Managing the Sales Force 303
money. Now Amatil contacts these small accounts through a regular schedule of tele-
marketing, freeing up its field reps to concentrate on larger accounts. This move has
resulted in a much lower cost per order and made small accounts financially feasible.
The compensation package is a critical element in attracting top-quality sales
reps, starting with the level and components. The level of compensation must bear
some relation to the “going market price” for the type of sales job and required abili-
ties. If the market price for salespeople is well defined, the individual firm has little
choice but to pay the going rate. However, the market price for salespeople is seldom
well defined. Published data on industry sales force compensation levels are infre-
quent and generally lack sufficient detail.
The company must next determine the four components of sales force com-
pensation—a fixed amount, a variable amount, expense allowances, and benefits.
Thefixed amount,a salary, is intended to satisfy the sales reps’ need for income sta-
bility. The variable amount,which might be commissions, a bonus, or profit sharing,
is intended to stimulate and reward greater effort. Expense allowancesenable sales
reps to meet the expenses involved in travel, lodging, dining, and entertaining.
Benefits,such as paid vacations, sickness or accident benefits, pensions, and life insur-
ance, are intended to provide security and job satisfaction. Fixed compensation
receives more emphasis in jobs with a high ratio of nonselling to selling duties and
in jobs in which the selling task is technically complex and involves teamwork.
Variable compensation receives more emphasis in jobs in which sales are cyclical or
depend on individual initiative.
Fixed and variable compensation give rise to three basic types of compensation
plans—straight salary, straight commission, and combination salary and commission.
Only one-fourth of all firms use either a straight-salary or straight-commission method,
while three-quarters use a combination of the two, though the relative proportion of
salary versus incentives varies widely.^8
Straight-salary plans provide sales reps with a secure income, make them more
willing to perform nonselling activities, and give them less incentive to overstock cus-
tomers. From the company’s perspective, they provide administrative simplicity and
lower turnover. Straight-commission plans attract higher sales performers, provide
more motivation, require less supervision, and control selling costs.
Combination plans offer the benefits of both plans while reducing their disad-
vantages. Such plans allow companies to link the variable portion of a salesperson’s
pay to a wide variety of strategic goals. One trend is toward deemphasizing volume
measures in favor of factors such as gross profitability, customer satisfaction, and cus-
tomer retention. For example, IBM now partly rewards salespeople on the basis of cus-
tomer satisfaction as measured by customer surveys.^9
MANAGING THE SALES FORCE
Effective management of the sales force is needed to implement the company’s cho-
sen sales force design and achieve its sales objectives. Sales force management covers
the steps in recruiting and selecting, training, supervising, motivating, and evaluating
representatives (see Figure 5-16).
Recruiting and Selecting Sales Representatives
At the heart of a successful sales force is the selection of effective representatives. One
survey revealed that the top 27 percent of the sales force brought in over 52 percent of
the sales. Beyond differences in productivity is the great waste in hiring the wrong peo-
ple. The average annual turnover rate for all industries is almost 20 percent. When a