financial incentives for salesman

M. S. PATEL FACULTY OF MANAGEMENT STUDIES,

M. S. UNIVERSITY, BARODA

ARCHAL SHAH (Roll No. 26)

Objective & Trends Objective in most companies

Attract Retain Motivate

Major Trends Only Fixed Salary – Extinct Spices Incentive quotient – Increasing Incentive α (Sales Vol., Mktg. Obj.)

Use of Incentive

In 1967, 444 Mfg companies (across 20 ind. employing 16,263 employees) were surveyed

Variation in Industry Heavy Ads | Sales Promotion

Non-Technical => Less payment Ex Cigarette industry (USD 6500/yr)

Custom Built | WOM (Little Ads) => Highly paid

Ex Footwear mfg for retailer (USD 22,500/yr)

Avg. Salary (as per survey) USD 12,100/yr

Earning Correlation Company size α Salesman salary

Small company >> High Salary (Ex In paper industry, as per survey

Avg. Co. ($2m) >> $1000. Big ($80m) >> $ 790 Reasons 1. Less well known, less Ads, Less Repo 2. No training, so borrow from competitor at

higher wages

Age Relationship

Sales Volume

Earnings

Salesman Age

Compensation Practices

Overpayment Policy

There are examples of salesman paid equivalent or more than sales executive or even MD

Effects

1. Impossible to persuade to leave field

2. Sales manager will resent (Exec. Turnover)

3. Largest element of selling cost

Compensation Practices

Underpayment policy

Effects

1. Buyer gets the quality, he pays for

2. If good ppl, higher turnover

3. Salesman gone to competitor means info gone

4. Hidden cost of turnover

5. Customer distraction

Compensation Practices Average Approach Apt for company with large sales force

Advantages 1. Hire young men, train as per firm 2. Unspoiled men

Disadvantages 1. More aggressive supervision 2. Rules required

Compensation Practices Above Average concept Apt for company with small sales team

Advantages 1. No extra trg cost 2. Get info of competitors 3. Highly motivated environment

Disadvantages 1. Long run above avg compensation 2. Must have above avg sales

Developing a plan Salesman expectation & company obj Gross amt company wants to and afford to pay Once hw much is decide, Decide hw much fixed

and hw much variable Full fixed, Full variable & Combination

Depends on 1. Company objective 2. Characteristics of selling job 3. Sales support provided

Ultimate Objective Today salesman is not mere order getter Salesman is territorial mktg manager OBJ max. co. profits inline mktg. manager Incentive plan should consider Full line selling Missionary workSales service of accounts Feedback of imp mktg intelligenceCooperation with other co. personnel Control of selling expense Preparation of prompt & complete report & records

Fundamental aims

Motivate the salesman

1. To plan ahead & max. effectivenes

2. Do as per sales management

3. Lower direct selling cost & more profits

THANK YOU