1. CHAPTER 14 COMPENSATING SALESPEOPLE

2. THE SALES FORCE REWARD SYSTEM F Financial compensation F Non-financial compensation

3. IMPORTANCE OF SALES FORCE REWARDS F Sales force F Company F Customer relations and goodwill F Strategic planning

4. DESIGN CONSIDERATIONS F Inherent conflicts F No plan fits all situations F Internal equity F External equity

5. COMPENSATION PLAN OBJECTIVES F Correlate efforts, results, and rewards F Control activities F Ensure proper treatment of customers F Attract and keep good salespeople

6. BASIC REQUIREMENTS F Provision for two types of income F Flexibility and stability F Simplicity F Economy and competitiveness F Fairness

7. STEPS IN DESIGNING A PLAN 1.Review job analysis/description 2.Determine objectives 3.Determine job elements 4.Establish level of compensation 5.Pretest 6.Administer/Evaluate

8. REVIEW JOB DESCRIPTION F Review nature, scope, and difficulty of job

9. SET OBJECTIVES F Increase volume F Obtain new accounts F Minimize expenses

10. ESTABLISH JOB ELEMENTS F Controllable F Measurable

11. LEVEL OF COMPENSATION F Type of plan F Size of company F Age of salespeople F Industry

12. COMPENSATION ISSUE F Should sales managers always be paid more than the people they manage?

13. PRETEST F Start with one or two sales divisions

14. ADMINISTER/EVALUATE F Implement F Review and modify where necessary

15. METHODS OF COMPENSATION F Straight salary F Straight commission F Combination F Team Selling F Optimum Pay Plans

16. STRAIGHT SALARY PLANS F Salary is a fixed element F Degree of security F Lower turnover F “Full” approach to selling F No direct incentive

17. WHEN TO USE F While in a training mode F Entering a new territory/new product market F Tremendous time to sell to one account F Missionary sales positions F Joint selling

18. STRAIGHT COMMISSION PLANS F Based on a unit of accomplishment F Base, rate and starting point F Advances (drawing account) F Provides incentive F Weeds out poor performers F Supervision problems F Split commissions

19. WHEN TO USE F Company is weak financially F Great incentive required F Little non-selling work required F Supervision not possible F Long term relationships not important F Part-time sales people/manufacturer’s agents

20. RATE SCHEDULES F Progressive rate schedule –5% on first $20,000 –7% on next $80,000 –10% on amount over $100,000 F Regressive rate schedule

21. COMBINATION PLAN F Most popular plan F Overcomes some of the weaknesses of straight salary and straight commission plans

22. TEAM SELLING F More common today F Difficult to provide rewards F Shared commissions/group bonuses

23. OPTIMUM PAY PLANS F Commission based on gross margin F Forces individuals to focus on items which maximize profits for the company

24. OTHER COMPENSATION ISSUES F Bonuses F Drawing Accounts F Expense Accounts

25. BONUSES F Payment for above normal performance F No obligation to provide regularly

26. DRAWING ACCOUNT F Cash advance called a “draw”

27. DRAWING ACCOUNT

28. EXPENSE ACCOUNTS F Reimbursement for travel and other sales related costs F A troublesome task for the sales manager!

29. EXPENSE BREAKDOWN Meals16% Air Travel26% Automobile24% Lodging18% Entertainment13% Other 3%

30. CHARACTERISTICS OF A GOOD EXPENSE PLAN F No net gain/loss F Equitable treatment F No curtailment of beneficial activities F Simple and economical F Avoidance of disputes F Company control/elimination of padding

31. CONTROLLING EXPENSES F Type of plan –salary versus commission –unlimited versus per diem F Automobiles F Training F Travel planning

32. FROM THE TEXT F Read everything in Chapter 14!!