Perreault−McCarthy: Basic
Marketing: A
Global−Managerial
Approach, 14/e
- Personal Selling Text © The McGraw−Hill
Companies, 2002
Personal Selling 447Summaryb. Welles thinks a sales rep might be motivated to work
harder and sell 1,100 units of Product B if the com-
mission rate (under the commission plan) were
increased to 10 percent. If Welles is right (and every-
thing else stays the same), would the higher
commission rate be a good deal for Nanek? Explain
your thinking.
c. A sales rep interested in the job is worried about mak-
ing payments on her new car. She asks if Welles
would consider paying her with a combination plan
but with more guaranteed income (an $18,000 base
salary) in return for taking a 3 percent commission on
Products B and A. If this arrangement results in the
same unit sales as Welles originally estimated for the
combination plan, would Nanek, Inc., be better off
or worse off under this arrangement?
d. Do you think the rep’s proposal will meet Welles’
goals for Product B? Explain your thinking.
For additional questions related to this problem, see
Exercise 15-3 in theLearning Aid for Use with Basic Mar-
keting, 14th edition.15.Sales Compensation
Franco Welles, sales manager for Nanek, Inc., is try-
ing to decide whether to pay a sales rep for a new
territory with straight commission or a combination
plan. He wants to evaluate possible plans—to compare
the compensation costs and profitability of each. Welles
knows that sales reps in similar jobs at other firms make
about $36,000 a year.
The sales rep will sell two products. Welles is planning a
higher commission for Product B—because he wants it to
get extra effort. From experience with similar products, he
has some rough estimates of expected sales volume under
the different plans and various ideas about commission
rates. The details are found in the spreadsheet. The pro-
gram computes compensation and how much the sales rep
will contribute to profit. “Profit contribution” is equal to
the total revenue generated by the sales rep minus sales
compensation costs and the costs of producing the units.
a. For the initial values shown in the spreadsheet, which
plan—commission or combination—would give the
rep the highest compensation, and which plan would
give the greatest profit contribution to Nanek, Inc.?Computer-Aided Problem