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Module Twelve

Motivation and Rewards

Motivating a
Sales Force

I believe I can fly,
I believe I can touch the sky!
R. Kelly, Space Jam

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Sales Motivation

Intensity
(How much effort?)

Choice of actions Outcome

Persistence
(How long?)

MOTIVATION is the desire to expend effort to fulfill a need
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Four Basic Questions in Motivation

• What arouses salespeople’s behaviour?
• What influences the intensity of the
behavioural arousal?
• What directs the person’s behaviour?
• How is this behaviour maintained over time?

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demanding customers • Individuality of salespeople • Diversity in Company goals • Changes in market environment 33 5 . rejected. Importance of Motivation • Unique nature of the sales job – Lonely.

Motivational Conditions Are the YES Does better YES Does more effort YES rewards GREATER performance lead to better worth the EFFORT lead to greater performance? effort? rewards? NO NO NO The same or less effort 6 .

promotion F: Affiliation. Maslow’s Hierarchy of Needs F: self actualisation M: Special projects. income security M: Mutually agreed performance standards Fulfilled through Food. clothing Managerial action: Compensation packages 33 7 . mentoring programs. social functions F: Job security. friendship. recognition M: title change. sales meetings. acceptance M: team selling. safety. more responsibility and authority F: Status. shelter.

greater the effort leading to superior performance 33 8 . Vroom’s Expectancy Theory • A person’s motivation to exert efforts depends on his expectations of success • Expectancy – A person’s perception of relationship between efforts and performance • Instrumentality – Relationship between performance and reward • Valence – Value placed on a particular reward by a sales person Motivation = Expectancy x Instrumentality x Valence • Higher the motivation.

Extrinsic Outputs Feedback 9 . Salespeople’s Basic Needs EXPECTANCY INSTRUMENTALITY VALENCE Rewards Equity Satisfaction Motivation Performance Intrinsic Determination Intrinsic To work Level Extrinsic Inputs vs.

high valence for promotion and pay • Maintenance – Primary concern is maintaining position. respect. and pay – Low valence for promotion • Disengagement – Primary concern is preparing for retirement and/or developing outside interest – Low valence for higher order and lower order rewards – Low instrumentality 33 10 . and performance – Have highest sales volumes and percentage of quota and pay – High valence for recognitions. Career Stages • Exploration – Primary concern is finding a suitable occupation – Underdeveloped skills and knowledge – Many drop out or are terminated – Low expectancy instrumentality. status. high valence for personal growth • Establishment – Primary concern is improving skills and performance – Lack of promotion may cause disengagement or quitting – New commitments make pay important – High expectancy instrumentality.

adapt the presentation Ensure abilty and effort adequatei Task Change strategy. avoid the Difficulty situation Luck No change in behaviour Avoid the situation 34 11 . work longer hours.Salesperson Motivation – Cause and Impact Perceived POSITIVE IMPACT Negative Action Reason for failure Ability Seek help. make more calls Do not question ability or strategy Strategy Change strategy. ask for Should not be attacked by manager’s assistance increasing effort Effort Increase effort. adapt the presentation. get additional training. seek help Become frustrated.

Motivational Tools • Financial • Non Financial – Salary – Promotion – Commission – Sense of accomplishment – Bonus – Personal growth opportunities – Fringe benefits – Recognition – Combination – Job security – Sales meetings and conventions – Sales training programmes – Job enrichment – Supervision – Performance Evaluation 12 .

Make sure the goals are reachable. Motivate the Team 1. 5. 6. Listen to your salespeople. 3. 34 13 . 4. Identify the business goal you hope to target. Don’t repeat the same programs over and over. 2. Communicate the business needs to your salespeople. Don’t try to do everything at once.

Guidelines for Motivating Salespeople • Differentiate between can’t do and won’t do • Segment the sales force to individualise the motivational programmes • Communicate and be the role model • Praise in public and criticise in closed rooms • Handle plateaued salespeople separately 33 14 .

Causes of Plateauing • No clear career path • Not managed adequately • Bored • Burned out • Economic needs met • Discouraged with company • Overlooked for promotion • Lack of ability • Avoiding risk of management job • Reluctance to be transferred 33 15 .

MOTIVATORS HIGH LOW • Rewards for successes • Company policy and • Recognition for achievement procedures • Job advancement • Fringe benefits • Freedom to manage oneself • Retirement programs • Training and sales meetings • More supervision • Leadership • Performance evaluation • Incentive compensation plans 34 16 .

Positive incentives in most instances motivate more successfully than negative incentives. Sales managers would do well to explore different aspects of incentives. Several things to consider are: Some salespeople like material incentives versus nonmaterial incentives. The attraction to short-range incentives versus long-range incentives. 33 17 .

Motivation Techniques Teach teamwork Empower Communicate Hear Notice Initiate integrity Query Unify Exalt 33 Set standards 18 .

How Little you know about the age you live in if you fancy that honey is sweeter than cash in hand. 19 .

What a Good Sales Compensation Plan Should Do Efforts + Control Treat Attract and Results = activities of customers keep good Reward sales reps properly people Motivate the Good sales Economical yet salesperson compensation plan competitive Security and Flexible and Fair Simple incentive stable 20 .

Steps in designing a sales compensation plan Review job description Identify plan’s objectives Establish level of compensation Develop the method of compensation Decide on indirect monetary compensation Pretest and install plan 34 21 .

Identify Specific Objectives • Increase – Profits – Sales volume of a specific class – Increase volume of existing accounts – Improve customer satisfaction – Stimulate missionary work – Develop a new territory • Should be based on factors: – Controllable by sales person – Measurable by Company 22 .

Establishing the Level of Compensation • Average amount earned over a given period • How much rather than how • Highest in financial services • Lowest in retail 23 .

Building Blocks for a Sales Compensation Plan Others Profit sharing Others Pension Entertainment Profit Sharing Moving Expenses Lodging Company Car Normally under Bonus Insurance Lodging expenses Salary Commission Paid Vacation Travel SECURITY INCENTIVES BENEFITS EXPENSES 24 .

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Basic Types of Compensation Plans • Straight salary • Straight commission • Combination 34 26 .

Compensation Methods for Salespeople Compensation Especially Useful Advantages Disadvantages Method For Straight Salary New sales reps Maximum security No incentive New sales Control over reps Requires close territories Easy to supervision Many required administer Selling expenses nonselling Predictable remain same activities expenses during sales Positive impact on declines consumers 34 27 .

Straight Commission Plans • Regular payment for performance of a unit of work • Base – units. revenue. regressive or combination • Splits – between two sales people • Payout Event – order confirmation. shipment. progressive. profits • Rate – constant. paid for or combination 34 28 . billing.

Compensation Methods for Salespeople Compensation Especially Useful Advantages Disadvantages Method For Straight Highly aggressive Maximum Little security Commission selling incentive Little control over Minimal required Managers can reps nonselling tasks encourage sales Reps may provide When company of certain items inadequate can’t closely Selling expenses service to smaller control sales force relate directly to accounts selling resources Selling costs less predictable 34 29 .

Compensation Methods for Salespeople Compensation Especially Useful Advantages Disadvantages Method For Combination Similar sales Some security Selling expenses potential across Some incentive are less territories Selling expenses predictable When company vary with revenue May be difficult to wants to offer Manager has administer incentive but some control over maintain some nonselling control activities 34 30 .

how should they be allocated among team members? • How often should the salesperson receive incentive payments? 34 31 . Design Questions for Combination Plans • What is the appropriate size of the incentive relative to the base salary? • Should a ceiling be imposed on incentive earnings? • When should the salesperson be credited with a sale? • Should team incentives be used? If so.

Bonus • Lump sum payment for above normal performance • Normally announced in advance • Not to be confused with Bonus laws in India • Normally paid on achievement of different levels against quota (target) • Could be monthly. quarterly. annual or combination 34 32 .

recognition. and a sense of accomplishment • Successful contests require: • Clearly defined. specific objectives • An exciting theme • Reasonable probability of rewards for all • Attractive rewards • Promotion and follow-through 34 33 . Sales Contests • Short-term incentive programs designed to motivate to accomplish specific sales objectives • Contest winners receive prizes.

Criticisms of Sales Contests • May not produce lasting improvements • Salespeople may borrow sales from another period to increase sales during the contest period • Poorly administered contests can hurt cohesiveness and morale 34 34 .

Minimize potential motivation and morale problems by allowing multiple winners. Recognize that contests will concentrate efforts in specific areas. Plan accordingly. Salespeople should compete against individual goals and be declared winners if those goals are met. often at the temporary neglect of other areas. Sales Contests: Recommended Guidelines 1. 2. 34 35 .

34 36 . Use variety as a basic element of sales contests. 4. duration. Sales Contests: Recommended Guidelines 3. and quantifiable to allow performance assessment. themes. realistically attainable. Vary timing. Consider the positive effects of including non-selling personnel in sales contests. Ensure that sales contest objectives are clear. 5. and rewards.

Possible Combination Compensation Plans COMMISSION BONUS SALARY What should the proportion be between the three? 34 37 .

Identify Specific Objectives • What combination should be used to increase – Profits – Sales volume of a specific class – Increase volume of existing accounts – Improve customer satisfaction – Stimulate missionary work – Develop a new territory 34 38 .

or promotion • Indirect monetary benefits – Group insurance – Pension – Provident fund – ESOP – Profit sharing – Paid holidays 34 39 . recognition. Indirect Monetary Compensation • Non financial compensation in form of honours.

Key Terms • compensation plan • salary • incentive payment • commission • bonus • quota • sales contests • benefits • nonfinancial incentives • variable commission rate • draw • perquisites (perks) • expense account 34 40 .