Staffing the Sales Force 3

7/30/2019 Staffing the Sales Force 3

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TYPES OF COMPENSATION PLANS

Straight Salary Plan

Fixed sum at regular intervals total payments for theirservices

Common amongst industrial goods companies; jobs

requiring extensive missionary / educational work; jobs

including servicing and providing technical & engineering

advice; salespersons doing considerable sales promotion /non-selling work; trade selling order-taking salespersons

Provides strong financial control over sales personnel and

management can direct their activities along most

productive lines with minimum opposition.

Provides stability of income & freedom from financialuncertainties to the sales personnel

Since there are no monetary incentives manysales peopleend up doing just an average job.


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Straight Commission Plan

Sales persons paid according to their productivity sales

volume is usually considered the best productivity measure

Straight commission with sales personnel paying their ownexpenses OR company paying their expenses

Advances may OR may not be paid against earnedcommissions

Progressive or Regressive changes in rates of commissionsas sales volume rises to different levels

Different commission rates for different products OR differentcategories of customers OR during different selling seasons

Provides maximum direct monetary incentive to salespersons to strive for higher volumes


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Contd

Means of cost control as sales compensation becomes

virtually a variable expense except for traveling and

miscellaneous expenses Provides little financial control over sales persons activities

they give secondary importance to non-selling activities like

reporting, new customer prospecting, sales promotion; avoid

selling high-margin hard-to-sell products; resist reductions or

change in territory etc. Costs of checking & auditing are higher

Efficiency may decline due to uncertainty of income.


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Combination Salary & Incentive Plan

These are designed so that sales personnel can have both

the security of stable incomes and the stimulus of directfinancial incentives

Greater cooperation from the sales force and a morale

booster

Provides greater flexibility to management for adjustment to

changing conditions

Clerical costs are higher than in straight salary or straight

commission plans.


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USE OF BONUSES

Bonus is different from commission it is paid for accomplishing a

specific task.

Additional financial reward for achieving results beyond a pre-determined minimum.

Never used alone but in combination with one of the three

compensation plans.


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FRINGE BENEFITS Do not bear direct relation to job performance.

Given to all employees - some of these benefits are required bylaw.

Range from 25 to 50 % of the total sales compensationpackage.

Contribute to safety & security needs and some to fulfillment ofesteem & higher order needs.


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MANAGING EXPENSES OF SALES

PERSONNEL General Expense Ratios

Compensation : Company Sales 0.4 to 8.2 %

Expenses : Company Sales 0.2 to 1.6 %

Total Sales Force Expenses : Company Sales 1.1 to 10.4 %

Expenses : Total Sales Force Expenses 9.3 to 33.3 %

Sales Expenses covering traveling, lodging, meals & entertainment in mostindustries varies from 25 % to 50 %.

Field selling expenses vary by type of pre-dominant selling style:

Missionary & Trade selling styles are lower as entertainment is not involved .

Technical & New Business require long calls on large customers as well asentertainment thus making this type of selling more expensive.


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Degree of formal control over sales expenses varies from

company to company.

Keeping expenses within certain bounds is important on one hand

whereas a degree of liberality is desirable to ensure sales personnel do

not fail to capitalize on market opportunities due to lack of adequatefunds.

REIMBURSEMENT OF SALES


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REIMBURSEMENT OF SALES

EXPENSES

Sales Personnel pay their own expenses

Such companies regard the sales personnel as independentbusinesspeople.

Most of them also pay straight commission only.

No expense records are necessary.

Compensation levels reflect the fact that sales personnel pay

their own expenses. Little management control over their route & call schedules


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Reimburse sales personnel for all or

part of their expenses

When expenses are reimbursable sales management needscontrol.

Reimbursable expenses should be enough to perform assigned

work in expected manner.

Should take into account customary living standards of

salesperson & customers, with emphasis on the latter.

Should keep expenses reasonable and should be economical

to administer.


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METHODS OF CONTROLLING &

REIMBURSING SALES EXPENSES

Flat Expense Account

Flexible Expense Account

Honor System

Expense Quota


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REIMBURSEMENT OF AUTOMOBILE

EXPENSES

Flat Mileage Rates

Graduated Mileage Rates

Fixed Periodic Allowance

Combination Fixed Periodic Allowance & Mileage Rates

Runzheimer Plan


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SALES MEETINGS

Important for both COMMUNICATION & MOTIVATION purposes

Since sales people generally work alone, it is a good idea to hold

periodic group meetings for exchanging information & ideas. Provide

occasions for management to stimulate the group to improve itsperformance


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Planning a sales meeting requires 5

major steps

A AIMS - Clearly defined objectives

jokingly called excuses holding a meeting. e.g. : New product introduction

New insights into customer attitudes & behavior

Application of proper sales techniques New company policies or sales goals requiring explanation

Improving quality of sales reports

Orienting on advertising program & coordinating tie-in activities

Increasing effectiveness of time management

Introducing new services inventory control.


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C CONTENTS

Agenda List or outline of things to be considered or done

during a meeting depends to large extent on the Aims.

M METHODS Local Short & participative group discussions best

Regional / National 2/3 days with wider mix of aims & contents

hence use a mix of different methods.

EXECUTION

Speakers, Seminar leaders, meeting site & time

Room & seating arrangements

Audio-Visual equipment & supplies, provision of materials,

breaks, refreshments etc.

E EVALUATION Whether meeting accomplished its aims

Feedback for future program planning.


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NATIONAL SALES MEETINGS

National meetings can introduce comprehensive marketing /sales policy changes rapidly & uniformly.

Major executives in the company attend a national salesmeeting difficult for them to attend a series of decentralizedones.

Sales personnel meet counterparts from other regions &

exchange experiences.

Meeting Head Office personnel leads to better coordination. Iffactory is also located at the same place or nearby there is anopportunity for product training with exposure to manufacturingdetails.

The costs of bringing the entire sales force to a central site aresubstantial. It is difficult to find convenient time to take off theentire sales force from the field unless sales are seasonal.


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REGIONAL SALES MEETINGS

Head office sales executives & personnel attend the regionalsales meetings reducing travel costs & loss of selling time.

Focus on unique problems of the region. HO executives learnabout the current problems first hand.

Smaller attendance increases participation per personattending.

Smaller percentage of HO / management participationdepreciates the importance of the meeting in eyes of the sales

force and smaller attendance also not conducive to spirit ofcontagious enthusiasm.


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LOCAL SALES MEETINGS

Weekly or biweekly last from 15 minutes to couple of hours.

Informally conducted meetings with each sales person having an

opportunity to pose questions and to state personal views.

Strengthen group identity.


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REMOTE CONTROL & TRAVELING

SALES MEETINGS

Closed-circuit television

Sales meetings by telephone

Sales meetings at home essentially by post / written mail

Traveling sales meetings where meetings require physical props

new product demonstration, displays etc. they can be done by out-fitting on trucks / trailers / vans etc.

Documents

Staffing the Sales Force 3