Basic Marketing: A Global Managerial Approach

Perreault−McCarthy: Basic

Marketing: A

Global−Managerial

Approach, 14/e

15. Personal Selling Text © The McGraw−Hill
    Companies, 2002

440 Chapter 15

Simplicity shows the
link between effort
and income

Sales managers must
plan, implement,
and control

0 Sales volume

Total selling

expense

Straight commission

Combination plan

Straight salary

into consideration when setting a salesperson’s sales quota—the specific sales or

profit objective a salesperson is expected to achieve.

Flexibility among peopleis important because most companies’ salespeople vary in

their stage of professional development. Trainees and new salespeople usually require

a special pay plan with emphasis on salary. This provides at least some stability of

earnings.

Flexibility among productsis desirable because most companies sell several dif-

ferent products with different profit potentials. Unless firms recognize this fact,

the salespeople may push the products that sell best—ignoring overall company

profit. A flexible commission system can more easily adjust to changing profit

potentials.

A final consideration is the need for simplicity.Complicated plans are hard for

salespeople to understand. Salespeople become dissatisfied if they can’t see a direct

relationship between their effort and their income.

Simplicity is best achieved with straight salary. But in practice, it’s usually bet-

ter to sacrifice some simplicity to gain some incentive, flexibility, and control. The

best combination of these factors depends on the job description and the company’s

objectives.

One way to increase flexibility and still make it faster and easier for a sales rep

to see the relationship between effort and compensation is to provide that infor-

mation online. For example, Oracle, a company that sells database systems, has

developed sales compensation software so its own sales reps can check a website at

any point and see how they are doing. As new sales results come in, the report at

the website is updated. Sales managers can also make changes quickly—for exam-

ple, by putting a higher commission on a product or more weight on customer

satisfaction scores. The system works so well that Oracle has decided to offer it to

customers—and now over 150 firms use it. Some firms develop their own systems,

or just give their sales reps a spreadsheet so that they can keep their own informa-

tion up-to-date.^18

There are no easy answers to the compensation problem. It is up to the sales

manager, together with the marketing manager, to develop a good compensation

plan. The sales manager’s efforts must be coordinated with the whole marketing mix

because personal selling objectives can be accomplished only if enough money is

allocated for this job. Further, managers must regularly evaluate each salesperson’s

performance and be certain that all the needed tasks are being done well. The com-

pensation plan may have to be changed if the pay and work are out of line. And

by evaluating performance, firms can also identify areas that need more attention—

by the salesperson or management.^19 In Chapter 19, we’ll talk more about control-

ling marketing activities.

Exhibit 15-3
Relation between Personal
Selling Expenses and Sales
Volume—for Three Basic
Personal Selling
Compensation Alternatives