Perreault−McCarthy: Basic
Marketing: A
Global−Managerial
Approach, 14/e- Personal Selling Text © The McGraw−Hill
Companies, 2002
training program adds on-the-job observation of effective salespeople and coaching
from sales supervisors. Many companies also use weekly sales meetings or work ses-
sions, annual conventions, and regular e-mail messages and newsletters, as well as
ongoing training sessions, to keep salespeople up-to-date.^15438 Chapter 15
Compensating and Motivating Salespeople
To recruit and keep good salespeople, a firm has to develop an attractive com-
pensation plan designed to motivate. Ideally, sales reps should be paid in such a way
that what they want to do—for personal interest and gain—is in the company’s
interest too. Most companies focus on financial motivation—but public recogni-
tion, sales contests, and simple personal recognition for a job well done can be
highly effective in encouraging greater sales effort.^16 Our main emphasis here, how-
ever, will be on financial motivation.^17
Two basic decisions must be made in developing a compensation plan: (1) the
level of compensation and (2) the method of payment.To attract good salespeople, a company must pay at least the going market wage
for different kinds of salespeople. To be sure it can afford a specific type of sales-
person, the company should estimate—when the job description is written—how
valuable such a salesperson will be. A good order getter may be worth $50,000 to
$100,000 to one company but only $15,000 to $25,000 to another—just because
the second firm doesn’t have enough to sell! In such a case, the second company
should rethink its job specifications, or completely change its promotion plans,
because the going rate for order getters is much higher than $15,000 a year.
If a job requires extensive travel, aggressive pioneering, or contacts with difficult
customers, the pay may have to be higher. But the salesperson’s compensation level
should compare, at least roughly, with the pay scale of the rest of the firm. Nor-
mally, salespeople earn more than the office or production force but less than top
management.Once a firm decides on the general level of compensation, it has to set the
method of payment. There are three basic methods of payment: (1) straight salary,
(2) straight commission,or (3) a combination plan.Straight salary normally supplies
the most security for the salesperson—and straight commission the most incentive.
These two represent extremes. Most companies want to offer their salespeople some
balance between incentive and security, so the most popular method of payment is
a combination plan that includes some salary and some commission. Bonuses, profit
sharing, pensions, stock plans, insurance, and other fringe benefits may be included
too. Still, some blend of salary and commission provides the basis for most combi-
nation plans.
What determines the choice of the pay plan? Four standards should be applied:
control, incentive, flexibility, and simplicity.The proportion of a salesperson’s compensation paid as salary affects how much
controlthe sales manager has. It also affects how much supervision is required. A
salesperson on straight salary earns the same amount regardless of how he or she
spends time. So the salaried salesperson is expected to do what the sales manager
asks—whether it is order-taking, supporting sales activities, solving customer prob-
lems, or completing sales call reports. However, the sales manager maintains control
onlyby close supervision. As a result, straight salary or a large salary element in the
compensation plan increases the amount of sales supervision needed.Compensation varies
with job and
needed skills
Payment methods vary
Salary gives control—if
there is close
supervision