salesperson compensation and incentives
TRANSCRIPT
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OverviewVarious compensation modes and methods
Straight Salary Straight Commission Combination
Sales ContestNon-Financial RewardsExpense AccountsMaking Compensation and IncentivePrograms WorkDeciding the Most Appropriate Mix
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3 basic questions Which method is most appropriate for what
kind of activity? What % of total should be incentive based? What is the suitable mix of financial and non-
financial benefits?
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Major components Salary
IncentivesCommissionBonusBenefits
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Straight SalaryStraight Commission
Combination ApproachSelection depends on:
Business Objectives (New Accounts or
Relationship Building) Close Supervision
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Proportion of Incentive Pay to TotalCompensation
Incentive CeilingsWhen a sale is a sale?Team versus Individual Incentives
Frequency of Rewards
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Contest Objectives Complement compensation program
Aimed to achieve extra salesContest Themes
Creative
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Probability of Winning 3 approaches:
Compete with themselvesCompete with othersCompete for group or individuals
Type of Contest Rewards Monetary Merchandise Travel
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Depends on person Point based system
Contest Promotion and Follow Through Launch in quarterly meetings Keep follow up to motivate people
Criticism of Sales Contest Short term motivation Borrowing sales May affect morale negatively
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Promotion Chances Lack of promotion leads to de-motivation
and low attraction of non-financial rewards Two career tracks
One is sales basedOther is sales management based
Recognition Programs Wall of Fame Newsletters etc.
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Key Features Performance based no subjectivity
Balanced A ceremony should be involved The program must be in good taste Adequate publicity
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Assessing the Relationship SellingObjectives
Determine breakup of efforts expended bysales person on various activities Determine what breakup is in the best
interest of organization Motivate towards the gaps
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Determine which Aspect of Job toReward
Should be realistic, measurable, specific,time bound, achievable Not too many metrics Trend towards customer centric metrics and
limitations Combination approach
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Suitable Mix Varies significantly
Determine the gross amount ofcompensation that is needed to attract andretain salesperson
Depends on importance of aspect of selling Also depends on company size
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Dangers of Paying too Little High turnover (for good performers)
Low Performance (for already lowperformers) Low motivation
Dangers of Paying too Much Increases selling cost Non-sales employees may have low morales Law of diminishing marginal utility applies