Motivation, Compensation, Leadership, and Evaluation of Salespeople Chapter 17 Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin 4-1 17-2 The Basic Sales Management Functions 17-3 The Motivation Mix: Choose Your Ingredients Carefully Exhibit 17.1: Sales Manager’s Motivation Mix 17-4 Compensation Is More Than Money ▪ Sales performance can be rewarded in three fundamental ways: ✓ Direct financial rewards ✓ Career advancement ✓ Nonfinancial compensation ▪ Although a sales reward system is not the only means of motivating salespeople, it is the most important 17-5 Three basic plans of financial compensation ➢ Straight salary plan ➢ Straight commission plan ➢ Combination plan Compensation Is More Than Money 17-6 ❑ Straight salary plan: salesperson is paid a specific amount at regular times. Advantages to the salesperson ✓Regular income ✓Independent of sales performance on the short run Advantages to management ✓Simple and economical ✓Directing selling duties that may not lead to sales (routinely calling customers) Compensation Is More Than Money Sales A. Straight Salary E a rn in g s 0 20000 40000 60000 80000 100000 120000 140000 160000 180000 200000 0 2M 4M $60,000 Disadvantages to the straight salary plan ✓ Lack of direct monetary motivation ✓ Salary adjustments are not based on specific performance When to use the straight salary plan? ✓ Routine selling ( milk, bread, beverage ) ✓Selling technical and complex products (require long presale & post sale services and negotiation) ✓ Person in training Compensation Is More Than Money 17-8 ❑ Straight commission plan: “If you don’t sell anything, you don’t earn anything” Two basic elements of straight commission ✓Pay is related directly to performance ✓A percentage rate of commission is attached to the unit Compensation Is More Than Money B. Straight Commission E a rn in g s Sales 0 20000 40000 60000 80000 100000 120000 140000 160000 180000 200000 0 1M 2M 3M 4M 7% Advantages of the straight commission plan ✓Maximum incentive for salespeople, so they use their sales time wisely ✓Salespeople think that they are in business for themselves ✓Selling cost are kept in proportion to sales Disadvantages of the commission plan ✓ Discourages salespeople who has never sold before ✓ Uncertainty and insecurity for salespeople ✓ Develops little loyalty to company ✓ High turnover and recruiting, selecting and training expenses Compensation Is More Than Money 17-10 ❑ Combination plans ▪ Salary and commission ▪ Salary and bonus: individual bonus or group bonus ▪ Salary, commission, and bonus: individual bonus or group bonus Compensation Is More Than Money 0 50000 100000 150000 200000 0 2M 4M E a rn in g s Sales C. Salary Plus Commission on All Sales $60,000 + 1% Sales D. Salary Plus Commission Over Quota E a rn in g s 0 20000 40000 60000 80000 100000 120000 14000.