Incentive as a Component of Salesman Compensation Structure

Incentives as a Component of Salesman Compensation Structure By Mohit Pandey 11DM-187 Sales Management-Section D What are Incentives? It is defined as a type of additional remuneration either in cash or kind given to an employee as a means of increasing output or as a motivational influence. Why do we need to give incentives? Firstly incentives work as psychological stimulant for a person to perform better. Incentives act like the pot of gold at the end of the rainbow. Secondly, the turnover rate of a salesperson is very high and also the cost of replacing a salesperson is also quite high, approximately around $40-50k. Thus to retain the best talent in the company we need to provide adequate incentives to the sales force.†¦show more content†¦A few key points that should be kept in mind while setting the parameters for deciding incentives are: * The current market situation (growth or recession). * The product type (B2C or B2B) * The sales order cycle (long or short) * The business strategy ( Increase market penetration or may increase sales of a high margin product or launch of a new product) How much incentive to offer and to whom? The percentage amount of incentive offered to the sales force should not be equal across the board. The high performers must be rewarded for their performance, while the low performers need to be encouraged to perform better. The better the performance the higher should be the incentive level. Also in case of team selling the incentive has to be distributed proportionately amongst the team. It should not be the case wherein the laggards piggyback on the star performers and get the same level of incentive. Additionally a proper framework has to be devised on a company-to-company basis to decide the distribution of incentive for a product sold amongst the team members so as to control costs and avoid giving multiple incentives for the same product to multiple persons involved in the sale. The incentives offered should be mix of both short and long term incentives i.e. commissions, bonus, non-cash rewards, etc. This is to ensure that the motivation level of the salesperson is up throughout the year and does not peak at certainShow MoreRelatedCompensating Sales Force6663 Words   |  27 PagesCOMPENSATING SALES FORCE Sales is one of the few jobs where you earn your money – every day. COMPENSATION IS MORE THAN MONEY Any type of sales organization can reward sales performance in three fundamental and interrelated ways: 1. Direct financial rewards. 2. 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