SALES FORCE MOTIVATION AND COMPENSATION.

MOTIVATION
• Motivation is derived from a Latin word
“Movere” meaning “To Move”.
• Motivation is the effort the salesperson
makes to complete the various activities of the
job.
• Includes three dimensions: Intensity,
Persistence & Direction.



Dimensions of Motivation
• Intensity refers to the amount of physical and
mental effort the salesperson spends on the
given task.
• Persistence describes how long the
salesperson continues to put forth the effort.
• Direction suggests the salesperson choice of
direction of effort among various tasks.



IMPORTANCE
Sales Managers find the task of motivating
salespeople difficult and important due to the
following factors:
 Changes in marketing environment
(Demographic, economic, technological, politicallegal,
social-cultural)
 Conflicting company objectives (Profit aspects)
 Unique nature of sales job (Odd hours of
working, bad mannered customers)
 Separate motivational package (Based on
individual salesperson needs).



Relevance of Motivational Theories
• Maslow’s hierarchy of needs theory (Refer
text)
• Hertzberg’s dual factor theory
• Expectancy theory.



HERTZBERG’S DUAL FACTOR THEORY
• Sources of Dissatisfaction and Satisfaction are
grouped in 2 groups:
– Hygiene factors
– Motivation factors.

HERTZBERG’S DUAL FACTOR THEORY
• Hygiene factors include working condition,
security, supervision, interpersonal relationship,
salary & company policy. They deal with the
condition of work and not the work itself.
• Absence of hygiene factors may cause
dissatisfaction but presence of these factors may
bring up motivation to a theoretical zero level,
but would not result in positive motivation.



HERTZBERG’S DUAL FACTOR THEORY
• Motivation factors include: Recognition,
Responsibility, Achievement, Challenges,
Opportunities for growth and Interest value of
work
• These factors are a part of work
• Pay can be both hygiene and motivational.
• Salary is included in hygiene factor, whereas commissions/incentives are
related to performance – directly relating to sales achievement; therefore
Motivational factor.



Expectancy Theory
• Expectancy: Refers to persons perception of
the relationship between effort and
performance.
• Instrumentality: Refers to the persons
perception of the relationship between
performance and reward
• Valence: Is the value placed on a particular
reward by a salesperson.

Motivational Tools

• For designing an effective motivational mix,

the sales manager should know each

salesperson and understand his/her specific

needs.

• The Motivational package which consists of

various motivational tools / methods should

have some components that fit every

individual salespersons needs.

Motivational Methods – Types

Financial Rewards

• Financial Compensation plan:

– Salary

– Commission

– Bonus payments

– Fringe benefits

– Combination

• Sales Contests.

Motivational Methods – Types

Non Financial Rewards:

• Promotion

• Sense of accomplishment

• Personal growth opportunities

• Recognition

• Job security

• Sales meeting and conventions

• Sales training programmes

• Job enrichment

• Supervision.

Guidelines For Motivating Salespeople

• Difference between “Can’t do” & “Won’t do”

– Sales performance depends on ability and

motivation i.e. efforts.

• Include individual needs into motivational

programmes

– To design different tailor made motivational

programmes for each salespeople. Segmenting of

salespeople based on their needs will help them

to design the motivational programme.

Guidelines For Motivating Salespeople

• Pleateaued salespeople

– Pleateaued salespeople are usually around 40 – 50

years of age who almost stopped improving and

developing, following a period of progress.

– The main reasons for pleateauing is less chances of

promotion, perceptions of unfair treatment, burnout,

boredom and satisfaction with income.

– Overcome by setting performance standards,

training/coaching new salesperson, developing new

territory, market survey of products and collecting

competitive information

Guidelines For Motivating Salespeople

• Proactive approach

– A Sales manager should control potential

problems in motivation by identifying and

removing them.

– Can be done by regular communication, praising

good performance, including suitable recognition

programmes and discussing less expected

performance in a constructive manner.

COMPENSATING THE SALESFORCE

• Financial Compensation:

– Direct payment of money such as salary,

commission and bonus

– Indirect payment: Fringe benefits, retirement

plans, medical reimbursements, LTA and various

insurance plans.

COMPENSATING THE SALESFORCE

• Non Financial Compensation:

–

Basic types of Compensation Plans

• Straight salary

• Straight commission

• Combination of Salary, commission and/or

bonus.

Straight-Salary Plan

• It’s a direct monetary reward paid for carrying

out certain duties over a period of time.

• It is related to unit of time and NOT unit of

work.

• Suited to Sales trainees, Missionary sales

activities, a company which introduces a new

product.

Straight-Commission Plan

• Represents strong financial incentives, in order to

ensure superior performance.

• Factors to be decided:

– Commission base: Base on which the salespersons

performance is measured and commission will be paid.

The most popular commission base is sales volume

– Commission rate: Rate to be paid per unit, usually

expressed as a percentage of sales or gross profit.

– Commission start: The starting point for the commission

payment, after selling the first unit or after reaching sales

quota

– Commission payout: The time when the commissions are

paid. Many companies pay after the customer is billed and

payment is received.

Straight-Commission Plan

• Situations where Straight Commission plan is

followed:

– Real estate and insurance

– Direct sales industry eg. Tupperware, Amway,

Avon

– Wholesalers who have limited working capital

who pay their salespeople by commission.

Combination Plan: Types

• Salary + commission

• Salary + bonus

• Salary + commission + Bonus

• Commission + Bonus.

EVALUATING THE PERFORMANCE

OF SALESPEOPLE.

Evaluating the Performance of

Salespeople - Purpose

The basic objective of the performance evaluation of salespeople is

to determine how these salespersons have performed.

 Improve performance by identifying the causes of

unsatisfactory performance

 To decide the increment in pay and incentive payment based

on the actual performance of the salesperson

 To identify the salesperson who may be promoted

 To determine the training needs of the individual and entire

sales force

 To identify the sales person whose services may be

terminated, after giving adequate chances for improvement

 To motivate salespeople through adequate recognition and

reward for good performance

 To find out strengths and weakness.

Salesforce Performance Evaluation and Control Procedure

Step 1

• Set policies on performance evaluation and control

Step 2

• Decide the bases of salespeople’s performance and evaluation

Step 3

• Establish performance standards

Step 4

• Compare actual performance with Standards

Step 5

• Review performance evaluation with Salespersons

Step 6

• Decide sales management actions and control.

Setting policies on performance evaluation and control

• Frequency of evaluation

• Who conducts the evaluation?

• Management by Objectives (MBO)

• Sources of Information

• 360 degree feedback.

Deciding the bases of evaluation

• Outcome/result based viewpoint

• Behaviour/activity/effort based viewpoint

• Both, outcome based and behaviour based.

Review performance evaluation with

Salespeople

• First the performance criteria or bases should be

discussed

• The salesperson should be asked to review

his/her own performance

• The sales manager then presents his view on the

review performance

• Mutual agreement on the performance must be

established

• If disagreements or serious differences of opinion

occurs then the sales manager should carefully

explain the reasons to the salesperson.