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Ask Score: Managing Sales and Marketing

Ask Score: Managing Sales and Marketing
Issues of Compensation, Motivation, and Management

Compensation systems for sales representatives can vary considerably between straight salary and commission only. As a general rule, a base salary with commission over ride is preferable, both to meet the needs of the representative (at least in part) for regular income (the salary part of the comp plan) and a commission for sales above a threshold level (to motivate the salesman or woman to seek sales orders for the firm).
There are several problems with the hybrid compensation system. One is setting the initial level of salary, and the second is setting the level of commission payments. The salary level must be sufficient to provide for the basic necessities while commissionable business is being developed. The commission level must be sufficient to motivate the representative to seek business from the firm's clients and prospects, and of course, there must be adequate support for the field rep to obtain answers to client questions and provide accurate and up to date information on prices, quality, and delivery schedules.
There are several important steps that management should take to ensure the best possible results from a field sales effort. They are the following: 1) Establish a compensation plan that provides an attractive earning potential for the motivated sales rep while ensuring that the firm earns a profit, 2) Provide Marketing support and direction to the field reps, 3) Use commission structure to guide field sales effort to attractive market segments and high profit products and services. We will now explain each of the three steps in detail.
Step 1 involves setting both a level of sales and a time frame to guide sales rep evaluation. A draw against future commissions provides a standard by which performance can be measured in that rising sales volume can be measured against costs of both draw and commission payments. Income from sales generated by the rep must exceed outflow for draw and commission payments by a certain date. Sales must rise against that theoretical breakeven point in order to provide a profit to the firm.
Step 2 involves providing Marketing support and guidance to field reps. Without support and guidance from Marketing, the firm becomes a sales driven organization and thereby forfeits its future in the sense that the strategic plan as envisioned by management will be over ridden by the field rep's motivation to seek sales where they can be found. The best solution is a Marketing driven organization that provides its reps with high value products and services to sell competitively in the market place.
Step 3 involves the use of commission structure to guide field sales efforts through the sliding scale of payments tied to company profits. Lower prices mean lower commissions. Higher prices mean higher commissions.
These three steps will make for a highly motivated and informed sales force, with effort concentrated on high value/profit products and services, thereby ensuring profits to the firm and high levels of satisfaction to the field sales representatives.

Richard Walton, Counselor for SCORE, and President, Enterprise Resource Management Associates, Inc., of Hagerstown, Maryland. Cell phone: 301-462-9850, email:

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