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TYPES OF COMPENSATION PLANS
Straight Salary Plan
Fixed sum at regular intervals total payments for theirservices
Common amongst industrial goods companies; jobs
requiring extensive missionary / educational work; jobs
including servicing and providing technical & engineering
advice; salespersons doing considerable sales promotion /non-selling work; trade selling order-taking salespersons
Provides strong financial control over sales personnel and
management can direct their activities along most
productive lines with minimum opposition.
Provides stability of income & freedom from financialuncertainties to the sales personnel
Since there are no monetary incentives manysales peopleend up doing just an average job.
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Straight Commission Plan
Sales persons paid according to their productivity sales
volume is usually considered the best productivity measure
Straight commission with sales personnel paying their ownexpenses OR company paying their expenses
Advances may OR may not be paid against earnedcommissions
Progressive or Regressive changes in rates of commissionsas sales volume rises to different levels
Different commission rates for different products OR differentcategories of customers OR during different selling seasons
Provides maximum direct monetary incentive to salespersons to strive for higher volumes
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Contd
Means of cost control as sales compensation becomes
virtually a variable expense except for traveling and
miscellaneous expenses Provides little financial control over sales persons activities
they give secondary importance to non-selling activities like
reporting, new customer prospecting, sales promotion; avoid
selling high-margin hard-to-sell products; resist reductions or
change in territory etc. Costs of checking & auditing are higher
Efficiency may decline due to uncertainty of income.
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Combination Salary & Incentive Plan
These are designed so that sales personnel can have both
the security of stable incomes and the stimulus of directfinancial incentives
Greater cooperation from the sales force and a morale
booster
Provides greater flexibility to management for adjustment to
changing conditions
Clerical costs are higher than in straight salary or straight
commission plans.
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USE OF BONUSES
Bonus is different from commission it is paid for accomplishing a
specific task.
Additional financial reward for achieving results beyond a pre-determined minimum.
Never used alone but in combination with one of the three
compensation plans.
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FRINGE BENEFITS Do not bear direct relation to job performance.
Given to all employees - some of these benefits are required bylaw.
Range from 25 to 50 % of the total sales compensationpackage.
Contribute to safety & security needs and some to fulfillment ofesteem & higher order needs.
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MANAGING EXPENSES OF SALES
PERSONNEL General Expense Ratios
Compensation : Company Sales 0.4 to 8.2 %
Expenses : Company Sales 0.2 to 1.6 %
Total Sales Force Expenses : Company Sales 1.1 to 10.4 %
Expenses : Total Sales Force Expenses 9.3 to 33.3 %
Sales Expenses covering traveling, lodging, meals & entertainment in mostindustries varies from 25 % to 50 %.
Field selling expenses vary by type of pre-dominant selling style:
Missionary & Trade selling styles are lower as entertainment is not involved .
Technical & New Business require long calls on large customers as well asentertainment thus making this type of selling more expensive.
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Degree of formal control over sales expenses varies from
company to company.
Keeping expenses within certain bounds is important on one hand
whereas a degree of liberality is desirable to ensure sales personnel do
not fail to capitalize on market opportunities due to lack of adequatefunds.
REIMBURSEMENT OF SALES
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REIMBURSEMENT OF SALES
EXPENSES
Sales Personnel pay their own expenses
Such companies regard the sales personnel as independentbusinesspeople.
Most of them also pay straight commission only.
No expense records are necessary.
Compensation levels reflect the fact that sales personnel pay
their own expenses. Little management control over their route & call schedules
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Reimburse sales personnel for all or
part of their expenses
When expenses are reimbursable sales management needscontrol.
Reimbursable expenses should be enough to perform assigned
work in expected manner.
Should take into account customary living standards of
salesperson & customers, with emphasis on the latter.
Should keep expenses reasonable and should be economical
to administer.
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METHODS OF CONTROLLING &
REIMBURSING SALES EXPENSES
Flat Expense Account
Flexible Expense Account
Honor System
Expense Quota
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REIMBURSEMENT OF AUTOMOBILE
EXPENSES
Flat Mileage Rates
Graduated Mileage Rates
Fixed Periodic Allowance
Combination Fixed Periodic Allowance & Mileage Rates
Runzheimer Plan
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SALES MEETINGS
Important for both COMMUNICATION & MOTIVATION purposes
Since sales people generally work alone, it is a good idea to hold
periodic group meetings for exchanging information & ideas. Provide
occasions for management to stimulate the group to improve itsperformance
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Planning a sales meeting requires 5
major steps
A AIMS - Clearly defined objectives
jokingly called excuses holding a meeting. e.g. : New product introduction
New insights into customer attitudes & behavior
Application of proper sales techniques New company policies or sales goals requiring explanation
Improving quality of sales reports
Orienting on advertising program & coordinating tie-in activities
Increasing effectiveness of time management
Introducing new services inventory control.
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C CONTENTS
Agenda List or outline of things to be considered or done
during a meeting depends to large extent on the Aims.
M METHODS Local Short & participative group discussions best
Regional / National 2/3 days with wider mix of aims & contents
hence use a mix of different methods.
EXECUTION
Speakers, Seminar leaders, meeting site & time
Room & seating arrangements
Audio-Visual equipment & supplies, provision of materials,
breaks, refreshments etc.
E EVALUATION Whether meeting accomplished its aims
Feedback for future program planning.
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NATIONAL SALES MEETINGS
National meetings can introduce comprehensive marketing /sales policy changes rapidly & uniformly.
Major executives in the company attend a national salesmeeting difficult for them to attend a series of decentralizedones.
Sales personnel meet counterparts from other regions &
exchange experiences.
Meeting Head Office personnel leads to better coordination. Iffactory is also located at the same place or nearby there is anopportunity for product training with exposure to manufacturingdetails.
The costs of bringing the entire sales force to a central site aresubstantial. It is difficult to find convenient time to take off theentire sales force from the field unless sales are seasonal.
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REGIONAL SALES MEETINGS
Head office sales executives & personnel attend the regionalsales meetings reducing travel costs & loss of selling time.
Focus on unique problems of the region. HO executives learnabout the current problems first hand.
Smaller attendance increases participation per personattending.
Smaller percentage of HO / management participationdepreciates the importance of the meeting in eyes of the sales
force and smaller attendance also not conducive to spirit ofcontagious enthusiasm.
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LOCAL SALES MEETINGS
Weekly or biweekly last from 15 minutes to couple of hours.
Informally conducted meetings with each sales person having an
opportunity to pose questions and to state personal views.
Strengthen group identity.
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REMOTE CONTROL & TRAVELING
SALES MEETINGS
Closed-circuit television
Sales meetings by telephone
Sales meetings at home essentially by post / written mail
Traveling sales meetings where meetings require physical props
new product demonstration, displays etc. they can be done by out-fitting on trucks / trailers / vans etc.