Sales Personnel Compensation

Sales Compensation
Provide a living wage Adjust pay levels to performance Provide a mechanism for demonstrating the congruency between attaining company goals and individual goals

Sales Compensation
Situations where total overhauling of compensation plans required :
When the sales force morale is very low Cultivation of new and different markets

Requirement of Good Sales Plan

Secure income Plan fitting with motivational program Fair plan Easy to understand Adjusts to changes in performance Economical to administer Helps in attaining the objectives of the sales organisation

Devising a Sales Compensation Plan

Define the Sales job Consider the Companys General compensation structure Job evaluation and sales positions Non-Quantitative
Simple ranking Classification or grading

Quantitative
Point System Factor comparison method

Devising a Sales Compensation Plan

Consider compensation patterns in community and industry
System being used Average compensation for similar positions Competitors plans Pros and cons of departing from industry or community pattern

Determine compensation level

Devising a Sales Compensation Plan

Provide for the various compensation elements
Fixed Element Variable element Perks Payment of expense allowances

Special company needs and problems Consult the present sales force Reduce tentative plan to writing and pretest it Revise the plan Implement the plan and provide for follow up

Types of Compensation Plans

Straight Salary Plan
More common in industrial goods companies Simple to administer Provides strong financial control over sales personnel Provides stability of income Average performance by sales people Attrition rate is high

Types of Compensation Plans

Straight Commission Plan
Fall into two broad classifications :
Straight commission with sales personnel paying their own expenses. Advances may or may not be made against earned commissions Straight commission with the company paying expenses, with or without advances against earned commissions.

Types of Compensation Plans

Straight Commission Plan
Advantages
Provides maximum direct monetary incentive Provide means for cost control Allows great flexibility

Weaknesses
Provide little financial control over sale peoples activities Follow up leads neglected Increased record keeping expenses Decline in efficiency due to income uncertainties

Types of Compensation Plans

Straight Commission Plan
Determining commission base

Drawing accounts

Types of Compensation Plans

Combination Salary-and-Incentive Plan
Salary plus commission
Strengths
Security of stable incomes and stimulus of direct financial incentive for sales force For companies, financial control and apparatus to motivate sales efforts

Weaknesses
High clerical costs