Compensation and

Motivation of Sales Force

Problems Of Motivating Sales
Personnel

 Motivation is the amount of effort sales person takes to

achieve his sales tasks or objective.
 Motivation is goal directed behaviours associated with
the terms "desires" and "needs".
 Because of the unique working environment following
are the problems areas of motivation of sales persons:
 Role conflict.
 Apathy.
 Team spirit.
 The main objectives of motivation are:
 1. To stimulate the salesmen to improve their
efficiency.
 2. To establish cordial relationship between the
managers and salesmen.
 3. To maintain high morale among the salesmen.
 4. To seek cooperation of the salesmen in achieving the
sales target.
Role Conflict

 Sales persons are the linkage

between the firm and the customers.
 They interact with the following
groups or persons:
 Sales Department.
 Customer service organisation that process
orders.
 Other company sales persons.
 Customers.
Types of Conflicts

 These interactions results in following

types of conflicts:
a) Identification conflict: arises out of the fact that
salesman belong to more than one group.
b) Advocacy conflict: As the promoter of customer needs
and wants, he must gain the confidence of the
customers whose interests are, at loggerheads
with objectives of other Departments in the firm.
c) Inherent Conflict: As a salesman, his compensation is
based on his sales volume, he may often magnify
merits while suppressing demerits.
Apathy Due to Monotony

 Sales persons lose interest by working on same product in the same

territory and meeting same customers.

 When they are bit by the "monotonous bug", their sales calls
degenerate into perfunctory acts.

 Such salesmen need additional motivational efforts to

rejuvenate and invigorate their efforts.
Lack of Team Spirit

 Sales persons working in the field is

separated from the rest of their colleagues.
 This working environment deprives them
the conventional concepts of team spirit.
 This is because of the absence of
"synergism" by working alone.
 This also calls for extra efforts of motivation.
Prospects Of Motivating Sales
Personnel
 There are no straight solutions to
motivate a sales person.
 Special efforts are needed to motivate
sales personnel.
 Some of these steps are listed below:
 Interdependency relationship.
 Leadership styles.
 Effective communications.
 Industrial relations and Unionism.
Interdependency and
Motivation
 In case of sales persons power-authority-relationship undergoes
changes.
 depend on the "interdependent relationship" between the superior
and subordinate.
 sales force-superior-relationship is one of “partial
dependence".
 Each person, thus, have a "zone of acceptance"-a range over
which he accepts his direction.
 each exhibits a "degree of acceptance” which will harmonise
their relationship and assist motivation.
Leadership Style

 Effective sales manager/executive is a "leader" not a "boss" to

his team of salesmen.

 Free and frank discussions, friendly disposition, helpful

nature, creating a sense of espirit de corps, equity and
fairness underline effective leadership style.

 Setting a good example by leaders, by their

enthusiasm and hard work, assists motivating sales person.
Communication

 Effective communication assists motivation.

 proper communication is essential for better
direction.
 Two-way communication assists other
managerial functions like co-ordination and
control.
 Some of the steps are given below:
 Free and Frank Discussions
 Interpersonal Contact
 Motivational Interview
 Bulletins and Written Communications
Industrial Relations and
Unionism
 Unionism is not popular with sales persons because of :
 their dispersed locations and
 nature of work which is more individualistic rather than a
group activity
 Good industrial relations also improve the motivational
level of employees.
 By and large, management failure drives employees to
unionism.
 Good industrial relations also improve the motivational
level of employees.
Motivation-Theory & Practice
(SELF STUDY)
Sales Compensation Plan-
Nature
 Sales incentives are for improving
motivation levels of sales person.
 Their sales efforts depend
on their motivational levels.
 Methods of motivation are broadly
classified as follows:
 Financial Incentives.
 Non-Financial Incentives.
 A combination of both.
Sales Compensation Plan-Objective
 Financial incentives in the form of Sales Compensation Plans, serve
the following purposes, objectives providing extrinsic motivation.
 Provide a living wage.
 Relate individual performance with rewards.
 Relate company goals with individual goals.
 Non-financial incentive schemes meet following objectives
providing intrinsic motivation.
 Self-motivation
 Sense of belongingness
 Espirit de corps
 Self-actualisation and
 Empowerment.
Sales Compensation Plan-
Principles
 Following principles must guide designing
incentive schemes for sales persons:
 Provide a living wage.
 Compatible with other motivational plans
existing or proposed.
 Equity and fairness.
 Easy to understand and implement.
 Rewards are directly related to performance.
 Economical.
 Meets the overall objectives of the organisation.
Features Of A Good Sales
Compensation Plan
 There are a number of plans ranging from salary to paid
vacations.
 Survey conducted ranked the following plans according to
their popularity rating.
 Salary
 Individual incentive like commissions, travelling allowances and
incidentals
 Stock options (shares)
 Group incentives
 Deferred individual incentives
 Pensions
 Insurance
Executive Compensations

 Sales executives like General Sales Manager

(GSM), Regional Sales Manager (RSM) and
District Sales Manager DSM) and other senior
executives, also require financial incentive
schemes.
 Executive compensation methods can be
grouped into four classifications.
(a) Salary payments.
(b) Deferred payment
(c) Fringe Benefits
(d) Bonuses
Factors Influencing Sales
Compensation Plans
(a) Nature of job, working condition responsibility (corporate
headquarters, field work etc.)
(b) Level of employment, seniority/ranking etc.
(c) Firms wages and salaries structure, classification, grading, point
rating, merit rating and performance evaluation.
(d) Compensation pattern in the industry.
(e) Compensation pattern in the geographic area.
(f) Employee's level of knowledge, skill and experience.
(g) Compensation package structure:
i. Fixed element (e.g. salary).
ii. Variable element (e.g. -commission, bonus etc.)
iii. Fringe element (e.g. insurance, paid vacation
etc.)
iv. Incidental element (e.g. reimbursing expenses
on travel) fuel etc.
(h) Special Company Allowance: These are
given to salesmen to assist special
marketing problems of a firm.

(i) Opinion of Sales Force: Constructive

criticism of existing policy by field staff
assists to improve existing compensation
plans.
 "Sales Compensation Plan" is a
financial incentive scheme for sales
persons.
 The various types of compensation plans
for sales persons are:
 Pure salary
 Pure commission
 Salary and Commission
 Fringe benefits
Pure Salary
 This is the simplest form of compensation plan and
is being used for even those engaged in sales
promotion and training activities such as:
 Trade selling
 Order taking
 Selling products like milk, beverages and breads
 Magazine/newspaper vendors etc.
 The advantages of this system are the stability
of income and freedom from financial risks
and uncertainties to the salesmen
 The greatest disadvantage is that there is no
incentive to improve sales.
Pure Commission
 Here, only commission is paid which depends on
sales volume
 Number of varieties are available on this scheme of
payment, such as:
 Straight commission
 Differential commission
 Commission which is inclusive of sales expenses
 Commission which is exclusive of selling expenses
 The main advantage is that merit is fully rewarded
and mediocre are paid less.
 The limitations are that average and mediocre who
form the majority are disillusioned.
Combination of Salary-cum-
Commission Plan
 The advantages are the following:
 Security of stable income
 Merit is recognized and rewarded greatly
 Average and mediocre sales persons are not penalized
 Both individual salesman and organisation are benefited
 Increases mutual trust and goodwill.
 The major limitations are given below:
 Procedure and computing compensations are cumbersome.
 Fixing optimum level of salary and commission become difficult.
 Wrong proportion between the two affects morale of sales persons
or eats away the profits.
Fringe Benefits
 Fringe benefits are not directly related to the performance but are essential
prerequisites to maintain high morale of sales persons.
 General: Company cars, specified parking lots, furnished housing,
secretarial service, credit cards, discounts etc.
 Subscriptions: Paid to professional bodies, clubs etc
 Leave/Vacations: Paid holidays, Leave travel concessions
(LTC), Maternity leave etc.
 Insurance and Medical: Accident Insurance, Medical Insurance, Medical
cover to self and dependents etc.

 Retirement Benefits: Social Security, Pension Scheme, Profit Sharing etc.

Bonuses

 Bonus is different from commission

 Bonuses are of different types, as follows:
a) Discretionary Bonus: This is judgement
bonus arbitrarily fixed by a superior.
b) Performance Bonus: Bonus paid for
performing a task say meeting "Sales quota"
or some such things.
c) Formula Bonus: This is bonus paid to
different levels of executives based on a pre-
fixed formula.
Non-financial Incentives
1. Intrinsic Motivation: Desires of promotion, status of job,
recognition of outstanding performance by superiors,
acknowledgement of merit by peers and job satisfaction, enhance
self-motivation which is also known as "intrinsic motivation."
2. Organisational Steps: Many steps are taken by organisations to
increase intrinsic motivation such as:
1. Face to face encouragement
2. Sales meetings
3. Sales contests
4. Travel contest
5. Training and development
6. Commendation letters/awards for outstanding performance
7. Publicity through bulletin.
Non-financial Incentives
3. Sales Meetings
 Improve communication and motivation.
 ACMEE approach can also be applicable to sales
meeting viz. Aim, Content, Method, Execute and
Evaluation.
4. Sales Contests such as Merchandise award,
Year round contest, Travel contest are
important motivators.
5. Bulletin :To salesmen, bulletin serves as
news paper.
 Like newspaper, salesmen eagerly await the
arrival of Bulletin.
 Design, layout and structure of bulletin must be
carefully done.
Sales Contests
 Sales contests and award of prizes/presents
for outstanding performance are effective
steps for intrinsic motivation.
 Merchandise Award
 Year-round Contest
 Advantages:
 Provide educational input.
 Make everyone to get a prize.
 Keep interest alive throughout the year, as prizes
gained through market penetration and contests are
not monotonous.
 Teaches better methods to sell and reward those who
apply new techniques and achieve results.
 Focuses a central theme, minimizes showmanship.
Travel Contests

 Chesterton Travel Contest: Designed for dealers. This

contest assists not only the income but also chances to
become a well traveled person.
 Cudahy Team Contest: Here a task is assigned to a group of
salesmen which is common. All are eligible for company paid
vacation at a selected place if the task is completed.