Title: Sales Management 12
1Sales Management 12
2Motivation Intrinsic vs. Extrinsic
When rewards such as pay and formal recognition
act as motivators
When doing the job is inherently motivating
3Types of Sales Force Rewards
Pay
Sense of Accomplishment
Job security
Promotion
Personal Growth Opportunities
Recognition
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5Aptitude
- Enduring personal characteristics that determine
individuals overall ability to perform a sales
job - Variables
- Intelligence
- Cognitive Abilities
- Verbal Intelligence
- Math Abilities
- Sales Aptitude
6Personality
- Enduring personal traits that reflect an
individuals 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
7Skill
- Individuals learned proficiency at performing
necessary tasks. - NB Skills can be trained!
- Variables
- Vocational skills
- Sales Presentation skills
- Interpersonal skills
- General Management
- Vocational Esteem
8Sales 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 dont know what
is expected, how they should meet expectations,
or how they will be evaluated rewarded
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10Sales Role Perceptions IIConsequences
- Role Inaccuracy, Conflict, and Ambiguity lead to
- Dissatisfaction
- Mental Anxiety
- Salesperson Turnover
- Absenteeism
- Poor Job Performance
11Sales Role Perceptions IIIImprovement
- Close (not stifling) supervision
- Training
- Salesperson experience
- Include salesperson when establishing expectations
12Sales Quotas
- Goals assigned to salespeople for specific time
period. - Three Purposes
- Motivate salespeople
- Evaluating performance
- Controlling salespeoples effort
13Problems with Quotas
- Not apples/apples
- 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.
14Characteristics 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
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17Types of Quotas
- Volume
- Units, Dollars, Points
- Activity
- cold calls, proposals, displays, service calls,
meetings, collections, demonstrations - Financial
- Expenses, Gross Margins, Net Profit
18How to Set Quotas
- Volume
- History
- Territory Potential
- Activity
- Sales reps and managers sales reports research
- Financial
- Based on financial goals of firm
- Adjust to meet needs
19Performance 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
20Rewards I
- Money salary, bonus, commission
- Promotion
- Non-financial (Contests, travel, prizes, etc.)
- Special Recognition (clubs, awards, etc.)
- Job security
21Rewards II
- Feeling of self-fulfillment
- Feeling of worthwhile accomplishment
- Opportunity for personal growth and development
- Opportunity for independent thought/action
22Motivation
- Motivation leads to effort.
- Effort leads to performance.
- What leads to motivation?
23Motivation
24Expectancy Theory
Expectancy
Instrumentality
Valence
Motivation
High
Yes
Yes
No
No
Low
Unmotivated
25Expectancy Theory
- Expectation
- Effort ? Outcome
- Instrumentality
- Outcome ? Reward
- Valence
- Reward has Value
- Must have all 3 to be motivated!
26Expectation
Must expect that effort will lead to performance
outcome
Studying Knowledge
Practice ? Jimi
27Instrumentality
Results must be instrumental in achieving reward
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29Valence
High Valence
Low Valence
30Expectancy 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 commiion. - 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
32Major 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 aint gonna happn!!!!
- Too complex to administer
- Question of fairness
- Changes over time
- Need to update continuously
33Designing 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.
34Assessing 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
35What 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
36Behaviors 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
37Valance
- Need to determine what drives the current sales
force at this time. - Survey
- Conjoint analysis
- Managers dont necessarily have an accurate
perception of their salespeoples valances for
different rewards.
38Appropriate 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?
39Dangers 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
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41Dangers 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
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45Compensation Components
- Commission
- Salary
- Incentive/Bonus
- Benefits
- Sales Contests
46Compensation 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
47Compensation 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
48Compensation 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
49Compensation 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 wont be motivating
50Compensation Benefits
- Health insurance, sometimes disability and life
insurance - Pension plan
- Not everyone offers, especially if contract (real
estate agent) or manufacturers rep - Salespeople are then forced to buy plans through
professional associations - Provides security, especially important to people
with families, or getting older
51Compensation Plans
- Straight Salary
- Straight Commission
- Combination Plan (most common)
52Straight Salary Advantages
- If non-short-term sales goals are important
- If difficult to measure individuals contribution
to the sales effort (missionary, team selling) - Provide salespeople with steady income
- Easy to manage and administer
53Straight Salary Disadvantages
- not tied to performance
- Lowers/clouds instrumentality
- No motivation to perform
54Straight 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
55Straight 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
56Combination 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
57Other 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)
58Sales 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
59Sales Contests Disadvantages
- Borrowed sales
- Hurt cohesiveness morale
- Necessary?
60Non-Financial Rewards
- Promotion
- Career Development
- Valence declines with age
- Add perquisites (perks) with position
- Car
- Better working conditions (hours, facility)
- Compensation, Profit-sharing
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