Compensation Plan for Biomed Sales Representatives

Biomed Co., Ltd.: Designing A New Sales Compensation Plan Group 10

Steps for deciding compensation plan

Understanding the strategy

Get out of low price hospital market and focus on drug stores and clinics Cut down product lines getting into low-medium to medium price range but maintaining the service levels

Understanding the Role of Sales Representative

Generate THB contribution by way of price negotiation, credit provision decisions and taking orders

Steps for deciding compensation plan

Understanding Responsibilities of Representatives

Focus on drug stores and clinics Developing new accounts Customer relationship building Link between customers and management Gathering market information

Developing compensation plan encouraging the representatives to achieve the results in fulfillment of organizational strategy.

Checking the alignment of plan with business objectives.

Compensation Plan

Retaining the current fixed salary (adjusted for inflation) so as to minimize resistance Commission should be based on THB contribution achieved (sales expenses). Attainment of quarterly THB contribution target should attract a bonus. No bonus should be paid is quarterly quota is not achieved. Territory based goals in accounts and sales Training in the products and in selling since they mostly take orders An annual performance incentive like tiered paid holidays in resorts etc should be introduced based on the performance of representatives like consistently achieving higher than targets in all quarters, achieving sales targets in all the products, and developing new accounts.

Checking Alignment with the Goals

Not disturbing Fixed salary to minimize resistance Commission based on THB contribution will provide incentive to sales to find higher margin customers, increase sales volumes, optimize expenses and eliminate focus on hospitals.

Quarterly Bonus will make them focus on the targets while elimination of retroactive payment of bonus on YTD basis will help in reducing complacency. The annual incentive scheme will take care of the objectives like market growth, product promotion etc not taken care by above means.

Proposed compensation plan

Component Base Salary Commission on THB Contribution (Performance to Goal/Commission Rate) Incentive on Focused Product selling New Account Generation (Payable at the end of 4 quarters of orders) Quarterly Bonus (Payable if 100% quarterly goals are achieved) (Goals are identified on Profit Generated) Rewards/Recognition Territory 1 (easy) THB 60,000 To 100% - 1% Beyond 100% - 2% Territory 2 (moderate) THB 60,000 To 100% - 1.25% Beyond 100% - 2.5% Territory 3 (difficult) THB 60,000 To 100% - 1.5% Beyond 100% - 3%

An incentive of 0.25% if revenue is generated from identified range of products THB500 THB750 THB1000

Q1 THB2000 Q2 THB2000 Q3 THB2000 Q4 THB2000

Q1 THB2500 Q2 THB2500 Q3 THB2500 Q4 THB2500

Q1 THB3000 Q2 THB3000 Q3 THB3000 Q4 THB3000

Annual Cash award of 5% of basic salary for maintaining good customer relationship Identification of parameters on which customer relationship will be judged Regular customer feedback 10 room nights in Phuket, after end of the FY depending on appraisal Based on highest revenue/margin generated On time payment from customer Substantial Market intelligence Keeping organization strategic context in mind