Overview Various compensation modes and methods

Straight Salary Straight Commission Combination

Sales Contest Non-Financial Rewards Expense Accounts Making Compensation and Incentive Programs Work Deciding the Most Appropriate Mix

3 basic questions
Which method is most appropriate for what

kind of activity? What % of total should be incentive based? What is the suitable mix of financial and nonfinancial benefits?

Major components
Salary Incentives Commission Bonus Benefits

Straight Salary Straight Commission Combination Approach Selection depends on:

Business Objectives (New Accounts or

Relationship Building) Close Supervision

Proportion of Incentive Pay to Total Compensation Incentive Ceilings When a sale is a sale? Team versus Individual Incentives Frequency of Rewards

Contest Objectives
Complement compensation program Aimed to achieve extra sales

Contest Themes
Creative

Probability of Winning
3 approaches: Compete with themselves Compete with others Compete for group or individuals

Type of Contest Rewards

Monetary
Merchandise Travel

 Depends on person Point based system

Contest Promotion and Follow Through

Launch in quarterly meetings Keep follow up to motivate people

Criticism of Sales Contest

Short term motivation Borrowing sales May affect morale negatively

Promotion Chances
Lack of promotion leads to de-motivation

and low attraction of non-financial rewards Two career tracks

One is sales based Other is sales management based

Recognition Programs
Wall of Fame Newsletters etc.

Key Features
Performance based no subjectivity Balanced A ceremony should be involved The program must be in good taste Adequate publicity

Assessing the Relationship Selling Objectives

Determine breakup of efforts expended by

sales person on various activities Determine what breakup is in the best interest of organization Motivate towards the gaps

Determine which Aspect of Job to Reward

Should be realistic, measurable, specific,

time bound, achievable Not too many metrics Trend towards customer centric metrics and limitations Combination approach

Suitable Mix
Varies significantly Determine the gross amount of

compensation that is needed to attract and retain salesperson Depends on importance of aspect of selling Also depends on company size

Dangers of Paying too Little

High turnover (for good performers) Low Performance (for already low

performers) Low motivation

Dangers of Paying too Much

Increases selling cost
Non-sales employees may have low morales Law of diminishing marginal utility applies