Implies that salespeople choose where their effort will be spent among various job activities.

PersistenceTenacityDirectionQuestion42.5 / 2.5 pointsWhen determining the financial compensation mix, the sales managermust

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Question52.5 / 2.5 pointsWhen a sales manager assures salespeople that they fulfill a critical role in revenue production and otherkey activities within the company, which type of nonfinancial reward is being offered?

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1. Social Science
2. Sociology
3. Management

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Terms in this set (79)

What is one of the Most Important Determinants of short and long-term sales performance

Salesforce reward system

What is the Largest Component of the Sales Organization's Budget?

Expenditures for financial rewards

Motivation

Intensity
Persistence
Direction

Intensity

Refers to the amount of mental and physical effort put forth by the salesperson

Persistence

Describes the salesperson's choice to expend effort over time, especially when faced with adverse conditions

Direction

Implies that salespeople choose where their efforts will be spent among various job activities

Motivation Cont.

Intrinsic
Extrinsic

Intrinsically Motivated

Is if salespeople find their job to be inherently (permanent) rewarding

Extrinsically Motivated

Is if salespeople are motivated by the rewards provided by others, such as pay and formal recognition

Reward System Management

Involves the selection and use of organizational rewards to direct salespeople's behavior toward the attainment of organizational objectives

Organizational Rewards

Compensation rewards
Noncompensation rewards

Compensation Rewards

Are those that are given in return for acceptable performance
Can include non-financial compensation, such as recognition and opportunities for growth and promotion

Noncompensation Rewards

Include factors related to the work situation and well-being of each salesperson
Can include providing adequate resources so that salespeople can accomplish their jobs and practicing a supportive sales management leadership style

Organization's Perspective: the Reward System should Help Accomplish What?

Provide and acceptable ratio of costs and salesforce output in volume profit, or other objectives
Encourage specific activities consistent with the firm's overall, marketing, and salesforce objectives and strategies
Attract and retain competent salespeople, therby enhancing long-term customer relationships
Reward salespeople performance based on measurable criteria that are easy to comprehend
Allow the kind of adjustments that facilitate administration of the reward system

Types of Salesforce Rewards

Pay
Promotion
Sense of Accomplishment
Personal growth opportunities
Recognition

Power of Various Rewards is Dependent on What?

Individual salesperson preferences
Cultural variations around the world
Workplace differences between sales organizations

Financial Compensation

Is composed of current spendable income, deferred income or retirement pay, and various insurance plans that may provide income when needed

Current Spendable Income

Includes money provided in the short term (weekly, monthly, and annually) that allows salespeople to pay for desired goods and services
It includes salaries, commissions, and bonuses

What does Bonus Compensation Include?

It may include noncash income equivalents, such as merchandise and free-travel awards

Types of Salesforce Financial Compensation Plans

Straight salary
Straight commission
Salary + incentive (commission)

Straight Salary

Is when a salesperson receives salary but no commission on sales

Straight Salary Advantages

Simple to administer
Planned earnings for the sales force are easy to project
Planned earnings facilitates budgeting and recruiting
Provides control over salespeople's activties
Reassigning salespeople and changing sales territories is less of a problem
There is general agreement that salesforce loyalty to the company may be greater
Easier to encourage teamwork and customer service
Customer loyalty is enhanced
There is more control of nonselling activities

Straight Salary Disadvantages

No financial incentive to improve performance
Pay often based on seniority, not merit
May be a burden to new firms or to those in declining industries

Salary Compression

A narrow range of salaries in the salesforce

Straight Commission

Offer strong financial incentives to maximize performance
They also limit control of the salesforce

Straight Commission Advantages

Salespeople's income is linked directly to desired results
Strong financial incentive to improve results
Costs reduced during slow sales periods
Less operating capital required

Straight Commission Disadvantages

Difficult to build loyalty of salesforce to company
Less control of non-selling activities
Salespeople may be encouraged to discount unnecessarily, resulting in lower profitability
Salespeople may earn more than their managers

Commission Plan Variations

Commission base
Commission rate
Commission splits
Commission payout event

Commission Base

Volume or profitability

Commission Rate

Constant
Progressive
Regressive
Combination

Constant Commission Rate

The commission rate or the percentage paid to the salesperson, may be a constant rate over the pay period, which is an easy plan for the salespeople to understand and provides incentive for them to produce more sales or profits (because pay is linked directly to performance

Progressive Commission Rate

Commission increases as salespeople reach pre-specified targets
This provides and even stronger incentive to the salesperson, but it may result in overselling and higher selling costs

Regressive Commission Rate

Commission declines at some predetermined point
Might be appropriate when the first order is hard to secure but reorders are virtually automatic

Commission Splits

Commission is split between two or more salespeople or between salespeople and the employer

Commission Payout Event

When the order is confirmed, shipped, billed, paid for, or some combination of these events

Sales Volume Commissions

Declare the commission earned at the time the customer is billed for the order, rather than when the order is confirmed, shipped, or paid for

Performance Bonuses

A form of additional compensation paid to an employee or department as a reward for achieving specific goals or hitting predetermined targets
Are typically used to direct effort toward relatively short-term objectives

Performance Bonuses Advantages

The organization can direct emphasis to what it considers important in the sales area
Sales emphasis can be changed from period to period

Performance Bonuses Disadvantages

Difficult to determine a formula for calculating bonus achievement if the objective is expressed in objective terms
If salespeople do not fully support the established objective, they may not exert additional effort to accomplish the goal

Combination Plans (Salary plus Incentive)

Compensation plan that features some combination of salary, commission, and bonus

Financial Compensation Mix

The relative amounts to be paid in salary, commission, and bonus

Combination Plans Advantages

Flexibility allows frequent reward of desired behavior
May attract high-potential but unproven recruits

Combination Plans Disadvantages

Complex to administer
May encourage crisis oriented objectives
Produce too many salesforce objectives

Nonfinancial Compensation Include

Opportunity for promotion
Sense of accomplishment
Opportunities for personal growth
Recognition of achievement

Opportunity for Promotion

Receiving a promotion typically involves a pay raise
Is a highly valued reward among salespeople

Sense of Accomplishment

Cannot be delivered to the salesperson from the organization
Because a sense of accomplishment emanetes from the salesperson's psyche, all the organization can do is facilitate the process by which it develops

Steps to Facilitate a Sense of Accomplishment in the Salesforce

Ensure that the salesforce members understand the critical role they fulfill in revenue production and other key activities within the company
Personalize the causes and effects of salesperson performance
Strongly consider the practice of management by objectives or goal setting as a standard management practice
Reinforce feelings of worthwhile accomplishment in communication with the salesforce

Personalize the causes and effects of salesperson performance

This means that each salesperson should understand the link between effort and performance and between performance and rewards

Opportunities for Personal Growth

Are routinely offered to salespeople

Recognition

Informal
Formal

Informal Recognition

Refers to "nice job" accolades and similar kudos usually delivered in private conversation or correspondence between a sales manager and a salesperson
Is easy to administer
Costs nothing or practically nothing
Can reinforce desirable behavior immediately after it occurs

Formal Recognition

Implies public recognition for accomplishment in presence of peers and superiors in the organization
Includes a symbolic award of lasting psychological value, such as jewelry or a plaque

What are Formal Recognition Programs Based On?

On group competition or individual accomplishments representing improved performance

Typical Reimbursable Expense Items

Automobile (company-leased)
Automobile (company-owned)
Mileage allowance
Other travel reimbursement
Lodging
Telephone (including cell phone or smart phone)
Entertainment
Product samples
Local promotions
Office and/or clerical expenses
Computer and related equipment

What Controls are Used in the Sales Expense Reimbursement Process

A definition of which expenses are reimbursable
The establishment of expense budgets
The use of allowances for certain expenditures
Documentation of expenses to be reimbursed

Expense Budgets

May be used to maintain expenses as a specified percentage of overall sales volume or profit

Expense Account Padding

In which a salesperson seeks reimbursement for ineligible or fictional expenses

Other Salesforce Reward Systems

Sales contests
Equal pay for equal work
Team compensation
Global consideration
Changing an existing reward system

Sales Contests

Are temporary programs (usually lasting one sales cycle) that offer financial and/or non-financial rewards for accomplishing specified, usually short-term objectives

The Equal Pay Act

Requires that equal pay be given for jobs that require the same skills, efforts, responsibilities, and working conditions

Team Compensation

Compensation packages in which team members' pay rates rise relative to their individual performance after the team as a whole reaches a certain target, or where pay rates for each rise according to their individual performance only after every member of the team hits an established target, are more effective at keeping high performers motivated and encouraging them to teach and share information with less-talented performers

Pay Equality

Each team member receives the same pay

Pay Equity

Each team member is compensated according to individual performance

Why is Team Compensation Important?

Becauce they can build excitement and motivation and lead to higher performance levels

Global Considerations

Sales representation in other countries is secured through a distributor or sales agent

Changing the Reward System

Changes in sales compensation are often made to bring the salesforce more in line with a shift in strategy or to maximize corporate resources
Sales compensation plans may also be changed to exploit a new market opportunity

Guidelines for Motivating and Rewarding Salespeople

Recruit and select salespeople whose personal motives match the requirement and rewards of the job
Attempt to incorporate the individual needs of salespeople into motivational programs
Provide adequate job information and ensure proper skill development for the salesforce
Use job design and redesign as motivational tools
Concentrate on building the self-esteem of salespeople
Take a proactive approach to seeking out motivational problems and sources of frustration in the salesforce

Recruitment and Selection

The importance of matching the abilities and needs of sales recruits to the requirements and rewards of the job cannot be overstated

Incorporation of Individual Needs

At the heart of the complexity of motivation is the concept of individual needs

Workplace Desires of Various Generations

Millennials
Generation X
Baby busters
Baby boomers
Traditionalists

Millennials Primary Desires

Teens to mid-20s
Work that has meaning for them
Feedback from a virtual coach with the push of a button

Generation X

Mid-20s to Late 30s
Freedom
A balanced life style
Instant feedback

Baby Busters

Early to mid-40s
Money
A title
Better schedule
Seniority

Baby Boomers

Late 40s to Late 50s
Money
A title
Schedule flexibility
Once a year feedback

Traditionalists

60s to 80s
Satisfaction from the job

Information and Skills

Salespeople must have high skill levels and be well equipped with the right information to do their jobs well

Job Design

Given the nature of sales jobs, one would expect good opportunities to stimulate intrinsic motivation without major changes in the job

Building Self-Esteem

Sales managers increase salesforce motivation by building salespeople's self-esteem
Positive reinforcement for good performance should be standard procedure

Proactive Approach

Sales managers should be committed to uncovering potential problems in motivation and eliminating them before they develop

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What are the two major categories of motivation for salespeople?

What financial reward system provides the most incentive for the sales force to sell quizlet?

Which one of the following forms of commission rate may actually result in overselling and higher selling costs to the company?

What is the common mistake made by many inexperienced sales people?