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Salesperson Compensation and Incentives

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Salesperson Compensation and Incentives

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    1. Salesperson Compensation and Incentives Management of the Modern Sales Force Marketing 6228

    2. Key Compensation Questions Which compensation method is most appropriate for motivating specific activities in specific situations? How much of the total compensation should be earned through incentives? What is the best mix of financial and nonfinancial compensation and incentives?

    4. Key Definitions Salary – a fixed sum of money paid at regular intervals Commission – a payment based on short-term results, usually a dollar or unit sales volume Bonus – a payment made at management’s discretion for achieving or surpassing some set level of performance

    5. Compensation Methods for Salespeople

    6. Compensation Methods for Salespeople

    7. Compensation Methods for Salespeople

    8. Compensation Methods for Salespeople

    9. Combination Plans Offer a base salary plus some proportion of incentive pay Most popular form of compensation Well-suited for relationship selling by compensating for nonselling activities while providing incentives to motivate sales

    10. Design Questions for Combination Plans What is the appropriate size of the incentive relative to the base salary? Should a ceiling be imposed on incentive earnings? When should the salesperson be credited with a sale? Should team incentives be used? If so, how should they be allocated among team members? How often should the salesperson receive incentive payments?

    11. Sales Contests Short-term incentive programs designed to motivate to accomplish specific sales objectives Contest winners receive prizes, recognition, and a sense of accomplishment Successful contests require: Clearly defined, specific objectives An exciting theme Reasonable probability of rewards for all Attractive rewards Promotion and follow-through

    12. Criticisms of Sales Contests May not produce lasting improvements Salespeople may borrow sales from another period to increase sales during the contest period Poorly administered contests can hurt cohesiveness and morale

    13. Nonfinancial Rewards Recognition is an attractive reward because it makes a salesperson’s peers and superiors aware of outstanding performance Effective recognition programs: Offer everyone a reasonable chance of winning Recognize the best performers across several dimensions

    14. Expense Account Types Direct reimbursement – direct and unlimited reimbursement of all “allowable and reasonable” expenses Limited reimbursement – either sets expense limits by-item or provides predetermined lump sum No reimbursement – requires salespeople to cover all expenses; usually combined with higher total financial compensation plan

    16. Sales Results from Compensation and Incentives

    17. Mix and Level of Compensation An appropriate mix and level of compensation should Maximize compensation plan’s motivational value Be fair Remain consistent with firm’s resource capabilities

    18. Key Terms compensation plan salary incentive payment commission bonus quota sales contests benefits nonfinancial incentives

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