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Compare the advantages and disadvantages of different methods of sales force compensation.. Be aware of developing trends in sales force compensation.. What are the advantages and disadv

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Joe F Hair

Rolph E Anderson

Rajiv Mehta

Barry J Babin

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Digital Multimedia PowerPoint Lectures for

Sales Force Management

Prepared by:

Dr Rajiv Mehta Professor of Marketing New Jersey Institute of Technology

Newark, N.J.

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Chapter 12:

Sales Force Compensation

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Learning Objectives

When you finish this chapter, you should be

able to:

1 Explain the reasons for regularly reviewing

sales force compensation plans

2 Describe the basic steps in developing

compensation plans

3 Compare the advantages and disadvantages

of different methods of sales force

compensation

4 Be aware of developing trends in sales force

compensation

5 Understand the efficient and effective use of

expense accounts and fringe benefits in

compensation planning

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What are sales force compensation plans?

How should sales force compensation plans be developed?

What are the advantages and disadvantages of different

compensation methods?

What are the trends in sales compensation?

What are expense accounts and fringe benefits?

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Sales Force Compensation Plans

Compensation is defined as “all monetary payments and benefits used to

remunerate employees for their performance.”

As extrinsic rewards, compensation plans and financial packages are

recognized as the greatest motivator of salespeople

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Types of Sales Compensation Plans

Nature of Reward

Non-Incentive Based

Incentive Based Benefits

Based

Hourly wage Straight

commission

Health insurance Straight salary Performance

bonus

Dental insurance Merit Pay Pension

plans Profit sharing Social

security Pay-for-

knowledge Stock options Flexible pay compensation Combination

Sales Force Compensation Plans

Another way of looking at

compensation plans is based on

the nature of the reward

Along with examples of each

that are shown in the table,

compensation plans are:

1 Incentive based

2 Non-incentive based, and

3 Benefit based

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Variable Pay Compensation Systems

The importance employees assign to

rewards and reward preferences are

known to differ due to:

1 Changing needs

2 Career stage, and

3 Organizational level

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Developing The Compensation Plan

The seven distinct stages in the process of developing a compensation plan include:

1 Prepare job descriptions

2 Establish specific objectives

3 Determine general levels of compensation

4 Develop the compensation mix

5 Pretest the plan

6 Administer the plan, and

7 Evaluate the plan

3.

Determine General Levels of

4.

Develop the Compensation

7.

Evaluate the Plan

6.

Administer the Plan

5.

Pretest the Plan

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1 Preparing Job Descriptions

Develop meaningful job descriptions before

they can develop a compensation plan

Systematically compare job descriptions—

including responsibilities and performance

criteria—to other sales positions in terms of their

importance to the organization

3.

Determine General Levels of Compensation

4.

Develop the Compensation Mix

7.

6.

5.

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2 Establish specific objectives

Compensation plans are designed to

achieve organizational objectives, such as:

a Larger market share

b Higher profit margins

c Introducing new products or services

3.

4.

7.

6.

5.

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Features of Good Compensation

Plans

Simplicity:

To administer, explain, and flexible to adjust

Motivational:

For salespeople to increase effort

Economic:

Balancing sales costs and sales results

Income Regularity

Standpoint of the Firm

Standpoint of Sales Representatives

Features of Good Compensation Plans

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3 Determining General Levels of Compensation

Compensation should be competitive to attract and retain competent salespeople

Basic pay level should be based on:

a Skills, experience, and education required for the job

b Income for comparable jobs in the company

c Income for comparable jobs in industry

3.

4.

7.

6.

5.

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4 Developing the Compensation Mix

Six factors for developing the compensation mix:

a Costs for alternative compensation mixes

b Proportion for salary

c Proportion for incentives

d Fixed, progressive, or regressive incentives

e Splitting commissions, and

3.

4.

7.

6.

5.

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a Costs for Alternative Compensation Mixes

§ Straight-commission plans are most efficient at

lower sales volume levels

§ Shift from commissions to salary at higher volumes

b Proportion for salary

§ Salaries should enable salespeople to meet living

expenses

c Proportion for Incentives

§ Commission and bonus are based on achieving a

3.

4.

7.

6.

5.

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Developing the Compensation Mix

d Fixed, Progressive, or Regressive Incentives

§ Fixed commissions do not offer incentives for

higher sales

§ Progressive incentive rates step up the

percentage of commission or bonus awarded as

sales volume grows past designated levels

§ Regressive incentives decline as sales increase

(used if there are windfall sales and a propensity

to overload customer inventories)

3.

4.

7.

6.

5.

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e Splitting Commissions

§ If two or more salespeople worked on closing

a sale, the commissions should be split

f Types of Incentives

§ Different incentives offered to salespeople

are:

1 Supplemental life insurance

2 Supplemental medical insurance

3 Low- or no-interest loans

4 Business-class air travel

3.

4.

7.

6.

5.

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5 Pretest the Plan

Managers must pretest and evaluate any

compensation plan before adopting it in one or

more sales divisions.

A committee of key employees should help

develop, approve, and implement any proposed

3.

4.

7.

6.

5.

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6 Administer the Plan

A compensation plan should be fair, easy

to understand, simple to calculate, and

flexible.

As market conditions and organizational

objectives change, the plan may need to

3.

4.

7.

6.

5.

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7 Evaluating the Plan

Sales managers should continually evaluate the

plan’s potential for:

a Attracting desirable people

3.

4.

7.

6.

5.

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When is Straight Salary Best?

Straight salary is best suited for:

1 Team selling

2 If there are long negotiating

periods

3 During periods where a salesperson

is learning the job

4 For missionary selling

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When is Straight Commission Best?

Straight commission is best suited when:

1 Strong incentives are needed to increase

sales

2 Selling costs need close control

3 Service is less important

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When Combination Compensation Plans Should Be

Used

Salary plus commissions is best suited when:

§ New salespeople are hired since it provides more

security than straight commission

Salary plus bonus is best suited for:

§ Achieving long-run objectives, such as selling large

installations

Commission plus bonus is best suited for:

§ Team based efforts, in which some salespeople call

on buying committees

Salary plus commission plus bonus is best when:

§ There are seasonal sales and frequent inventory

imbalances

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Straight Salary Advantages and Disadvantages

Straight salary has the advantages of:

1 Providing security

2 Developing a sense of loyalty

3 Providing more control over

salespeople, and

4 Being simple to administer

The disadvantages straight salary are:

1 It may cause a lack of incentive

2 Increase selling costs, and

3 Lead to adequate but not superior

performance

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Straight Commission Advantages and

Disadvantages

Straight commission has the advantages of:

1 Relating income directly to sales

2 Basing income strictly on accomplishments

with no ceiling, and

3 Ensuring that costs are proportional to sales

The disadvantages of straight

commission include:

1 An overemphasis on sales

2 Neglect of non-selling activities

3 Erratic earnings, and

4 Loss of control by sales managers

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Combination Plan Advantages and Disadvantages

Combination plans advantages of are

that they offer:

1 Greatest flexibility and control

2 Provide security plus incentive, and

3 Frequent, immediate reinforcement of

desired behaviors

Combination plans disadvantages are:

1 Be complex and difficult to understand

2 Be expensive to administer, and

3 Fail if not carefully developed

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Expense Accounts and Fringe Benefits

Expense accounts enable sales

representatives to carry out necessary

selling activities,

Fringe benefits help provide them with

personal security and job satisfaction

The costs associated with supporting

salespeople in the field include:

1 Meals

2 Travel (air, train, auto)

3 Auto Rental, and

4 Lodging

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A well-designed expense plan requires the following building blocks:

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Controlling Expenses Through Reimbursement

For controlling expenses through reimbursement, sales managers can use three basic reimbursement plans that include:

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Note

This Electronic Presentation To Be Used With:

Hair, Joe, Rolph Anderson, Rajiv Mehta, & Barry Babin (2020), “Sales

Force Management,” 2nd Ed Hoboken: John Wiley & Sons

(ISBN-13: 9781119702832)

Text/images may not be modified or reproduced in any way without

prior written permission of the publisher www.wiley.com/go/permissions

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express written permission of the copyright owner is unlawful Request for further information should be addressed to the Permissions Department, John Wiley & Sons, Inc The purchaser may make back-up copies for

his/her own use only and not for distribution or resale The Publisher

assumes no responsibility for errors, omissions, or damages, caused by the use of these programs or from the use of the information contained

herein.

Copyright

Tiêu đề	Sales Force Compensation
Tác giả	Joe F. Hair, Rolph E. Anderson, Rajiv Mehta, Barry J. Babin
Người hướng dẫn	Dr. Rajiv Mehta
Trường học	New Jersey Institute of Technology
Chuyên ngành	Sales Force Management
Thể loại	PowerPoint Lectures
Năm xuất bản	2020
Thành phố	Newark

Định dạng
Số trang	31
Dung lượng	1,68 MB