This document summarizes key aspects of compensation plans for sales forces. It discusses the purposes of compensation, different types of plans including straight salary, straight commission, and combination plans. Factors to consider in designing compensation programs are outlined, such as determining major compensation factors, implementing long and short-term programs, relating rewards to performance, and pretesting plans. Sales force expenses and benefits are also covered. The overall aim is to motivate salesperson behavior and direct their efforts towards company objectives through the appropriate compensation system.

2. C HAPTER 13 C OMPENSATION FOR H IGH P ERFORMANCE

4. Sales is one of the few jobs where you earn your money – every day.

5. Any type of sales organization can reward sales performance in three fundamental and interrelated ways: 1. Direct financial rewards. 2. Career advancement and personal development opportunities. 3. Nonfinancial compensation. C OMPENSATION I S M ORE T HAN M ONEY

6. A sales reward system is not the only means of motivating salespeople, but it is the most important. Measuring sales performance but not properly rewarding it severely limits the achievement level for salespeople.

8. FIGURE 13.1 EFFECTS OF PAY DISSATISFACTION Absenteeism Grievances Job Dissatisfaction Turnover Performance

10. FIGURE 13.2 FORMAL COMPENSATION PROCESS

14. I MPLEMENT L ONG AND S HORT- R ANGE C OMPENSATION P ROGRAMS Communicate compensation policy.

16. R ELATE R EWARDS TO P ERFORMANCE Rewards and promotions should be tied directly to the salesperson’s individual contributions to sales force objectives.

17. M EASUREMENT OF P ERFORMANCE Companies need to regularly measure individual, sales group, and organizational performance to determine whether the compensation program’s objectives are being met.

23. FIGURE 13.3 TYPICAL COMPENSATION PLANS

24. S TRAIGHT S ALARY T YPES OF C OMPENSATION P LANS Of all the compensation plans, the straight salary plan is the simplest: The salesperson is paid a specific dollar amount at regular intervals.

27. Drawing Accounts Drawing accounts combine the incentive of a commission plan with the security of a fixed income.

35. Sales contests are special sales programs offering salespeople incentives to achieve short-term work goals.

38. S ALES F ORCE E XPENSES Expense plans have the same basic objectives as a compensation system, that is, to motivate the salesperson’s behavior in terms of membership, performance, and attendance.

46. T HE B OTTOM L INE Compensation given for certain behaviors have major influences on a sales force’s culture. Compensation is one part of the salesperson’s behavioral model. Money can be an extremely powerful performance motivator if used with the right compensation program. Under a combination salary plan, a proportion of the salesperson’s total pay is guaranteed, and the rest is incentive pay. Daily expenses of field salespeople are a major part of the sales force budget.

47. When developing a new pay plan, managers must consider the nature of the job, the market, channels of distribution, the caliber of the salespeople, a company’s financial condition, and suggestions made by sales personnel. The sales manager can better “sell” the job to prospective salespeople by determining the dollar value of fringe benefits and presenting pay and benefits as a total compensation package. T HE B OTTOM L INE