1. Motivation and Rewards
Sales Management 12
Motivation and Rewards

2. Motivation: Intrinsic vs. Extrinsic
When doing the job is inherently motivating
When rewards such as pay and formal recognition act as motivators

3. Types of Sales Force Rewards
Motivation
Intrinsic
Extrinsic
Sense of Accomplishment
Pay
Job security
Promotion
Personal Growth Opportunities
Recognition

5. Aptitude:
Enduring personal characteristics that determine individual’s overall ability to perform a sales job
Variables
Intelligence
Cognitive Abilities
Verbal Intelligence
Math Abilities
Sales Aptitude

6. Personality
Enduring personal traits that reflect an individual’s consistent reactions to situations encountered in the environment.
Variables
Responsibility
Dominance
Sociability
Self-Esteem
Creativity/Flexibility
Need for Achievement/Intrinsic Rewards
Need for Power/Extrinsic Rewards

7. Skill Individual’s learned proficiency at performing necessary tasks.
NB: Skills can be trained!
Variables
Vocational skills
Sales Presentation skills
Interpersonal skills
General Management
Vocational Esteem

8. Sales Role Perceptions I
Role Accuracy: Knowing what is expected
Role Conflict: Incompatible demands from different role partners (firm, boss, customer, family)
Role Ambiguity: Believe that they don’t know what is expected, how they should meet expectations, or how they will be evaluated & rewarded

10. Sales Role Perceptions II: Consequences
Role Inaccuracy, Conflict, and Ambiguity lead to:
Dissatisfaction
Mental Anxiety
Salesperson Turnover
Absenteeism
Poor Job Performance

11. Sales Role Perceptions III: Improvement
Close (not stifling) supervision
Training
Salesperson experience
Include salesperson when establishing expectations

12. Sales Quotas Goals assigned to salespeople for specific time period.
Three Purposes
Motivate salespeople
Evaluating performance
Controlling salespeople’s effort

13. Problems with Quotas Not apples/apples May be tough to apply to teams
Different levels of difficulty in different territories
May be tough to apply to teams
Can be expensive to establish
If not done well, may focus efforts too much in one area.

14. Characteristics of Good Quotas
Attainable
Motivation requires reasonable chance of attainment
Easy to understand
Too complex  suspicion and mistrust
Complete
Cover all criteria to avoid imbalance

17. Types of Quotas Volume Activity Financial Units, Dollars, Points
# cold calls, proposals, displays, service calls, meetings, collections, demonstrations
Financial
Expenses, Gross Margins, Net Profit

18. How to Set Quotas Volume Activity Financial History
Territory Potential
Activity
Sales reps and managers; sales reports; research
Financial
Based on financial goals of firm
Adjust to meet needs

19. Performance Criteria Total Sales Volume; Increase over last year.
Percentage of Quota Attainment.
Selling Expenses; Decrease from last year.
Profitability of sales; Increase over last year
New Accounts
Improved administrative duties (paperwork)
Improvements in customer service

20. Rewards I Money: salary, bonus, commission Promotion
Non-financial: (Contests, travel, prizes, etc.)
Special Recognition (clubs, awards, etc.)
Job security

21. Rewards II Feeling of self-fulfillment
Feeling of worthwhile accomplishment
Opportunity for personal growth and development
Opportunity for independent thought/action

22. Motivation Motivation leads to effort. Effort leads to performance.
What leads to motivation?

23. Motivation

24. Expectancy Theory Expectancy Instrumentality Valence Motivation
High
Yes
Yes No No
Low
Unmotivated

25. Expectancy Theory Expectation Instrumentality Valence
Effort  Outcome
Instrumentality
Outcome  Reward
Valence
Reward has Value
Must have all 3 to be motivated!

26. Expectation Must expect that effort will lead to performance outcome
Studying = Knowledge
Practice ≠ Jimi

27. Instrumentality
Results must be
instrumental in
achieving reward

29. Valence
High Valence
Low Valence

30. Expectancy Theory in Sales
If I make ten cold calls/day, I will get 2-3 new customers per week, leading to higher sales.
If I get 2-3 new customers/week and have higher sales, I will make more commi$$ion$.
I like money. I want to make more, so I am motivated to make the cold calls.
Note: People have different values, so they are motivated by different rewards.

31. Compensation and Incentive Programs

32. Major Issues
People have different personal characteristics and different valances for various kinds of rewards.
Ideally want to have unique compensation program for each person.
It ain’t gonna happ’n!!!!
Too complex to administer
Question of fairness
Changes over time
Need to update continuously

33. Designing a Compensation Plan
Compensation plan is intended to have the sales force do what management wants, how it wants it, and within the desired time.
First, need to decide what it is that management wants.

34. Assessing Situation/Objectives
How are salespeople allocating time?
How good are the current outcomes?
Job Analysis
Recruitment and selection
Company records
Company marketing & sales objectives
Account management

35. What do you reward? Performance outcomes Behaviors
Need to align the sales forces’ objectives with that of the company.
Can strive to achieve multiple objectives, but not too many at once.
Use mixed-incentive plan

36. Behaviors & Activities to Reward
Higher $ volume sales
Increase sales of more profitable items
Push new products
Higher penetration: products, customers
Larger average order size
New customers
Service/Maintain existing customers
Retain customers
Encourage team cooperation
Balanced (full-line) selling
Lower sales costs
Increase calls
Prompt paperwork

37. Valance
Need to determine what drives the current sales force at this time.
Survey
Conjoint analysis
Managers don’t necessarily have an accurate perception of their salespeople’s valances for different rewards.

38. Appropriate Compensation Mix
Determine gross amount necessary to attract, retain, and motivate right type of salespeople.
Then allocate to salary, commission, bonus, benefits, prizes.
Varies with type of sales job, size of company and sales force, and policies.
What do competitors pay?
Pay low, high, or average?

39. Dangers of Paying Too Much
Increases selling costs  lowers profits
Can cause resentment and low morale among non-sales employees and managers
Not necessarily a motivator
Maslow
Prospect Theory

41. Dangers of Paying Too Little
You get what you pay for.
Attract only weak people
Leads to poor results
High turnover, especially among good people. Only the less capable will stay.
Leads to higher costs for recruiting, and training.
Lost sales
Managers always recruiting and hiring

45. Compensation Components
Commission
Salary
Incentive/Bonus
Benefits
Sales Contests

46. Compensation: Commission
Payment based on short-term results
Usually a % of $ sales, or $/volume
Direct link between performance and payment
Motivates high level of selling effort
Encourages sales success

47. Compensation: Salary Fixed sum of money paid at set intervals
How most of the country is paid
Function of experience, competence, tenure, past performance
Motivate effort on non-sales activities
Adjust for differences in territory potential
Motivate investment in long-term sale

48. Compensation: Incentive/Bonus
Additional commission tied to sales or profitability (e.g. + 1% after $2,000,000)
Bonus for meeting or exceeding target
Direct effort to strategic objectives
Provide additional rewards to top performers
Encourage sales success

49. Compensation: Sales Contests
Encourage extra effort at specific short-term objectives
Can offer:
Cash
Merchandise (TV, Car, Shopping, Golf, Dinner)
Travel (Can also be a team building event)
Offer multiple opportunities for prizes
Needs to be achievable to be motivating
Cannot be too easy, or won’t be motivating

50. Compensation: Benefits
Health insurance, sometimes disability and life insurance
Pension plan
Not everyone offers, especially if contract (real estate agent) or manufacturer’s rep
Salespeople are then forced to buy plans through professional associations
Provides security, especially important to people with families, or getting older

51. Compensation Plans Straight Salary Straight Commission
Combination Plan (most common)

52. Straight Salary Advantages
If non-short-term sales goals are important
If difficult to measure individual’s contribution to the sales effort (missionary, team selling)
Provide salespeople with steady income
Easy to manage and administer

53. Straight Salary Disadvantages
$ not tied to performance
Lowers/clouds instrumentality
No motivation to perform

54. Straight Commission Advantages
Direct link between selling and reward
Motivating
Inherently fair: rewards to best performers
Usually easy to compute/administer
Vary directly with sales volume & $

55. Straight Commission Disadvantages
Lose control over sales force
No motivation for non-selling activities
Milk existing customers, no service
Unstable income, tough to predict
Can establish draw, but may be deep hole

56. Combination Plans Most common form
Smaller commissions, but with base salary
Can also offer bonuses for reaching target (e.g. % of quota)
Can manipulate (not often, or too much) to motivate performance or activities
Gives salespeople both security and incentive to work hard and perform

57. Other Issues Appropriate size of incentive/base (25%+)
Incentive Ceiling: Arguments on both sides
When is a sale a sale?: order acceptance, allowances or returns, shipment, payment?
Group incentive? Allocation? Can pay both group and individual components: Linkages
How often to pay incentive? Monthly (52%), Quarterly (24%), or Annually (21%)

58. Sales Contests Criteria for Success
Clearly define and specify the objectives
Have an exciting theme
Have a reasonable probability that most/all salespeople can win a prize.
Attractive prizes
Promotion and follow through

59. Sales Contests Disadvantages
Borrowed sales
Hurt cohesiveness & morale
Necessary?

60. Non-Financial Rewards
Promotion
Career Development
Valence declines with age
Add perquisites (perks) with position:
Car
Better working conditions (hours, facility)
Compensation, Profit-sharing