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Unit 3: Motivating and Compensating the Sales Force
Notes
Example: A firm might have a "small orders" problem. It is possible to design
compensation plans that encourage sales personnel to write larger orders. Commission rates
can be graduated so that higher rates apply to larger orders.
Consult the Present Sales Force
Management should consult the present sales personnel, in as much as many grievances have
roots in the compensation plan. Management should encourage sales personnel to articulate
their likes and dislikes about the current plan and to suggest changes in it. Criticism and
suggestions are appraised relative to the plan or plans under consideration.
Reduce Tentative Plan to Writing and Pre-test it
For clarification and to eliminate inconsistencies the tentative plan is put in writing. Then it is
pre-tested. The amount of testing required depends upon how much the new plan differs from
the one in use. The greater the difference, the more thorough is the testing. Pre-tests of
compensation plans are almost always mathematical and usually computerised. If the sales
pattern has shown considerable fluctuations, speculations are made for period's representative
of average, good and poor business.
Then a look is taken into the future. Utilising sales forecast data, new and old plans are applied
to future periods. The plan is tested for the sales force as a group and for individuals faced with
unique selling conditions. Analysis reveals whether the plan permits earnings in line with the
desired compensation level. If deficiencies show up the plan may not be at fault; weaknesses can
be traced to the way territorial assignments have been made or to inaccuracies in sales forecasts,
budgets, or quotas.
To conduct a pilot test, several territories representative of different sets of selling conditions
are selected. The proposed plan is applied in each one long enough to detect how it works under
current conditions.
Revise the Plan
The plan is then revised to eliminate trouble spots or deficiencies. If alterations are extensive,
the revised plan goes through further pre-test and perhaps another pilot test. But if changes have
been only minor, further testing is not necessary.
Implement the Plan and Provide for Follow up
At the time the new plan is implemented, it is explained to the sales personnel. Management
should convince them of its basic fairness and logic. Details of changes from the old plan and
their significance require explanation. All sales personnel should receive copies of the new plan,
together with written examples of the method used for calculating earnings. If the plan is at all
complex, special training sessions are held and aimed at teaching sales personnel how to compute
their own earnings.
Provisions for follow up are made. From periodic check ups need for further adjustments is
detected. Periodic checks provide evidence of the plans' accomplishment and they uncover
weaknesses needing correction.
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