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Compensation

Compensation. Compensation. Facts & Figures Planning Mini-cases Summary. Facts & Figures. Facts & Figures. Facts & Figures: Average Compensation. Facts & Figures: Average Compensation. Sales Force Compensation Study by Dartnell Corporation, 1992.

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Compensation

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  1. Compensation

  2. Compensation • Facts & Figures • Planning • Mini-cases • Summary

  3. Facts & Figures

  4. Facts & Figures

  5. Facts & Figures: Average Compensation

  6. Facts & Figures: Average Compensation Sales Force Compensation Study by Dartnell Corporation, 1992

  7. Facts & Figures: Travel & Entertainment

  8. Facts & Figures: Travel & Entertainment

  9. Setting the Pay Level • Pay the prevailing rate? • Pay a premium? • Pay below the typical rate?

  10. Assess the firm’s marketing and sales objectives, and current performance of the sales force Determine aspects of job performance to be rewarded (desired instrumentalities) Assess personal characteristics of salespeople and their valences for alternative rewards Determine most attractive and motivating mix of rewards Decide on most appropriate level of total compensation Decide on form and % of incentive-Commission,Bonus, Contest (short-term incentive awards) Communicate the program to the sales force Do analysis to determine the cost of program under various scenarios/ modify plan if necessary. Steps in Designing Compensation Programs

  11. Commissions Bonuses Contests Salary What’s on the Menu?

  12. Straight Commissions: Examples: Door-to-door (Mary Kay, Tupperware, etc) commissions of 25-50% of sales Examples: Retail sale of automobiles & trucks commissions on gross margins Examples: life insurance, real estate, stock brokerage, printing & wholesalers, 5-14% of sales Commissions

  13. When it’s commission + salary 39% of firms establish a commission threshold progressive commission rates- higher rate as sales go higher different commission rates on different products Commission

  14. When? draw monthly over several months (cash flow) what about contract type business- anything for just getting the contract? On what? Net margin- need to train reps; credibility Gross margin- ditto Sales- who controls pricing? Pay-out details

  15. How to set these up? Performance measures: output or input? Pay-out for achievement of goals Set the goals: for each individual (quota like) company level- matrix (a little less quota like) Bonus

  16. Pay-out Matrix (example)

  17. Contests • Contests: you want to encourage the “average” rep to expend extra effort since the top reps are doing that already • lots of prizes (typically half of the sales people eligible win some sort of prize) • often have themes • prizes are often theme related; or cash; merchandise; trips; points for catalog purchases • may ‘borrow” sales from the future and be expensive to administer

  18. Recognition Programs • Usually based on annual performance (or even longer) • Hewlett-Packard Examples • The 100% club- team-building & recognition program for achieving 100% or more of quota • Achiever’s Club- weekend vacation for two for the top 10-20% of reps in each region • President’s Club- top 100 performers in sales organization; 85 reps, 15 managers. Based on sales performance, customer satisfaction, resource management, sales planning, teamwork, leadership, enthusiasm, and being a role model.

  19. Administrative Issues • Manageable- costs/resources/frequency • Easy to understand- for reps & managers- know where the numbers/criteria are coming from • Sensitivity analyses- what happens if??? • Especially important with new products

  20. Time for the mini-cases: • What do you recommend and why?

  21. Summary • There are many options available… • First, figure out what you want to reward • Choose measurable and communicable metrics • Keep in mind the cost of administrating and what could happen given shocks to the system

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