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INTRODUCTION
Compensation in the global market is an extremely important managerial area This is because the compensation plan:
Helps
attract potential salespersons Impacts a salespersons motivation Is a determinant of status and value Determines lifestyle and purchasing power
IN GLOBAL MARKET
balance between company policies and country-specific elements Total compensation package includes financial
Salary,
COMPENSATION PLANS
Lower salary, but higher deferred components Cannot simply transfer a compensation plan from one culture to another
What
Straight
STRAIGHT SALARY
Salesperson paid a set amount of money based upon hours or days worked
Often adopted when salesperson must devote significant amounts of time to other duties
Market
Simple to administer by sales manager But, no direct link between performance and reward!
More
commonly used in Europe and may be difficult to change by global sales managers
STRAIGHT COMMISSION
Major dilemma hire the best salesperson for the lowest possible salary. Other dilemmas include: Pay at, below or above market salaries? Setting a cap on total pay? Assigning lucrative sales territories? Team vs. individual incentives? Frequency of paying commission? Pay discrimination?
DISCUSSION QUESTIONS
What are the advantages of each pay plan? The disadvantages? Which pay plan would work best for a software firm that is a market leader?
SALES CONTESTS
Sales contests are short-term incentive programs implemented to motivate salespersons to achieve specific goals or activities For sales contests to be successful:
Objectives must be specific and clearly defined Contest theme must be exciting and clearly communicated Each salespersons must believe they can win Awards must be attractive to participants Contest must be promoted and managed properly
Contest Objectives
To increase total and product sales most common Sales force must be given sufficient time All contest information and rules must be clear
Contests receive a theme to create excitement
Theme
Chance of winning
TYPES OF REWARDS
Sales contests can offer many types of reward in the form of:
Cash, prizes, or travel Perceived value very important as it must be of sufficient value to motivate additional effort Launched as a special event with handouts Large scorecards to communicate progress Newsletter articles or interim prizes can keep motivation up
not properly designed contests take a lot of managerial time to administer Improper contests can actually de-motivate Do sales contests generate additional sales? Should sales force be paid twice for doing job? If contests are for short-term, then why have a never-ending sales contest?
DISCUSSION QUESTIONS
How might a sales contest motivate sales personnel to greater efforts? Does a sales contest take into consideration the needs of the buyer? Is it possible sales contests have become a part of the compensation system? If so, what does this tell us?
NON-FINANCIAL INCENTIVES
Opportunity
firm may pay salespersons expenses to live overseas that include family Expatriate expenses are significant
Communicates trust to the sales force Sales manager can focus on more important issues Salesperson cannot complain that resources not available to make sale
Sales force must be given guidance and expenses must still be monitored to insure sound judgment
The salesperson is given a set amount of money for each day s/he is in the field
For
Budget
can be set by multiplying rate times total days sales force expected to travel Single rate unlikely to work in all locales due to varying costs Sales manager must adjust per diem rates regularly as prices expand or contract
The firm sets a maximum daily amount paid for each category of expense
That
is, US$125 for lodging, $50 for meals, $30 for auto rental, and $20 for miscellaneous
Limits
firms upper travel expense limit Must be updated and will vary by location When actual costs exceed plan, salesperson may try to save in some areas to meet expenses in other Salespersons attention may be diverted from client
DISCUSSION QUESTIONS
Is there a connection between the ethical practices of sales managers, regarding pay matters, and the ethical behavior of salespersons? What is the purpose of expense plans? Compare and contrast the advantages and disadvantages of the three expense plans covered in this chapter
CHAPTER SUMMARY
Compensation is culturally influenced Must be properly planned and managed Cover legitimate expenses, but always remember that Sales Expenses = Profits
Rules for sales force compensation, contests, and expenses must be simple and unambiguous!