Module 5

PA & Salesforce Compensation

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 Contents
Sales Incentives & Sales Compensation
(Factors influencing design of sales compensation plan,
Types of sales compensation
Financial
• Straight salary,
• Straight commission,
• combination salary
Non-financial
• Promotions,
• Recognition programs,
• Fringe benefits,
• Expense accounts,
• Sales contests

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 GOALS

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 OPTIONS

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 Factors Influencing
DESIGN OF COMPENSATION PLAN
– financial ability of the firm to pay in current & future period

– Need of higher VC in pricing

– High pull strategy products need less SF compensation

– Supply higher than demand- compensation is needed

– Otherwise, not required

– Limited market size & higher competition , compensation is needed

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 DESIGNING COMPENSATION PLAN
Determine SF & Compensation objectives
Attainment of Sales volume
market penetration,
achievable with a s-t-r-e-t-c-h
Determine Major Compensation issues
– Industry average
– Benchmarking
– Administrative issues
– Morale of support staff
Implement long & Short term Plans
– Attrition rate of SF and Customers as LT adequate money for SF as ST
Relate Reward & Performance
– Develop metrics
Measure Performance
– after each cycle say year
Appraise the COMPENSATION PLAN PERIODICALLY
– Redundancy effect

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 Types of Compensation Plans

Financial
Straight Salary
Straight Commission
Combination salary

Non- financial
Promotions
Recognition programs
Fringe benefits
Expense Accounts
Sales Contests

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 AIM-WHY

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 Straight Salary
Positives
•Fear of running family
•Simple & easy to administer
•Can direct the SF on action you need
•Less resistance by SF
•No OVER high pressure tactics by SF on customers
•To cultivate tomorrows customers SF wont resist
Disadvantages
•Lack of monetary incentives
•Curb the SF potential
•Time lag for salary review may not be OK for SF
•Salary kept secret, SF wonder whether justice done to his performance
•Can lower the work intensity

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 Straight Salary

Appropriateness
•Order Taking sales
•High pull strategy products that involves less sales effort
•Missionary sales
•High degree of technical selling team effort
•Long cycle time B2B products
•Sales Force during Infancy, OJT

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 Straight Compensation
Two Types in this are:
1.Straight commission- after you sell / month end
2.Draw against commission- Draw as salary, adjust later based on sales
performance
Advantages
•Max incentive, max sales
•SF acts as a businessman
•Time flexibility, SF wouldn’t complain

Disadvantages
•Slave of incentive, you may lose some customers
•Neglect other work
•Insecurity for newcomer

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 Straight Compensation
Disadvantages
•Unhealthy loyalty with customers’ decision maker?
•Reluctant to split territory
•Service after sales may suffer
•High turnover of SF
•Differential % on mix would result in CHERRY PICKING
•Administering is not easy
•Business goals ad SF goals may not align
Appropriateness
•Real Estate
•Mary Kay, AmWay, Tupperware
•Part time attraction

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 Combitination

A.SALARY + COMMISSION

B. SALARY + COMMISSION Over a QUOTA

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 Bonuses
A. Individual
B. Group
C. Across Board
D. Performance on
– Sales
– New accounts
– On new products
– New territory
– Customer retention

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 NON-FINANCIAL
1. PROMOTIONS
– Up the ladder
– On to key accounts / Territory
2. RECOGNITION PROGRAMS
– Medallions presented in conferences
– Millionaire club membership
– Encouraging letter from CEO
3. FRINGE BENEFITS
– Medical /retiral / Insurance / stock Options / Gratuity
– LTC / Paid holiday
4. EXPENSE ACCOUNT
– Reimbursement of expenses on / off job
5. PERKS
– Car /Housing/Driver/Gardner/club
6. SALES CONTESTS

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 Basic SF Performance Standards
QUALITATIVE
Product Knowledge
Customer need assessment
Maintaining Relationship
Punctuality
Timely reporting
Integrity
QUANTITATIVE
Quota achievement
Selling expenses VS Quota
Profit
Market share
Coverage
Call ratio

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