Evaluate straight salary, straight commission, and combination pay plans in terms of

their advantages and disadvantages. When should each be used?

Straight Salary
Common Uses: Sales trainees, sales support

Advantages
• Salaries are simple to administer • Salaries offer little incentive for
• planned earning are easy to
project
• salaries can provide control over
salespeople´s activities, and
reassighnments are less of a
problem
• Salaries are useful when
substantial work is required
Disadvantages
better performance
• Salary compression could cause
perceptions of inequity among
experienced salespeople
• salaries represent fixed
overhead

Straight Commission
Common uses: Real estate, insurance,
wholesaling, securities, automobiles

Advantages Disadvantages
• Strong incentive to • Straight commission plans
perform contribute little to
• income is linked directly compony loyalty.
to desired results • Problems may also arise if
• Straight commission plans commissions are not
offer cost-control benefits limited by an earning cap.
 Combination Pay Plans
Widely Used, most popular type of
financial pay plan
Advantages Disadvantages
• Flexibility allows • Complex to
frequent reward of administer
desired behavior • may encourage crisi-
• may attract high oriented objectives
potential but
unproven recruits

Straight Salary: aren´t very common. No bonuses, no commissions, few if any sales incentives.

Used for direct sales, when sales people work as a small groups or teams, and all
contributions are equal. Don´t tend to offer Motivation as there are no incentives to work harder.

Commission only: The sales people are paid for the sales they bring in and nothing else. May in a
market volatile time there is no guarantee for income. Easier to administer than combination pay
plan, salary is based on sales achieved. Attract most performing and hardest working sales
professionals.

Salary plus Commission (Combination): The most common used plan. Sales people receive a lower
base salary, along with commission pay as the majority of the total compensation.

Better choice as opposed to straight salary and straight commission. Offers motivation to increase
productivity and achieve goals. Also, more stability: Sales People so as trainees will get a base salary
even if they´re training, even if sales get low for months when market conditions get volatile.

More Complex than straight pay plans.

Define the terms specialization and centralization. Discuss three situational factors
that suggest the need for specialization and centralization. Provide a specific example
of each factor discussed.

Specialization
• The degree to which individuals perform some of the required tasks to the
exclusion of orders
• Individuals can become experts on certain tasks, leading to better performance
for the entire organization
• Certain selling activities for certain products for certain costumers
• more authority to make decisions

Centralization
• The degree to which important decisions and tasks performed at higher levels in
the management hierarchy.
• Centralized structures place authority and responsibility at higher management
levels.
• All selling activities, and all products to all customers
• less authority to make decisions

Situational Factors that suggest the need for specialization and centralization

Organizational Structure Specialization Centralization

Environmental Characteristics High Environmental Low Environmental
Uncertainty Uncertainty
Task performance Non-Routine Repetitive
Performance Objective Adaptiveness Effectiveness

Environmental characteristics: Degree of environmental uncertainty.

Higher environmental uncertainty: → specialized structure. (e.g. high Volatile

Marketplace)

Low environmental uncertainty: → centralized structure. (e.g. low Volatile

Marketplace)

Task Characteristics: non-routine activities or repetitive

Creative and non-routine activities. (products developed individually to meet

customers specifications. → Specialized structure

Routine and repetitive: → centralized structure

Performance Objectives: adaptiveness (new Products every few months) or effectiveness

Adaptability is critical → Specialized structure

Effectiveness → Centralization.
Discuss the Elements of Sales strategy Framework, focusing on organizational buyer
behavior. Do you believe that the type of buying situation affects the buying center
and the buying process? How?
New Tasks: Extensive problem solving, Greater Risks

Modified Rebuy: Limited Problem solving, Moderate Risk

Straight Rebuy: Routinized Response Behavior, Lower Risk

I believe that the type of buying situation affects the buying center.

For example, if a company needs a straight Rebuy of something which was already in use, so there is
lower risk that something could go wrong at the process. The user tells gatekeepers he needs a
rebuy, and the gatekeepers do a straight rebuy, regularly by the same supplier if its not an expensive
product or not a specialized product.

In case of modified rebuys, there are some new values for the user. The buying process is slower
than a straight buy. The buyer needs different quotations for the same product. The user needs a fast
delivery and quality. At this case the buyer may choose another supplier then who was always
supplying with a moderate risk.

In case of New Task, the buying process needs much longer time. The company may decide to
introduce a completely new process with need of completely new products. The buying processes
are mostly involved into a new process project. So, there is nothing regular for a straight Rebuy nor
for a modified Rebuy. The buyer will need more information and personal selling. The risk is greater
than at any other buying behaviors.
Personal selling is typically emphasized in business markets and advertising
emphasized in consumer markets. Why? + Advantages and disadvantages
Personal Selling: Mostly B2B, Business target markets.

Characteristics: Few buyers, Buyers concentrated geographically, Purchase needs High

product information, Purchase is made in large amounts, high importance purchases, complex
products, post-purchase service is important.

Advertising driven: Consumer target Markets

Characteristics: Many buyers, buyers are dispersed geographically, low purchase information
needs, purchase made in small amounts, Low importance purchases, post-purchase service is not
important.

Personal Selling Driven Advertising Driven

•Message flexibility is important
•Message Timing is important
•Reaction speed is important
•message credibility is important
•Trying to close the Sale
•Low cost per contact is important
•Repetitive Contact is important
•Control of Message is Important
•Audience is Large
Sales contests represent a widely used motivational practice for the sales workforce.
What concerns should sales manager have regarding the use of sales contests? What
are the ways of optimizing the use of sales contests? Sometimes these motivators act
as a demotivator, wh?

Optimizing Sales Contest

• Use variety as a basic element. Vary timing, duration, themes and rewards.
• Publicize it, to build interest and excitement.
• Ensure that Objectives are clear, realistically attainable and quantifiable
• Send periodic e-mail reminders to keep them informed of their goal progress.
• By using sales contest, sales managers should minimize potential moral and motivation
problems by allowing multiple winners, but not setting low expectations.
• Top performers are likely be motivated no matter what the incentives are. Encourage strong
effort from the remainder of the salesforce.
• Contests will concentrate efforts in specific areas, plan accordingly.
• Help to build teamwork by considering the positive effects of including the non-selling
personnel.
• Using team contests to enhance customer relationships
• Provide public (special event) and private (letter from management) recognition to winners.
• Encourage the winners to share their winning strategies