stability of the salary , the incentives of a commission and special rewards of bonus
Advantages :_1. Allow manager to reward everyone2. Allow to design different plan to appeal
salespeople needs3. Earn more money
Salary + commission +Bonus
Limitations :-
This method is too complex
Application:
Industries such as electronics and business services .
Commission +Bonus
Combines the incentives of a commission and a special rewards for meeting firm’s objectives
Advantages :
1. Easy to understand
2. Simple to administer
3. Similar cash flow benefit
Commission +Bonus
_Limitations :Perceived equity of the year end bonus
that’s mean a typical high performing sales person become frustrate when he or she sees that top salesperson receive larger year end bonus
_Application :Suited to companies which use independent
sales Rep .
Conclusion for these methods
So company recognize that compensation plans are than just a way to pay people for their service they become everything from recruiting tool to culture driver .
Customer satisfaction and sales force compensation
_ The concept of TQM focus on delivering high quality products & making sure customers are satisfied
Team selling plan
Team selling : involves two sale persons in separate territories need to coordinate their activities and work together to complete the sale
The customer demand and the complex of business environment making team selling is more common
Profit based commission
The main objective of compensation program is to provide direction to sales force to achieve business objectives .
In the profit based commission company and salespeople share the same pool of money (Gross margin) both are interested in maximizing the amount .