Page 73 - DMGT507_SALES AND PROMOTIONS MANAGEMENT

Unit 3: Motivating and Compensating the Sales Force

payments for their services. Only 17.5% used this method. It is more common among industrial Notes
goods companies than consumers' goods companies. Firms that previously used the straight
salary plan have switched over to combined basic salary with a variable element.

Advantages

1. There is control and direction over the sales personnel.
2. There is flexibility in adjusting the work.

3. Sales persons cooperate more if paid straight salary rather than commissions.
4. It is simple and economical to administer.
5. More stability of income.

6. Sales persons are relieved of much burden of planning their own activities.
Disadvantages

1. Since there is no direct monetary incentive many sales persons do only an average rather
than an outstanding job.
2. There is tendency to under compensate productive sales persons and to over compensate
poor performers.
3. If this exists for long, the turnover rate rises.
4. The morale of the sales persons is affected.

5. It is difficult to adjust to changing circumstances.
Straight Commission Plan

In this, sales persons are paid according to productivity. This method provides for progressive
or regressive changes in commission rates as sales volume rises to different levels. Others
provide for different commission rates for sale of different products, to different categories of
customers, or during given seasons.
Straight commission plans fall into one of the two broad classifications:

1. Straight commission with sales persons paying their own expense. Advances may or may
not be made against earned commissions.

2. Straight commission with the company paying expenses, with or without advances against
earned commissions.
For this method non-selling duties are unimportant, rather getting order is the main objective.

Advantages

1. It provides maximum direct monetary incentives.

2. It provides means of cost control.
3. The straight commission plan is also characterised by great flexibility for revising
commission rates for different products.

LOVELY PROFESSIONAL UNIVERSITY 67