Sales Force Compensation

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• Sales Force Compensation
• How little you know about the age you live in if
  you fancy that honey is sweeter than cash in
  hand.
• Ovid

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What a Good Sales Compensation Plan Should Do
Correlate efforts and results with rewards
Control salespeoples activities
Attract and keep competent salespeople
Ensure proper treatment of customers
Be economical yet competitive
Motivate salespeople
Good sales compensation plan
Provide choice
Be flexible yet stable
Be fair
Be simple
Provide secure and incentive income
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Potential Conflicts in Compensation Plan Design
Characteristics of Plan 1 2 3 4 5 6
7 8 9 10 11 12 1. Reward results __
2. Reward efforts C __ 3. Provide steady
income C __ __ 4. Provide incentive __ C
C __ 5. Fair C C C C __ 6.
Flexible __ C C __ __ __ 7.
Simple C __ __ C C C __ 8.
Economical __ C C __ C __ C __ 9.
Competitive __ C C __ __ __ C C __
10. Controls and directs C __ __ C C C
__ __ __ __ 11. Consistent w/ company
objectives C C C C __ __ C __ __ __
__ 12. Stable C C __ C C C __ C
__ C C __ C Potential for conflict
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Steps in Designing a Sales Compensation Plan
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Building Blocks for a Sales Compensation Plan
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Method Advantage Disadvantage
Best Used
Straight salary
Provides security and stability for reps Better
for directing and controlling sales
activities Ensures proper treatment of customers
Direct incentive is easily lost if not
administered properly Represents a fixed
cost Requires supervision to direct, control, and
evaluate
For products that require a lot of presale and/or
post-sale service For building long-term customer
relationships When supervision is available for
new recruits For new territories For missionary
sales
Difficult to direct and supervise sales
people Customers best interests may be
ignored Sales peoples earnings may fluctuate
widely
Straight commission
When a strong incentive is needed to attain
sales For products that require little presale
and/or post-sale service The sale is a one-time
sale Adequate field supervision is not
available Company is in a weak financial
position Company uses part-time or independent
sales people
Provides a strong incentive Sales people have
more freedom Acts as a screening method
Bonus
Added incentive Can be used for specific
activities - flexible
To encourage above-normal performance of specific
activities
Added cost May be seen as inequitable if not
administered properly
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Possible Combination Compensation Plans
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Compensating Cross-Functional Teams