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Compensation Plan for Motivating the Sales Force

i. Offering challenging sales territories, in which the sales person finds job
satisfaction as well as spend major time in a week with his family.
ii. Leadership style of the Sales Manager is such that the sales force is fully
satisfied with the work environment. Managerial grid type leadership may be
more rewarding.
iii. Suitable compensation package for the sales-force provide motivation to do
their best. Sales-force compensation is an important tool for motivation.
The compensation has two parts:
(i) Monetary
(ii) Non-monetary.
Money helps a person acquire status and improve life styles. But money can
provide motivation up to a point, beyond which non-monetary incentives become

(i) Straight Salary Method:

This comprises of fixed salary per month. This form of compensation is useful for
selling capital goods, industrial products and project sale where mostly one time
sales deal takes place. The limitation of this method is that it creates
complacency among the sales force who become used to the fixed salary
scheme and loose initiative and aggressiveness for achieving higher
In this compensation method, the market development suffers, since the
salesperson puts no extra effort for the purpose. However, this compensation
method may be satisfying for a non-performing salesperson. A high calibre and
performing sales person will start losing initiative and the organisation will
ultimately be a great looser.
(ii) Commission Only Method:
The only commission method of compensation is applied with the belief that the
reward should be commensurate to ones efforts. For every sale executed, the
sales person gets a commission fixed at a certain percentage say 3-5% of the
total sales made in a month.
In this method a high achiever gets the highest reward but the main draw-back
of this method is that a salesperson becomes uncertain about his/her monthly
income. In some month, the salesperson may not earn at all, because due to
situation beyond control, he/she has not executed any sale.

If the opportunity permits, the salesperson may push the fast moving items with
making little efforts for prospecting a sale. Since, the privatisation of LifeInsurance and General Insurance fields in India, many large domestic foreign
players have entered the field and most of these companies are adopting the
only commission method for their insurance agents who put flexible working
hours for the sale of policies.
(iii)Combination of Salary and Commission Methods:
The limitations of above two schemes of compensation are over come through a
combination plan. In the combination plan, a sales person is given a fixed
monthly salary which is independent of his/her sales performance. The other part
of compensation is the commission which is linked to his/her sales performance.

These two parts together may make a salesperson satisfying so far as monetary
compensation is concerned and he/she would do the best to earn extra money
every month in the way of larger amount of commission due to improved sales
A good organisation may provide additional perks for the high performing sales
force according to the service rules which may include motor cycle, cars, lunch
coupons and club membership etc. This combination method has the advantage
of the sales persons responding to market conditions and putting in their best
efforts. It also ensures prospecting, market penetration and selling slow moving
items whenever the situations arise.
The main drawback of this method is that it equates a senior sales person with a
junior one and it prohibits generation of organisation loyalty for the sales force.
The high performing persons may find opportunity to leave the company for
better prospect.

(iv) Non-Monetary Incentives for the Sales force:

It is the wisdom and leadership of the sales manager which help in devising
means for retaining the high achievers in the sales-team within the organisation.
A good organisation where the high performing sales force would like to be
associated for long may create satisfying work environment, good career
prospect, and attractive retirement benefits like superannuation scheme,
medical benefits for self and family members, annual leave travel allowance for
the family, childrens education allowance, foreign postings/tours on official work
and recommending for attending management development programmes etc.

It is the responsibility of the sales manager to ensure that a high performing

sales person is adequately rewarded on monetary and non-monetary terms and
the salesperson is able to deliver the best according to his/her potential.