Sales Force Management - Chapter 6 Summary PROBLEMS OF MOTIVATING SALES PERSONNEL 1. Introduction: Motivation is goal directed behaviour. This is associated with the terms "desires" and "needs". In regards to sales persons, motivation is the amount of effort the sales persons takes to achieve his sales tasks or objective. Because of the unique working environment of sales force, the problem areas of motivation of sales persons are (1) Role conflict (2) Apathy and (3) Team spirit. 2. Role Conflict: Sales persons are the linkage between the firm and the customers. Sales persons will interact between the Sales Department, Customer service organisation that process orders, other company sales persons, and Customers. These interactions results in following types of conflicts: (a) Identification conflict: This conflict arises out of the fact that salesman belong to more than one group. (b) Advocacy conflict: As the promoter of customer needs and wants, their interests are, more often than not, at loggerheads with objectives of other Departments in the firm. (c) Inherent Conflict: Apart from conflict between the differing interests between the firm and the customers, he must also safeguard his own self interest. Role conflicts make motivation a difficult task. 3. Apathy Due to Monotony: Some sales persons lose interest by working on same product in the same territory and meeting same customers. Such salesmen need additional motivational efforts to rejuvenate and invigorate their efforts. 4. Lack of Team Spirit: Sales persons working in the field are separated from the rest of their colleagues. This also calls for extra efforts of motivation. PROSPECTS OF MOTIVATING SALES PERSONNEL 1. Introduction: There are no straight solutions to motivate a sales person whose motivational problems are unique and difficult. Special efforts are needed to motivate sales personnel. Some of these steps are listed below: Interdependency relationship. Leadership styles. Effective communications. Industrial relations and Unionism. 2. Interdependency and Motivation: In the case of sales persons power-authority-relationship undergoes changes and sales force-superior-relationship is one of partial dependence". Each person, thus, have a "zone of acceptance"- where each exhibits a "degree of acceptance that harmonises their relationship and assists motivation. 3. Leadership Style: Effective sales manager/executive is a "leader" not a "boss" to his team of salesmen. Setting a good example by leaders, by their enthusiasm and hard work, assists motivating sales person. 4. Communication: Effective communication assists motivation. Some of the steps are : (a) Free and Frank Discussions: Achieved by giving an opportunity for these persons to open their mind. In similar lines, freedom to talk over problem by subordinates with superiors can assist creativity and innovations. (b) Interpersonal Contact: This will enable to identify problems which cause anxiety and worries-be it family, social or economical. Solution of such problems can assist in improving efficiency of individuals and achieving objectives of the organisation.
2 (c) Motivational Interview: This is the technique where sales personnel were encouraged to talk about their roles, goals, ambitions, likes, dislikes etc. Based on such input, most important motivational steps suitable for each are selected. (d) Bulletins and Written Communications: Written communication is essential to introduce new products, technology and company policies which will update information bases of the salesman. 5. Industrial Relations and Unionism: Unionism is not popular with sales persons. By and large, management failure drives employees to unionism. Good industrial relations also improve the motivational level of employees. 6. Motivation-Theory and Practice: Proper leadership style and effective communication improves morale and motivation of sales persons. "Vroom's Expectation Theory" explains motivational behaviour of sales persons. The behaviour of individual and therefore, his efforts, depends on how strongly, he believed in (1) his efforts lead to performance (2) Good performance leads to reward and (3) the rewards are worth possessing. Thus the role of managers, is to reinforce, by words and deeds, the above convictions by the sales personnel, FEATURES OF A GOOD SALES COMPENSATION PLAN, NATURE, OBJECTIVE AND PRINCIPLES 1. Nature: Salespersons need special attention to motivate them. Their sales efforts depend on their motivational levels. Methods of motivation are broadly classified as (1) Financial Incentives (2) Non-Financial Incentives (3) A combination of both. "Sales compensation plans" are based on financial incentives. Non-financial incentives such as encouragement and personal recognition take care of these limitations. 2. Objectives: Financial incentives in the form of Sales Compensation Plans provide a living wage, relate individual performance with rewards, and company goals with individual goals. Nonfinancial incentive schemes meet objectives such as (1) Self-motivation (2) Sense of belongingness (3) Espirit de corps (4) Self-actualisation and (5) Empowerment. 3. Principles: Principles that guide designing incentive schemes for sales persons are (1) Provide a living wage (2) Compatible with other motivational plans existing/proposed (3) Equity and fairness (4) Easy to understand and implement (5) Rewards are directly related to performance (6) Economical (7) Meets the overall objectives of the organisation FEATURES OF A GOOD SALES COMPENSATION PLAN, FACTORS INFLUENCING THEIR DESIGN 1. Nature: Sales compensation plan is a financial incentives scheme developed to motivate sales persons to put up maximum efforts in their jobs. Even though no research work is carried out in India, findings similar to developed countries can be expected here also. It is interesting to note that salary is the most popular incentive scheme among the employees, even among affluent nations. 2. Executive Compensations: Executive compensation methods can be grouped into four classifications (a) Salary payments (b) Deferred payment (c) Fringe Benefits (d) Bonuses. 3. Factors Influencing Sales Compensation Plans: (a) Nature of job, working condition responsibility (corporate headquarters, field work etc. (b) Level of employment, seniority/ranking etc (c) Firms wages and salaries structure, classification, grading, point rating, merit rating, and performance evaluation (d) Compensation pattern in the industry (e) Compensation pattern in the geographic area (f) Employee's level of knowledge, skill and experience (g) Compensation package structure (h) Special Company Allowance (i) Opinion of Sales Force. CLASSIFICATION OF SALES COMPENSATION PLANS AND TYPES 1. Types: Various types of compensation plans are (a) Pure salary (b) Pure commission (c) Salary and Commission (d) Fringe benefits. Page 2 of 5
3 2. Pure Salary: Here the sales persons are paid monthly salaries. The advantages of this system are the stability of income and freedom from financial risks and uncertainties to the salesmen. The greatest disadvantage is that there is no incentive to improve sales. 3. Pure Commission: Here, only commission is paid dependent on sales volume. A number of varieties are available on this scheme of payment. The main advantage is that merit is fully rewarded and mediocre are paid less. The limitations are that average and mediocre who form the majority are disillusioned. 4. Combination of Salary-cum-Commission Plan: This scheme minimizes the disadvantages of both "Pure Salary" and "Pure-commission" Plans. The advantages are (a) Security of stable income (b) Merit is recognized and rewarded greatly (c) Average and mediocre sales persons are not penalized (d) Both individual salesman and organisation are benefited (e) Increases mutual trust and goodwill. The major limitations are (a) Procedure and computing compensations are cumbersome (b) Fixing optimum level of salary and commission become difficult. 5. Fringe Benefits: Fringe benefits are not motivators indicated by Maslow but hygiene factors as defined by Herzberg. Hence fringe benefits are essential prerequisite to maintain high morale of sales persons. Some examples of fringe benefits are: General: Company cars, specified parking lots, furnished housing, secretarial service etc. Subscriptions: Paid to professional bodies, clubs etc. Leave/Vacations: Paid holidays, Leave travel concessions (LTC), Maternity leave etc. Insurance and Medical: Accident Insurance, Medical cover to self and dependents etc. Retirement Benefits: Pension Scheme, Profit Sharing etc. "Confetaria approach" of fringe benefits is now offered by certain companies. Here company offers certain core facilities which are benefits, some of which are mandatory. 6. Bonuses: Bonus is different from commission. Bonuses are of different types such as (a) Discretionary Bonus (b) Performance Bonus (c) Formula Bonus NON-FINANCIAL INCENTIVES-TYPES AND BENEFITS 1. Intrinsic Motivation: There are many ways to stimulate sales people to greater efforts. Desires of promotion, the status of job, recognition of outstanding performance by superiors, acknowledgement of merit by peers and job satisfaction, enhance self-motivation which is also known as "intrinsic motivation." 2. Organisational Steps: Many steps are taken by organisations to increase intrinsic motivation such as (a) Face to face encouragement (b) Sales meetings (c) Sales contests (d) Travel contest (e) Training and development (f) Commendation letters/awards for outstanding performance (g) Publicity through bulletin. 3. Sales Meetings: Sales meetings improve communication, motivation and stimulate sales persons to upgrade and update their performance standard. ACMEE approach can also be applicable to sales meeting. 5. Bulletin: Bulletin has an important role to play in communication. To salesmen, bulletin serves as news papers. Like newspapers, salesmen should eagerly await the arrival of Bulletin. NON-FINANCIAL INCENTIVES-RESEARCH STUDIES AND ANALYSIS 1. Introduction: A number of research studies have established importance of N.F. Incentives. Notable among them are (a) Ranking Steps and (b) Opinion Polls. 2. Ranking of Steps: Dartnell carried out extensive survey of over 5000 sales personnel and ranked various intrinsic rewards under hierarchial order. 3. Opinion Poll: In another research study, sales force opinion was sought on the priorities, they attach to various types of incentives. Their responses to order of preference on financial and non-financial incentives were (a) Financial incentive: 73% (b) Desire for autonomy and freedom to work: 48% and (c) Prestige and Status: 48% Page 3 of 5
4 SALES CONTESTS AND TRAVEL CONTESTS 1. Sales Contests: Sales contest and award of prizes/presents for outstanding performance are effective steps for intrinsic motivation. (a) Merchandise Award: Sales persons prefer merchandise awards better than cash. Merchandise provide better and long-term motivating effect compared to money. (b) Year-round Contest: Year-round contest for sales persons has better advantage compared to one or two in an year. (c) Advantages: (a) Provide educational input (b) Make everyone to get a prize. Hence prize is won not by the "star fighters" alone (c) Keep interest alive throughout the year, as prizes gained through market penetration and contests are not monotonous (d) Teaches better methods to sell and reward those who apply new techniques and achieve results (e) Focuses a central theme, minimizes showmanship. 2. Travel Contest: There are a number of travel contests. (a) Chesterton Travel Contest: Designed for dealers. This contest assists not only the income but also chances to become a well traveled person. (b) Cudahy Team Contest: Here a task is assigned to a group of salesmen which is common. This will assist team work in which those who achieve their individual tasks, assist their colleagues also to reach the same, to claim the holiday trip. SALES EXPENSES AND ITS REIMBURSEMENT-THE CONCEPT AND FACTORS 1. Factors Influencing Expenses: A number of factors influence the sales expenses such as (a) Selling style (b) Type of industry and nature of business (c) Location (d) Policy of firm. Most of the sales persons advocate developing separate policies of reimbursement for sales forces distinctly different from similar policies for other personnel like, production, repair and service, R&D etc. 2. Selling Style: Predominant selling styles are: Missionary sales: Sales to busy professionals like doctors, architects and lawyers. New business sales: Calls are made on potentially large accounts such as Electricity Board, PWD and the like. Technical sales: Involve lesser field tour but longer duration calls on decision makers to convince them on technical superiority of the product Trade sales: The salesman involved in routine calls on large number of prospects wherein, the time spent with each is less. 3. Control of Expenses: If there is no control, the human tendency is to spend more. However, strict control kills their initiative and may lead to missed good sales opportunities. Imaginative control policy needs to be designed. REIMBURSEMENT OF SALES EXPENSES-POLICY, PRINCIPLES AND METHODS 1. Policy: The policy alternatives are (a) Sales persons to pay their own expenses (b) Company to pay part of their expenses (c) Company pays the entire expenses of sales persons. 2. Pay own Expenses Fully: Advantages: (a) Sales persons do better control their own expenses (b) Most economical (c)simple with least accounting and back up documents like "bills," "vouchers" and "monthly statements Disadvantages: (a) Attempt reduce expenses by using cheap mode of travel and stay (b) Avoid non-sale activities (c) Avoid lavish entertainment which may reflect losing good prospects (d) Avoid prospects/accounts located far and wide (e) Restrict calls to large accounts. 3. Company Pay Sales, Expenses: These are paid either in part of fully. The exact amount of expenses or the ratio of company share of expenses in case of partial reimbursement depends on various factors such as territorial size, nature of territory, mode of travel, nature and range of product line etc. etc. Page 4 of 5
5 4. Principles: (1) All personal expenses of salesmen, since he was away from home must be reimbursed. (2) Reimbursed amount must be liberal enough to permit smooth functioning of assigned duties. It must be remembered that sales persons must maintain a living standard befitting that of the customers. 5. Methods: Various methods of reimbursement of expenses are: (a) Flat Expense Account: Here a flat amount is allocated to the salesman for a given period, say, every month. This system relives management from cumbersome jobs like (a) Maintain account for each salesman and (b) Check accounts for each salesman. (b) Flexible Expense Account: Here expenses are categorized as "Payable" and "Non Payable." This method is sometime called "Exact Plan." This system is flexible because (a) Salesman has freedom to spend on items which promote sales (b) The amount can vary with territory, nature of product and type of prospects (c) Management control possible by categorisation by "heads" and freedom for salesmen to use his discretion. The limitations are (a) Administrative/clerical costs are more on record keeping and inspection of accounts (b) Documentation is more cumbersome and time consuming (c) When control is loose it may lead to over spending. (c) Honour System: Sales expenses are fully reimbursed. This system is simple and easy to administer. The major disadvantage is that management control on expenses is weak. One way to overcome this disadvantage is to fix the ceiling of amount as a ratio of sales turnover (d) Expense Quota: Management fixes an upper ceiling of expenses for a given period. The salesman is now free to incur expenses at variable levels during the interval. REIMBURSEMENT OF VEHICLE EXPENSES.SALES PERSONS 1. Introduction: Sales persons use their own vehicle for company purpose need a different policy and method of reimbursing their expenses. (a) Nature of Vehicle: Expenses vary with type of vehicle. (b) Nature of Expenses: Expenses involved are of different types like (a) Fixed expenses such as insurance, road tax etc (b) Variable expenses such as fuel, P.O.L. etc (c) Semi-variable like depreciation. 2. Methods: It is very difficult and time consuming to calculate exact expenditure for all salesmen. (a) Flat Kilometer Rate: Here the vehicle expenses are reimbursed on a fixed rate per km traveled. The advantages are (a) Simple and easy to administer (b) Economical when territory is small and travel distance in moderate (c) Salesmen are happy when rate is liberal without bothering how much travel is made for personal use vs. official purposes. The disadvantage is that this system does not different at the Variation between "nature of vehicle" and "nature of expenses" discussed above. (b) Graduated Kilometer Rate: Here differential rates per km are arranged for different ranges of distances, say up to 5,000 km/year, 10,000 km/year etc. (c) Fixed Period Allowances: Here a fixed amount is given for a given period, say, per month or per week etc. The disadvantage is that salesmen covering longer distance may be at a disadvantage since they travel more distances. (d) Combination of Fixed Period Allowance and Kilometer Rate: Here a "fixed periodic allowance" is combined with kilometer rate. This method minimizes the disadvantages of both fixed period allowance and kilometer rate while combining their advantages. Page 5 of 5