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Motivation in Sales The Basics

When many business managers hear the term sales force motivation plan they see dollar
signs that end up cutting into profits to compensate top sales performers. However,
motivation in a sales team doesnt have to include big bonuses and large payouts for
meeting sales goals.
According to the Harvard Business Review, there is in excess of $800 billion a year spent on
sales force compensation in the United States. This total represents approximately three
times as much as the same businesses spend on advertising. However, and this may be
surprising, these simple cash incentives rarely impact the very members of the sales team
that are most important.
The issues that ranked higher in the survey included peer recognition, camaraderie, feeling
encouraged, being recognized and having an intrinsic desire to go a good job. With all of
these issues more motivating than cash benefits, programs in the workplace that encourage
and support this type of positive workplace culture need to be at the forefront of sales team
development and plan strategy.
This highlights the importance of both intrinsic and extrinsic motivation. The extrinsic
motivation for a sales team can include those cash bonuses and advances, prizes, inter-
team competition and even tracking and monitoring of reaching targets set by the sales
managers.
Intrinsic motivation includes internal rewards for the sales team. This includes feeling a
sense of contributing to the common goals, meeting personal milestones, developing a
sense of belonging to the workplace culture and increasing mastery in sales at a personal
level.
To build a culture in a sales team that encourages both intrinsic and extrinsic
motivators, consider the following key factors:
Set Goals there needs to be a good combination of both individual and team goals.
By setting group goals based on projected sales, you can incorporate the extrinsic
motivators of competition, tracking and monitoring as well as actual prizes and
bonuses for meeting or exceeding goals. By setting smaller individual goals which are
done privately between the sales manager and each team member, it is possible to
tap into intrinsic motivation.
Use past performance incentivizing or motivating sales people based on
improving past performance is a good starting point. This allows the process to be
more intrinsic and fosters collaboration and belonging within the sales group rather
than what can become unhealthy types of competition. It is more akin to competing
against yourself rather than the team to achieve both internal satisfaction and
external rewards.
Social Recognition encouraging social recognition for a job well done should be
part of the corporate culture. This can include providing peer to peer recognition
within the team as well as recognition by direct managers and those further up the
corporate ladder. Recognition is only meaningful if it is personalized, specific and
targeted to the person earning the praise. It doesnt have to be formalized, but it
needs to occur for sales staff to be intrinsically motivated to continue to exceed
expectations.
Increase mastery of necessary skills one of the key intrinsic motivators is for
the sales staff to feel competent and have the training and support they need to do
their job. In top companies interviewed in the Aberdeen Group study it was found
that 84% of the companies identified as top sales businesses provided coaching,
training and mentoring services to all employees that included regular feedback from
supervisors to sales team members. This is highly effective for both top performers
as well as those that are struggling.
Personalize incentives simply assuming what motivates a given sales
professional and a sales team can lead to poor motivation levels. Instead, consider
meeting with the team to not only set goals but to consider what are the motivators
to use at the various levels within the program. Sometimes simple things, such as
earning the opportunity to work from home one day a week can be highly
motivating. The book by Mark Faust Growth or Bust: Proven Turnaround Strategies
to Grow Your Business takes this a step further. He indicates that a day off with pay
to go to a special event such as golfing, fishing or taking in a ball game is often
highly motivational for all sales staff.
Out of the Box in addition to personalized incentives, consider having the element
of chance within the win. You can have a prize wheel to spin, a secret envelope or
any other type of pick or play type of option. Choose prizes that are out of the
ordinary such as a luxury spa day for the employee and a spouse, a weekend
getaway at a local resort or even a free training event or conference attendance may
be just what will motivate individuals.
Provide clear direction it is essential for sales professionals to know the
expectations of the management when it comes to performance expectations. Often
a lack of clear direction by the sales managers creates a lack of motivation in sales
professionals.

It will also be critical to create an incentive program that allows everyone to have the
opportunity to achieve goals, feel part of the team, and be encouraged to continue to
improve. This is why personal goals and milestones are important to recognize and not just
the end results. Be ambitious with goals, not deadlines.

The most important determinants of motivation are (1) the nature of the task, (2) the
personality, particularly the strength of the salespersons need for achievement, and (3) the
type of compensation plan. Unfortunately, our measurement of the fourth determinant, the
quality of management, is not precise enough for us to say any more than that field
supervision is important.

MOTIVATIONAL TOOLS
The simple motivational tools of early years such as only financial benefits prove to be a
poor method of motivation beyond physiological and safety needs satisfaction on account of
the unique aspects of a salespersons job. The non-financial incentives, become an
important component of motivation. Some of the factors that make a special mark on
salesforce motivation are discussed below.
1. Meeting between manager and salesforce- These are highly regarded by sales managers
in the motivation of their sales teams. This provides opportunity to managers to meet their
salesforce in the field, at head office and at the sales meetings/conventions. This provides a
number of opportunities for improving motivation. These meetings allow the sales manager
to understand the personality, needs and problems of each salesperson.
2. Clarity of job- Clarity of job and what is expected from the salesperson is a great
motivator. The objectives when duly quantified and well defined, properly connected and
linked 101 with the reward and recognition serve as source of motivation to the salesperson.
3. Sales targets or quotas- If a sales target or quota is to be effective in motivating a
salesperson, it must be regarded as fair and attainable and yet offer a challenge to him.
Because the salesperson should regard the quota as fair, it is usually sensible to allow him to
participate in the setting of the quota.
4. Sales contest- The sales contest is an important tool to motivate salesperson. The
purpose of the sales contest varies widely. It may encourage a higher level of sales in
general, to increase the sales of a slow-moving product or to reward the generation of new
customers. It provides an incentive to show better performance and secure more
satisfactory results.
5. Sales conventions and conferences- These are the devices of group motivation. They
provide opportunities for salesperson to participate, gain social satisfaction and express
their views on matters directly affecting their work. They promote team work, dissolve social
barriers, inspire and raise salespersons morale. Most of the companies in India are now-a-
days adopting this method to motivate their salesforce.
6. Positive affect- The positive affect method is also an important techniques for motivating
the salesforce to their best. The proper application of praise, positive feedback, and 102
human warmth and understanding can impel others to perform up to their capabilities. This
must be done in a genuine way and not be perceived as overtly-self-serving.
7. Leadership style of the manager- Leadership style of the manager plays an important role
in motivating the salesperson. Inspirational leadership, which refers to influence through
referent power. Identification or charismatic charm is an important tool in the motivational
strategy of the management.
8. Freedom to work- In order to perform the onerous duties and responsibilities, the
salesperson must be given a reasonable amount of freedom and discretion in performing
their job. Discretion and freedom may be accomplished by allowing salesperson to develop
their own call patterns, more control over the types of promotional packages that are offered
to their customers etc. Freedom or autonomy satisfies the psychological needs and is like
power pay (which is a reward), making the job of salesperson more important in the
organization.
9. Reward and recognition- Although sales quotas, sales contests, conventions and
conferences have positive carry over effects, these are short lived techniques of motivating
salesmen. On the other hand reward and recognition on salesperson accomplishments are
more enduring and relatively economic methods of motivation. Some of the ways to extend
recognition and honour to salesperson include 103 conferment upon the title of salesman of
the month/year. Congratulation telegrams from members of top management, sales
trophies, offering membership of social clubs, mention in company newsletter, certificate
etc.
10. Persuasion- One of the more common and recommended forms of inducing high levels of
motivation is through persuasion. In this situation, managers use rational arguments to
convince salesperson that it is in their own best interests to act in preferred way. Persuasion
has the advantage of getting people to conclude that their actions were performed out of
their own free will. This leads to higher levels of self-direction than reward or coercive modes
of influence where one perceives he or she acts more as a function or external compulsion
than internal volition.
Compensation Plan
Compensation can also be defined as follows:
1. A system of rewards that can motivate the employees to perform.
2. A tool that is used to foster values and culture.
3. An instrument that enables an organization to achieve its objectives.
The management should ensure that compensation structure is designed after taking into
account certain factors such as qualification, experience, attitude and prevailing rates in the
markets. Compensation means the reward that is received by an employee for the work
performed in an organization. It is an important function of human resource management.
Employees may receive financial and non-financial compensations for the work performed
by them.
Financial compensation includes salary, bonus, and all the benefits and incentives, whereas
non-financial compensation includes awards, rewards, citation, praise, recognition, which
can motivate the employees towards highest productivity.
The main characteristics of the compensation system are as follows:
1. A hierarchy of pay levels
2. A hierarchy of jobs
3. A set of rules and procedures
4. Qualities required for movement from one level to other
An organizations compensation system usually consists of three separate components. Each
element of the compensation package has a link with an individual need hierarchy. All
allowance are linked to basic pay. In order to motivate the employees when they achieve
objectives, rewards and incentives are incorporated along with basic pay. To retain the
employees and to get long-term commitments, stock option plan, annual increments and
promotion are provided.
Objectives of Compensation:
1. Entice the employees: Compensation should be high enough to attract the best
talent in an organization. If an organization wants the service of a competent
employee, then the salaries must be high enough to motivate them to apply and join
you.
2. Retain the best talent: An employee would leave an organization if compensation
levels fall. So, it is essential to have a proper compensation panning to retain the
best talents.
3. Ensure equity: Pay should always be equal the worth of the job of an employee.
Employees doing similar jobs should be paid equally and likewise, more qualified
employees should be paid better.
4. Reward new ideas and behaviors: Pay should reward an employees loyalty,
commitment towards work, his experience, the amount of risk the job holds and the
initiatives taken. When companies fail to reward such contributions, employees will
fall apart.
5. Cost control: Hiring cost should never be too high. The compensation planning
should ensure that workers are neither overpaid nor underpaid.
6. Compliance: The compensation planning and management should invariably satisfy
governmental compliance of minimum wages, bonus, allowances, benefits etc.
o

Sales Force Compensation: Components and Methods

A compensation plan of a company consists of one or more of following


components:

1. Basis Pay (plus Dearness Allowance):

It consists of a time-based fixed payment made to all the salesmen on an equal basis.
Mostly, dearness allowance (D.A.), as certain per cent of the basis pay, is also paid to meet
the increasing living expenses.

2. Commission:

Commission is the payment made for the actual work. It is a form of the piece-based
payment. Commission is paid on the basis of sales volume. And, the rate of commission may
be fixed or variable depending upon policy of a company.

3. Expenses:

Over and above basic pay and commission, the expenses are paid extra. In most cases,
companies pay the actual expenses or a lump-sum amount to meet expenses. Expenses
include traveling, lodging and boarding, sales expenses like telephone, telegram, and
expenses made for customers, entertainment allowances, etc.

4. Bonus:

Some companies pay bonus. Note that bonus is not a part of regular payment and is not
compulsory to pay. It is the extra payment made for extra work done by the salesmen and/or
for their outstanding achievements. Bonus may be paid equally or in relation to sales.

5. Fringe Benefits:

Companies pay some amount to salesmen as the fringe benefits for better living. Fringe
benefits cover paid vacation, free holiday-home, insurance premiums, provident fund, car or
scooter allowance, gratuity, medical allowance, club membership, educational expenses for
children, and so forth.

6. Profit Sharing:

Certain portion of net profit (profit remained after meeting all the statutory provisions) is
distributed among salesmen. Company, by combining one or more of these components,
formulates a suitable remuneration plan. The remuneration plan must be adequate,
attractive, and motivating.

Methods of Remunerating Salesmen or Alternative Remuneration Plans:

Remuneration plan must be attractive to attract and motivate salesmen. Using different
components, various methods are possible to suit different requirements of a company
and/or the expectations of salesmen. Each remuneration method has its merits, demerits,
and suitability.

There are main four methods:

1. Straight Salary Method

2. Straight Commission Method

3. Salary plus Commission Method

4. Combination Plans

a. Salary and Bonus

b. Commission and Bonus

c. Salary plus Commission plus Bonus Method

Straight Salary Method:

It is the most common method for remunerating sales force. Here, payment made to
salesman is called salary. Mostly, salary includes basic pay plus dearness allowance. The
salary is the payment made to a person for carrying out his job or performing his duties over
a given period of time.

Merits:

Straight salary method offers following merits to both company as well as


salesmen:

1. It is very simple to understand and administer.

2. It gives a definite guaranteed income. It is a stable income. Business fluctuations do not


affect salesmens remuneration. Salesmen can work without tension of any reduction in
payment.

3. It gives security. Salesmen can have a tension-free life. They can concentrate on their
work.

4. This method enables a company to make necessary provisions in advance for amount of
salary as it is easy to estimate.

5. High level of cooperation exists among sales force as they are earning equally.

6. Salesmen do not resist to transfer at any place or to carry out other assignments as their
income will not be affected by change in place or work. Company has more freedom to
adjust with the changing needs.

7. It ensures stability in staff.

8. It is not necessary for salesmen to resort to aggressive salesmanship. They give more
attention to needs and expectations of customers than on their targets.
9. Salesmen do not tantalize to resort any dishonest way to raise sales volume.

10. Under this method, management is able to direct and control the salesmen better than
any other method.

Demerits:

Following are demerits of this method:

1. Basic drawback of this method is lack of incentives for better performance.

2. Generally, those salesmen who are capable, enthusiastic, and ambitious are discouraged.

3. Highly ambitious salesman may not stay with the company in a long run. Ultimately, staff
stability is affected adversely.

4. Salary is paid irrespective of sales volume. Company has to incur fixed expenses
regardless of sales or profits.

5. Salesmen may develop a tendency to avoid work because they are paid fixed amount.
Sales force may be inactive or rigid.

6. In case when adequate increment is not granted regularly, it is difficult for salesmen to
cope with rising living expenses.

7. This method does not lead to self-motivation and self-control. Company has to direct and
control them on a continuous basis to make them active and interested to carry out assigned
work in time.

8. In a slack season, a company cannot reduce selling costs. It is not advisable for a
company. On the other hand, during prosperity, salesmen are not benefited with additional
income.

9. Salesmen are not interested in prosperity of company. Their interest is only to earn fixed
pay. They are found less interested to develop new techniques and tactics to attract
customers.

10. This method is not suitable for hard-selling products or hard-selling territories.

Straight Commission Method:

Mostly, income/payment of salesmen depends on total sale achieved. There are two options
one is straight commission plus expenses, expenses are paid extra, and the second is
straight commission inclusive of expenses.

In the second option, obviously, the rate of commission is kept high. In actual practice,
commission is treated as a part of total payment, which is paid along with the fixed salary.
Pure commission method is hardly practiced by any company.

Amount of commission is calculated as certain per cent of either total sales an individual
salesman has achieved or on the basis of sales of particular territory. Commission is also
associated with new account opened (number of new customer generated).
Merits:

Followings are the merits of this method:

1. It motivates salesmen to do a better job. This method acts as a greater incentive for
efficient and capable salesmen.

2. Alike straight salary method, it is also simple to understand and implement.

3. This scheme provides unlimited opportunities for capable and skillful salesmen. There is
no ceiling of income. Payment under this method is usually higher than the previous one.

4. There is freedom of activities for the salesman. He is not bound for specific hours of work
in a day. He can draw up his own plan and prepares schedule accordingly. He can acts as an
independent businessman.

5. There exists close and direct relationship between efforts and rewards. This method leads
to the increased productivity. Company and sale force both are benefited.

6. Salesman can easily be prepared to undergo for training, or to attend/participate


seminars, discussions, and conferences organized for improving better skills to achieve more
sales.

7. Under this method, due to freedom and incentives, the salesmen of better ability and
caliber can be attracted. A company has enthusiastic, industrious, up-to-date, and confident
sales people. Salesmen, along with sales and profits, also improve firms image.

8. There is no complaint for overwork and underpayment. Every salesman can earn as per
his ability to generate sales.

9. The most important plus point of this method is that selling costs can be controlled in
direct relation to volume of sales. During recession, selling costs can be reduced. Selling
costs remain parallel to sales.

10. By applying variable commission rates, a firm can promote new product or new market.

11. Attractive commission rate can attract salesmen of competing firms. It can multiply
companys gain.

12. Company is not required to supervise and control them. Salesmen develop a sense of
self-motivated, self-directed, and self-controlled.

Demerits:

However, following are the weak points of straight commission method:

1. From management point of view, it is difficult to manage sales force as it has no direct
control over salesmen. They are independent.

2. In order to increase sales, salesman may resort to some unfair practices. He may work
against interest of company and/or customers by compromising with companys original
policy. It spoils both companys image and relations with customers. For example, salesman
may offer price concession against the companys pricing policy.
3. Salespeople concentrate only on the easy-sold products and territories. They, unless
strong incentives are provided, are found less interested to promote a new product or
territory.

4. Since they are constantly engaged in raising sales volume, they do not provide
satisfactory services to customers or attend customer complaints.

5. They do not collect information for the company. They may not spare time for any other
activities important for a company except selling the products.

6. Salesmen avoid promotional work and creative salesmanship. They remain persistent to
achieve sales.

7. This method doesnt guarantee steady income. Income is highly fluctuating. In recession,
salesmen find it difficult to cover living expenses.

8. Sometimes in order to increase sales volume and earn more commission salesmen
may employ some tactics such as cheating, false promises or misleading information that
affect companys reputation adversely.

9. Salesmen develop the money-oriented mentality. They frequently change the jobs.

10. Company cannot plan in advance regarding sales expenses.

11. This method is not suitable for new salesmen. Also, there may be conflict among
salesmen working in the same territory with same products.

12. This method is time-consuming and expensive because a company has to maintain sales
records of each salesman in terms of different products and territories to calculate amount
of commission.

Salary plus Commission Method:

This is a popular and widely practiced method/plan to remunerate sales force. Under this
method, over and above fixed and regular salary, a salesman is paid commission, too. Rate
of commission may be fixed or variable, may be common or different to all products and
territories.

Proportion of fixed salary and commission depends upon types of products, territories,
company objectives and policies, and other relevant factors. The strongest aspect of this
method is that it combines elements of a regular fixed payment and an incentive to do
better.

Merits:

This plan offers following merits:

1. It satisfies both types of salesmen fixed regular income seekers, and industrious and
ambitious salesmen.

2. Company has to bear minimum fixed costs of selling. Cost of commission is compensated
with increased sales.

3. It is suitable for both salesmen a new salesman and an experienced salesman.


4. It ensures stability in staff. After training and experience, they continue with the company
as they find the scheme fit with their expectations.

5. They devote full time and energy for selling the products. They are not required to do any
extra activities to earn extra.

6. All other merits of individual plans are equally applicable here.

Demerits:

However, one must be careful of following drawbacks:

1. The major problem with this method is to determine the proportion of fixed salary and
rate of commission. What should be the minimum salary is difficult to decide. In absence of
suitable formula (guideline), it is difficult to find out a satisfactory combination.

2. It is comparatively a complex plan. Company has to maintain record of individual


salesman to decide on rate of commission and/or amount of commission.

3. Lack of uniformity among various companies neutralizes benefits of both plans. For
example, some companies pay commission for any level of sales; some pay commission
after certain level of sales; some pay at fixed rate, while some pay at variable rate.

4. Sometimes, when companies pay minimum amount as a fixed salary, it is difficult for
salesman to achieve more sales during slack seasons. It leads to exploitation.

5. Company, to adjust with its own need, frequently changes the proportion of fixed salary
and rate of commission. Ultimately, salesmens interest is victimized.

6. In some cases, company pay commission not only for achieving sales, salesmen have to
perform certain tasks extra. It gets its several activities done for the same amount of
commission.

Combination Plans:

In combination plan, various aspects are combined to make remuneration plan more
attractive. Bonus and profit sharing are used with straight salary and/or commission.

Combination plan involves combination of one or more of following elements:

1. Salary and bonus

2. Commission and bonus

3. Salary plus commission plus bonus method

4. Profit sharing with salary, commission and/or bonus.