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Sales Force Management
Chapters 11
46
Marketing
Undergraduate 4
07/25/2009

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Cards

Term
Compensation Plan
Definition
The way the reward structure is implemented in a sales organization.
Term
Three basic questions that drive successful compensation plans:
Definition

1. Which comp method is most appropriate for motivating specific kinds of selling activities in specific selling situation?

 

2. How much of a salespersons total compensation should be earned through incentive programs?

 

3. What is the appropriate mix of financial and non-financial compensation and incentives for motivating the sales force?

 

Term
salary 
Definition
a fixed sum of money paid at regular intervals
Term
incentive payments
Definition
encourage good performance
Term
commission 
Definition
a payment based on short-term results, usually a salespersons dollar or unit sales volume
Term
bonus
Definition
a payment made at the discretion of management for achieving or surpassing some set level of performance
Term
quota
Definition
often the minimum requirement for a salesperson to earn a bonus.
Term
sales contests
Definition

encourage extra effort aimed at specific short-term objectives

 

Term
benefits
Definition
designed to satisfy the salespersons basic needs for security
Term
non-financial incentives
Definition
take form of oppourtunities for promotion or various types of recognition for performance such as special awards and publications in company newsletters
Term
commission
Definition
motivate a high level of selling effort and encourage sales success
Term
bonuses
Definition
direct effort toward strategic objectives, provide additional rewards for top performers, encourage sales success
Term
Straight salaries are used for
Definition

1. New Sales Reps

2. new sales territories

3. many required non-selling activities

Term
straight salaries-advantages
Definition

  • maximum security
  • control over reps
  • easy to administer
  • predictable expenses

Term
straight salary-disadvatages
Definition

  • no incentive
  • requires close supervision
  • selling expenses remain same during sales declines

Term
straight commission useful for
Definition

  • highly aggressive salespeople
  • minimal required non-selling tasks
  • when company cant closely control sales force

Term
straight commission advantages
Definition

  • maximum incentive
  • managers can encourage sales of certain items
  • selling expenses relate directly to selling resources

Term
straight commission disadvantages
Definition

  • little security
  • little control over reps
  • reps may provide inadequate service to smaller accounts
  • selling costs less predictable

Term
salary/commission useful for
Definition

  • similar sales potential across territories
  • when company wants to offer incentive, but maintain some control

Term
salary/commission advantages
Definition

  • some security 
  • some incentives
  • selling expenses vary with revenue
  • manager has some control over nonselling activities

Term
combination plans
Definition

  • offer a base salary plus some proportion of incentive pay
  • most popular form of compensation
  • well-suited for relationship selling by compensating for non selling activities while providing incentives to motivate sales

Term
questions for combination plans
Definition

  • appropriate size of incentives relative to base salary?
  • should ceiling be imposed on incentive earnings?
  • when should the sale be credited?
  • should team incentives be used? How?
  • how often should incentive payments be made?

Term
sales contests
Definition

short term incentive programs to accomplish specific objectives

winners receive prizes, recognition, sense of accomplishment

 

Term
successful contests require
Definition

  • clearly defined objectives
  • reasonable profitability of rewards for all
  • attractive rewards 
  • promotion and follow-through

Term
criticisms of sales contests
Definition

  • may not produce lasting improvements
  • salespeople may borrow sales form another period to increase sales during contest periods
  • poorly administered contests can hurt cohesiveness and morale

Term
non-financial rewards
Definition

  • recognition makes peers and superiors aware of outstanding performance
  • offer everyone a reasonable chance of winning
  • recognize best performers across several dimensions

Term
Dumb-down pay programs
Definition

  • eliminate non-selling activities
  • no more than three performance measures
  • exclude inappropriate measures
  • hold supervisors accountable
  • tighten sales credit rules

Term
rewarding A while hoping for B
Definition

  • straight commission may work for transactional selling
  • relationship selling requires operating within a team and securing, building, longterm relationships with profitable customers
  • organizations must reward these additional behaviors

Term
Which of the following is a basic question that needs to be addressed when developing successful sales compensation plans?
Definition

  1. Which compensation method will motivate specific selling activities?
  2. How much of a salesperson's compensation should be incentive based?
  3. what mix of financial incentives will motivate the sales force?
  4. What mix of non-financial incentives will motivate the sales force

Term
Fenton is developing a compensation plan for the salespeople in his new company. In order to have a successful compensation plan, a basic question he will need to address is?
Definition
Which compensation plan is most appropriate for motivating specific kinds of selling activities?
Term
Bonuses encorage
Definition
selling success
Term
three primary methods of compensating salespeople
Definition
straight salary, straight commission, and combination plans
Term
a sales manager wanting his/her salespeople to focus on customer relationships will likely use a ______ compensation plan
Definition
straight salary
Term
salespeople who are primarily engaged in ___ will likely be paid straight salary
Definition
nonselling activites, customer problem analysis, product stocking, market promotion
Term
a sales compensation plan based on sales of the most profitable items is a
Definition
variable commission rate
Term
Olga, like most salespeople, was always was paid commissions based on sales volume but recently she started being paid commissions based on ______________.
Definition
profitability
Term
sales contests should not
Definition
be considered of a firms ongoing compensation plan
Term
better automobiles and better office facilities are examples of 
Definition
perks
Term
which of the following is a guideline for effective formal recognition programs
Definition

  1. performance-based
  2. balanced
  3. a ceremony should be involved
  4. program must be in good taste

Term
managing sales personnel expense accounts creates the conflict between _ and _ of sales people
Definition
control; motivation
Term
a sales quota system may not be working if
Definition
nobody makes the goal, there are no overachievers, only superstars make the goal
Term
one negative outcome of__ compensation and incentive programs is they lead to confusion among salespeople
Definition
complex
Term
one advantage of straight commission sales compensation is it
Definition
causes compensation costs to vary with sales
Term
yurgen's company offers their salespeople a draw against commissions to help offset their
Definition
unstable income flows
Term

when considering incentive plans,

 

Definition
most companies pay incentive earnings monthly
Term
rhonda's company uses a combination salary comp plan. The incentive portion of the plan will likely be large if
Definition
selling skill in an important component to overall success
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