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Sales Management 12

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Sales Management 12 Motivation and Rewards Sales Role Perceptions I Role Accuracy: Knowing what is expected Role Conflict: Incompatible demands from different role ... – PowerPoint PPT presentation

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Title: Sales Management 12


1
Sales Management 12
  • Motivation and Rewards

2
Motivation Intrinsic vs. Extrinsic
When rewards such as pay and formal recognition
act as motivators
When doing the job is inherently motivating
3
Types of Sales Force Rewards
Pay
Sense of Accomplishment
Job security
Promotion
Personal Growth Opportunities
Recognition
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5
Aptitude
  • Enduring personal characteristics that determine
    individuals 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
    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

7
Skill
  • Individuals 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 dont know what
    is expected, how they should meet expectations,
    or how they will be evaluated rewarded

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Sales Role Perceptions IIConsequences
  • Role Inaccuracy, Conflict, and Ambiguity lead to
  • Dissatisfaction
  • Mental Anxiety
  • Salesperson Turnover
  • Absenteeism
  • Poor Job Performance

11
Sales Role Perceptions IIIImprovement
  • 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 salespeoples effort

13
Problems 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.

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

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

18
How 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

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
  • 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
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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 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
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 aint gonna happn!!!!
  • 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 dont necessarily have an accurate
    perception of their salespeoples 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

40
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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

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45
Compensation Components
  1. Commission
  2. Salary
  3. Incentive/Bonus
  4. Benefits
  5. 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 wont be motivating

50
Compensation 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

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 individuals 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

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