Devising a Sales Compensation Plan

Whether contemplating major or minor changes or drafting a completely new sales compensation plan, the sales executive approaches the project systematically. Good compensation plans are built on solid foundations. A systematic approach assures that no essential step is overlooked. 1. Define the Sales Job The first step is to reexamine the nature of the

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Types of Sales Compensation Plans

The four elements of compensation are combined into hundreds of dif­ferent plans, each more or less unique. But if we disregard the “fringe benefit” and “expense reimbursement” elements—as is entirely reason­able, since they are never used alone—there are only three basic types of compensation plans: straight salary, straight commission, and a combina­tion of salary

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Use of Bonuses in Sales Compensation

Bonuses are different from commissions—a bonus is an amount paid for accomplishing a specific sales task; a commission varies in amount with sales volume or other commission base. Bonuses are paid for reaching a sales quota, performing promotional activities, obtaining new accounts, following up leads, setting up displays, or carrying out other assigned tasks.

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Fringe Benefits in Sales Compensation

Fringe benefits, which do not bear direct relationships to job performance, range from 25 to 40 percent of the total sales compensation package. Some are required by federal and state law—for example, payments for social security premiums, unemployment compensation, and worker’s compensation. Most, however, the company provides for other reasons: to be competitive with

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Reimbursement of Sales Expenses – Policies and Practices

The two general policy alternatives on reimbursing sales expenses are (1) have sales personnel pay their own expenses or (2) reimburse sales personnel for all or part of their expenses. The first alternative is the simpler by far, but few companies choose it. Those that do are organizations, by and large, that regard sales

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Methods of Controlling and Reimbursing Expenses of Sales Personnel

1. Flat Expense Account The flat expense account provides the salesperson with a stipulated sum to cover all expenses during a given period, such as a month or week. Allocation of this sum among different expense items is left to the individ­ual’s discretion. The majority of companies using flat expense accounts do so because

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Reimbursement of Travel Expenses of Sales Personnel

Companies using either flexible expense accounts or expense quotas and whose sales personnel operate their own vehicles (rather than company owned or leased vehicles) need some system for determining the amounts of travel expense reimbursements. Calculating ‘‘exact’’ travel expenses is complicated. Three categories of expense are involved: variable, semi­variable, and fixed. Variable expenses include

Job Satisfaction and Job Performance of Sales Personnel

Think of the relationship of job satisfaction to job performance. According to Herzberg’s motivation-hygiene theory, job performance leads to job satisfaction. Many managers believe exactly the opposite—job satisfaction leads to job performance. Most studies of industrial workers show a pos­itive relationship between job satisfaction and job performance, but there is little agreement as to

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Sales Contests

A sales contest is a special selling campaign offering incentives in the form of prizes or awards beyond those in the compensation plan. The underlying purpose of all sales contests is to provide extra incentives to increase sales volume, to bring in more profitable sales volume, or to do both. In line with Herzberg’s

Standards of Sales Performance

Setting standards of performance requires consideration of the nature of the selling job. In other words, sales job analysis is necessary to determine job objectives, duties and responsibilities, and the like. These, in turn, depend upon selling strategy. In some companies, for example, the key problem is to obtain new customers. The selling of

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Relation of Performance Standards to Personal-Selling Objectives

Standards of sales performance facilitate the measurement of progress made towards departmental objectives. Specific objectives vary with changes in the company’s marketing situation, but are reconcilable with the general objectives of volume, profit, and growth. For instance, a general objective might be to add $10 million to sales volume, a figure in itself of

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Recording Actual Sales Performance

Sales management’s next task is to measure actual performance. Emphasis in this phase of control, in other words, shifts to gathering performance information. It is necessary to define information needs, determine the information sources, and collect the information. The choice of performance standards dictates the information needed. However, with increasingly sophisticated management information systems,

Evaluating – Comparing Actual Sales Performances with Standards Taking Action – the Dynamic Phase of Control in Sales Management

1. EVALUATING—COMPARING ACTUAL PERFORMANCES WITH STANDARDS The most difficult step in sales force control is the evaluation step—the com­paring of actual performances with standards. This is more than a mechanical comparison; this step is difficult because evaluation requires judgment. The same standards cannot be applied to all sales personnel—there are differences in individual territories,

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Controlling Sales Personnel Through Supervision

Management also controls sales personnel through supervision. Regard­less of who does the supervising, the objective is to improve the job per­formances of sales personnel. Exercising supervisory responsibilities, the executive establishes working relations with sales personnel for pur­poses of observing, evaluating, and reporting on performance, correcting deficiencies, clarifying responsibilities and duties, providing motivation, informing sales

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Norton Brothers, Inc.: Manufacturer of Men’s Furnishings – Attempt to Reduce Personnel Turnover

Norton Brothers, Inc., of Rochester, New York, was a manufacturer of men’s popular-priced neckwear sold under the brand name Snappy Cravats to small and large haberdashers and department stores. Joseph Norton, pres­ident and sales manager, was assisted by two people who were assigned primarily to office duties but who doubled as salespeople during the

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Holden Electrical Supplies Company: Manufacturer of Electrical Equipment-Recruiting Sales Personnel

Holden Electrical Supplies Company, Cincinnati, Ohio, manufactured a wide line of electrical equipment used in both home and industry. The sales force called on both electrical wholesalers and industrial buyers with the greater part of their efforts concentrated on industry buyers. The indus­trial products required considerable technical expertise upon the part of salespeople. Sales

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Arthur Tompkins – Shaklee Sales Distributor: A Sales Distributor – Problems in Recruiting Salespeople

When Arthur Tompkins became a Shaklee sales distributor, his number one priority was to recruit a sales force. He felt that with unemployment above 10 percent in the Athens, Georgia, area, he would not have problems finding salespeople. However, six frustrating months later, he had only recruited one salesperson. 1. TOMPKINS’S BACKGROUND Upon Tompkins’s

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Belton Industries, Inc.: Manufacturer of Toys and Bicycles – Selecting Sales Personnel

Albert Thompson, general sales manager for Belton Industries, Inc., faced a problem of high turnover of sales personnel. He was led to believe that something was wrong with the selection process and that the selection procedure should be evaluated. Belton manufactured a wide line of children’s toys and bicycles. Its sales organization consisted of

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American Machine and Foundry Company: Industrial Manufacturer – Proposed Establishment of Formal Training Program

R.R. Woodruff, vice-president of marketing of the Bowling Products Divi­sion of American Machine and Foundry Company, was faced with a deci­sion regarding a proposed new training program for bowling products sales personnel. American Machine and Foundry Company, an old estab­lished manufacturer of several lines of industrial products, had gotten into the bowling market early

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Holmes Business Forms Company: Distributor of Office Supplies – Centralized versus Decentralized Training

Holmes Business Forms Company was founded in Chicago, Illinois, in 1923 by Arthur K. Holmes to sell bookkeeping forms and office stationery. Gradually, the line of products was broadened and the market was expanded to the entire American market. The company distributed an extensive line of business office products such as various types and

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