Professional Documents
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Ch-6
Chapter
6-1
(2nd Edition)
S L Gupta
Excel Books
Ch-6
Compensation Plans
Compensation plans for the sales force are designed to achieve several objectives. Some of these are:
i.
ii. iii.
performance.
6-2
(2nd Edition)
S L Gupta
Excel Books
Ch-6
5.
6.
5.
6.
No argument here, but not all companies can afford full range.
As much to the companys advantage as the salespersons.
Cont. Copyright 2010, S L Gupta
6-3
(2nd Edition)
S L Gupta
Excel Books
I
7. 8.
Ch-6
A yardstick to measure performance. Equitable treatment to all sales people; pay based on performance no free loaders, no favouritism or exploitation. A sense of security because of the feeling that he is respected and regarded as a human being who is important to the company.
7. 8.
Equally important for the company to measure performance. Equally important to the employer.
9.
9.
Just as important to the company which must rely on the morale of its sales force. The sense of security and wellbeing of sales force pay many bonuses to an employer.
10. Flexibility in a plan, sensitivity to changing conditions. 11. Simplicity easy to understand.
10. Equally important to a company. 11. The company agrees the simpler the plan, the easier and cheaper to administer it.
6-4
(2nd Edition)
S L Gupta
Excel Books
Ch-6
6-5
(2nd Edition)
S L Gupta
Excel Books
Ch-6
6-6
(2nd Edition)
S L Gupta
Excel Books
I
1.
Ch-6
Strengths of the Salary Compensation Plan For the sales force 2. Simple to calculate Fixed income Job security Reduces turnover in sales force Increases authority of sales manager in controlling sales force An effective tool in case
6-7
Group efforts are required Of business that is technical in nature Hiring new staff Of seasonal business
Text & Cases Cont. Copyright 2010, S L Gupta
(2nd Edition)
S L Gupta
Excel Books
Ch-6
1.
2.
6-8
(2nd Edition)
S L Gupta
Excel Books
Ch-6
Straight Commission Paying a commission is a variable expense rather than a fixed one. If sales are
6-9
(2nd Edition)
S L Gupta
Excel Books
Ch-6
Target Commission A straight commission is paid on sales volume. On a fixed commission base, a fixed percentage of sales volume is paid to the sales force. Other plans call for increase in rate as volume increases. A fixed rate commission is easy to figure and administer. If the rate is 2 per cent, it stays at that percentage whether the salesperson sells goods worth Rs 40,000 or Rs 4,00,000. A progressive commission rate accomplishes a major objective of most companies: it provides a constant incentive to the sales force to do better. The following example explains this:
Up to From Above Sales (Rs) 40,000 40,000 to 1,00,000 1,00,000 Commission Rate 2% 3% 4%
If a salespersons quota is Rs 80,000, he would earn Rs 2,000 if he achieved that target exactly a composite rate of 2.5 per cent. For example: Smith Kline Beecham is using this method in their worldwide selling. Cont. Copyright 2010, S L Gupta
6-10 Sales and Distribution Management
Text & Cases
(2nd Edition)
S L Gupta
Excel Books
Ch-6
Bonus, Profit Sharing, Fringe Benefits Paying bonus is a method that a company adopts to reward special contribution and as an incentive to superior performance. Profit Sharing Many experts in the field of sales management disapprove extending profit sharing to salespeople. For once, companies agree with them. There may be an argument in favour of such a payment if no bonus plan is established for excellence in sales performance. Fringe Benefits Fringe benefits have become a fascinating subject and an item of considerable expense to organisations. The costs of fringes can be as high as 30 per cent of direct compensation expense depending on what benefits are offered and Cont. whether a portion of the expense is shared with the employee.
Copyright 2010, S L Gupta
6-11
(2nd Edition)
S L Gupta
Excel Books
Ch-6
Reimbursement of Expenses Travel usually by car or scooter Meals Lodging Entertainment Miscellaneous
6-12
(2nd Edition)
S L Gupta
Excel Books
Ch-6
6-13
(2nd Edition)
S L Gupta
Excel Books
I
7.
Ch-6
What have you done in the past week with the deliberate intention of motivating a salesperson?
8.
9. 10. 11. 12. 13.
14. 15.
Do you treat your salespeople with respect? Do you show your salespeople trust?
Source: Ginger Trumfio, Are you an Effective Motivator? Sales and Marketing Management (May 1994): 136.
Cont. Copyright 2010, S L Gupta
6-14
(2nd Edition)
S L Gupta
Excel Books
Ch-6
A pat on the back. A smile. A simple, sincere, thank you. A personal letter to the employee, with copies sent to your immediate supervisor and to the employees supervisor. Public recognition in front of peers. Public recognition in front of ones boss. A letter of praise from a customer or vendor praising an employee, posted on the companys bulletin board. Listening to an employee who has an idea for improving efficiency and then acting affirmatively on that suggestion. Arranging employee discounts from your vendors or customers. Allowing the employee to work on an especially exciting project that he or she would not usually work on. Asking employees what non-monetary rewards they would like to have and, if possible, providing them. Issuing a You Were Mentioned certificate to employees whenever you hear something nice about them, whether from a customer, co-worker, or superior.
Cont. Copyright 2010, S L Gupta
6-15
(2nd Edition)
S L Gupta
Excel Books
Ch-6
Electing a high-achieving employee to a quality circle or to a company wide task force. Providing free lunch for employees caught in the act of victory by an appointed group of company wide catchers
Rotating the company flag or other symbols of excellence from one deserving unit to another on a quarterly basis.
Source: Sam Deep, Lyle Sussman, Smart Moves Reading, Mass: Addison-Wesley, 1990
6-16
(2nd Edition)
S L Gupta
Excel Books
Ch-6
6-17
(2nd Edition)
S L Gupta
Excel Books
Ch-6
Characteristics of Different Stages in a Salespersons Career Exploration Career Concern Finding an appropriate occupational field. Establishment Successfully establishing a career in a certain occupation. Maintenance Holding on to what has been achieved; reassessing career, with possible Disengagement Completing ones career.
redirection.
Developmental Tasks Learning the skills required to do the job well; becoming a contributing member of an organisation. Using skills to produce results; adjusting to working with greater autonomy; developing creativity and innovativeness.
Cont. Copyright 2010, S L Gupta
Developing broader view of work and the organisation; maintaining a high performance level.
Establishing a stronger self identity outside of work; maintaining an acceptable performance level.
6-18
(2nd Edition)
S L Gupta
Excel Books
Ch-6
Personal Challenges
Psychological Needs
Source: Adapted from William L Cron, Industrial Salesperson Development: A Career Stages Perspective, Journal of Marketing (Fall 1984) 40; and William L Cron, Alan J Dubinsky, and Ronald E Michales, The influence of Career Stages on Components of Salesperson Motivation, Journal of Marketing (January 1988); 79-92
Copyright 2010, S L Gupta
6-19
(2nd Edition)
S L Gupta
Excel Books
I
i.
Ch-6
6-20
(2nd Edition)
S L Gupta
Excel Books
Ch-6
Dimensions of Motivation
Motivation has mainly three dimensions
PERSISTENCE
DIRECTION
1.
2. 3.
Persistence: It is the extension of effort over time. Direction: It implies that the individual can choose how his or her efforts will be spent.
Cont. Copyright 2010, S L Gupta
6-21
(2nd Edition)
S L Gupta
Excel Books
Ch-6
6-22
(2nd Edition)
S L Gupta
Excel Books
Ch-6
2.
3. 4.
5.
6.
6-23
(2nd Edition)
S L Gupta
Excel Books
Ch-6
Process begins
Performance
6-24
(2nd Edition)
S L Gupta
Excel Books
Ch-6
Motivation Theories
Motivation theories are approached through two main models 1. 2. Cognitive Approach/Model Non-Cognitive Approach/Model
6-25
(2nd Edition)
S L Gupta
Excel Books
Ch-6
Cognitive Approach/Model Models of motivation which focus on internal states and mental processes are known as cognitive models.
Cognitive Models
Content Theories
Process Theories
6-26
(2nd Edition)
S L Gupta
Excel Books
Ch-6
Content Theories These theories answer the question What motivates people?, To answer such a question most of the theories under this category focus on human needs and desires that are internalised and that give impetus to individual behaviour.
(2nd Edition)
S L Gupta
Excel Books
Ch-6
Process Theories
These theories answer the question, How are people motivated? To answer this,
most of the theories under this category focus on the dynamics of major variables that are interrelated in explaining the direction, degree and persistence of effort in human behaviour. Some of the theories which are described under this category
are:
i. ii. Vrooms Expectancy Model Porter and Lawler Expectancy Model
iii.
iv. v.
Equity Theory
Self-concept Theory Vrooms Valence Expectancy Theory
Cont. Copyright 2010, S L Gupta
6-28
(2nd Edition)
S L Gupta
Excel Books
Ch-6
Non-cognitive Approach
This approach concentrates on operating conditions, i.e., Behaviour is a result of its consequences and is explained through the Reinforcement Theory.
Reinforcement Theory
This theory is based on the operating conditions that behaviour is a result of its consequences. It has been developed by well-known psychologist, A F Skinner. According to him, individuals, having learnt from the past, develop patterns of behaviour to control future consequences.
6-29
(2nd Edition)
S L Gupta
Excel Books
Ch-6
6-30
(2nd Edition)
S L Gupta
Excel Books
Ch-6
6-31
(2nd Edition)
S L Gupta
Excel Books
Ch-6
Other Factors of Motivation Job Related Factors The Job Itself Skill variety Task identity Task significance Job autonomy Job feedback Leadership Job Organisational and Involvement Commitment Job involvement Organisational commitment Institutional stars Corporate citizens Apathetics
6-32 Sales and Distribution Management
Text & Cases
(2nd Edition)
S L Gupta
Excel Books
Ch-6
Exploration Establishment Maintenance Disengagement Performing deficiencies Selection and training Redesigning job to increase intrinsic motivation Reducing stress and burnout Increasing growth opportunities Acceptance of growth opportunities
Copyright 2010, S L Gupta Text & Cases
Career Plateauing
(2nd Edition)
S L Gupta
Excel Books
Ch-6
6-34
(2nd Edition)
S L Gupta
Excel Books