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OverviewVarious compensation modes and methods

Straight Salary Straight Commission Combination

Sales ContestNon-Financial RewardsExpense AccountsMaking Compensation and IncentivePrograms WorkDeciding the Most Appropriate Mix

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3 basic questions Which method is most appropriate for what

kind of activity? What % of total should be incentive based? What is the suitable mix of financial and non-

financial benefits?

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Major components Salary

IncentivesCommissionBonusBenefits

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Straight SalaryStraight Commission

Combination ApproachSelection depends on:

Business Objectives (New Accounts or

Relationship Building) Close Supervision

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Proportion of Incentive Pay to TotalCompensation

Incentive CeilingsWhen a sale is a sale?Team versus Individual Incentives

Frequency of Rewards

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Contest Objectives Complement compensation program

Aimed to achieve extra salesContest Themes

Creative

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Probability of Winning 3 approaches:

Compete with themselvesCompete with othersCompete for group or individuals

Type of Contest Rewards Monetary Merchandise Travel

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Depends on person Point based system

Contest Promotion and Follow Through Launch in quarterly meetings Keep follow up to motivate people

Criticism of Sales Contest Short term motivation Borrowing sales May affect morale negatively

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Promotion Chances Lack of promotion leads to de-motivation

and low attraction of non-financial rewards Two career tracks

One is sales basedOther is sales management based

Recognition Programs Wall of Fame Newsletters etc.

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Key Features Performance based no subjectivity

Balanced A ceremony should be involved The program must be in good taste Adequate publicity

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Assessing the Relationship SellingObjectives

Determine breakup of efforts expended bysales person on various activities Determine what breakup is in the best

interest of organization Motivate towards the gaps

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Determine which Aspect of Job toReward

Should be realistic, measurable, specific,time bound, achievable Not too many metrics Trend towards customer centric metrics and

limitations Combination approach

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Suitable Mix Varies significantly

Determine the gross amount ofcompensation that is needed to attract andretain salesperson

Depends on importance of aspect of selling Also depends on company size

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Dangers of Paying too Little High turnover (for good performers)

Low Performance (for already lowperformers) Low motivation

Dangers of Paying too Much Increases selling cost Non-sales employees may have low morales Law of diminishing marginal utility applies