Incentives for Salespeople

15/11/2020 0 By indiafreenotes

Compensation plan for salespeople consist of a straight salary plan, a straight commission plan or a combination of salary and commission plan.

  1. Straight Salary Plan: It provides stable income and provides freedom from financial uncertainties. But there is no additional incentive for good performance. Example, Straight salary plan can be used in jobs where non-selling activities are more in the total times spent by the salesperson like sales and service engineers. Also, in the case of salespersons, who do more of sales promotion activities in the field.
  2. Straight Commission Plan: Here, payment is made as per sales productivity. The person receives no compensation if sales are not made. A high performing salesperson can earn very high commission based on business generated. Example: Selling insurance and financial products.

The disadvantages of the system are:

  1. The person may be careless in sending reports on market situation, competition and performance of products.
  2. The person may consider individual accounts as private property.
  3. May shade prices to make sales.
  4. Use high pressure tactics to sell.
  5. May push easy-to-sell products.
  6. May not focus on new products or difficult to sell products.
  7. Salary plus Commission Plan: The plan provides security of stable income and additional income through commission for achieving sales targets. The plan is very useful for maintaining the morale of sales people. Therefore salary plus commission plan is being increasingly used by most of the companies in our country.

Sales Incentives:

The objectives of sales incentive are:

  1. Motivation of salesperson to achieve sales targets.
  2. Increase selling effort (meeting more number of prospects/customer/extended working hours, selling full range of products, conducting sales campaigns etc.).
  3. Increase in sales, market share and profits.

Types of Sales Incentives:

  1. Financial incentive: The salesperson is eligible for cash incentive for achievement of sales target/exceeding the sales target. The sales target may be for a quarter or for the whole year.
  2. Non-financial incentives: While financial reward is a powerful motivation, money is not the sole motivator. Therefore, companies have come out with non-financial incentive such as recognition of outstanding performance, annual conferences in hill stations/foreign countries, membership in Achievers’ Club, members of the task force, personal letters of commendations, etc. to motivate sales people.
  3. Combination of financial and non-financial incentives: Many companies dealing with pharma products, consumer goods and durables are increasingly using a combination of financial and non-financial incentive system to motivate sales people and achieve increase in sales, market share and profits.