Sales Management 12

1. Sales Management 12 Motivation and Rewards

2. Intrinsic Extrinsic Motivation Motivation: Intrinsic vs. Extrinsic When doing the job is inherently motivating When rewards such as pay and formal recognition act as motivators

3. Intrinsic Extrinsic Motivation Types of Sales Force Rewards Sense of Accomplishment Pay Job security Promotion Personal Growth Opportunities Recognition

5. Aptitude: • Enduring personal characteristics that determine individual’s overall ability to perform a sales job • Variables • Intelligence • Cognitive Abilities • Verbal Intelligence • Math Abilities • Sales Aptitude

6. Personality • Enduring personal traits that reflect an individual’s consistent reactions to situations encountered in the environment. • Variables • Responsibility • Dominance • Sociability • Self-Esteem • Creativity/Flexibility • Need for Achievement/Intrinsic Rewards • Need for Power/Extrinsic Rewards

7. Skill • Individual’s learned proficiency at performing necessary tasks. • NB: Skills can be trained! • Variables • Vocational skills • Sales Presentation skills • Interpersonal skills • General Management • Vocational Esteem

8. Sales Role Perceptions I • Role Accuracy: Knowing what is expected • Role Conflict: Incompatible demands from different role partners (firm, boss, customer, family) • Role Ambiguity: Believe that they don’t know what is expected, how they should meet expectations, or how they will be evaluated & rewarded

10. Sales Role Perceptions II:Consequences • Role Inaccuracy, Conflict, and Ambiguity lead to: • Dissatisfaction • Mental Anxiety • Salesperson Turnover • Absenteeism • Poor Job Performance

11. Sales Role Perceptions III:Improvement • Close (not stifling) supervision • Training • Salesperson experience • Include salesperson when establishing expectations

12. Sales Quotas • Goals assigned to salespeople for specific time period. • Three Purposes • Motivate salespeople • Evaluating performance • Controlling salespeople’s effort

13. Problems with Quotas • Not apples/apples • Different levels of difficulty in different territories • May be tough to apply to teams • Can be expensive to establish • If not done well, may focus efforts too much in one area.

14. Characteristics of Good Quotas • Attainable • Motivation requires reasonable chance of attainment • Easy to understand • Too complex  suspicion and mistrust • Complete • Cover all criteria to avoid imbalance

17. Types of Quotas • Volume • Units, Dollars, Points • Activity • # cold calls, proposals, displays, service calls, meetings, collections, demonstrations • Financial • Expenses, Gross Margins, Net Profit

18. How to Set Quotas • Volume • History • Territory Potential • Activity • Sales reps and managers; sales reports; research • Financial • Based on financial goals of firm • Adjust to meet needs

19. Performance Criteria • Total Sales Volume; Increase over last year. • Percentage of Quota Attainment. • Selling Expenses; Decrease from last year. • Profitability of sales; Increase over last year • New Accounts • Improved administrative duties (paperwork) • Improvements in customer service

20. Rewards I • Money: salary, bonus, commission • Promotion • Non-financial: (Contests, travel, prizes, etc.) • Special Recognition (clubs, awards, etc.) • Job security

21. Rewards II • Feeling of self-fulfillment • Feeling of worthwhile accomplishment • Opportunity for personal growth and development • Opportunity for independent thought/action

22. Motivation • Motivation leads to effort. • Effort leads to performance. • What leads to motivation?

23. Motivation

24. Expectancy Theory Expectancy Instrumentality Valence Motivation High Yes Yes No No Low Unmotivated

25. Expectancy Theory • Expectation • Effort  Outcome • Instrumentality • Outcome  Reward • Valence • Reward has Value • Must have all 3 to be motivated!

26. Expectation Must expect that effort will lead to performance outcome Studying = Knowledge Practice ≠ Jimi

27. Instrumentality Results must be instrumental in achieving reward

29. Valence High Valence Low Valence

30. Expectancy Theory in Sales • If I make ten cold calls/day, I will get 2-3 new customers per week, leading to higher sales. • If I get 2-3 new customers/week and have higher sales, I will make more commi$$ion$. • I like money. I want to make more, so I am motivated to make the cold calls. Note: People have different values, so they are motivated by different rewards.

31. Compensation and Incentive Programs

32. Major Issues • People have different personal characteristics and different valances for various kinds of rewards. • Ideally want to have unique compensation program for each person. • It ain’t gonna happ’n!!!! • Too complex to administer • Question of fairness • Changes over time • Need to update continuously

33. Designing a Compensation Plan • Compensation plan is intended to have the sales force do what management wants, how it wants it, and within the desired time. • First, need to decide what it is that management wants.

34. Assessing Situation/Objectives • How are salespeople allocating time? • How good are the current outcomes? • Job Analysis • Recruitment and selection • Company records • Company marketing & sales objectives • Account management

35. What do you reward? • Performance outcomes • Behaviors • Need to align the sales forces’ objectives with that of the company. • Can strive to achieve multiple objectives, but not too many at once. • Use mixed-incentive plan

36. Behaviors & Activities to Reward • Higher $ volume sales • Increase sales of more profitable items • Push new products • Higher penetration: products, customers • Larger average order size • New customers • Service/Maintain existing customers • Retain customers • Encourage team cooperation • Balanced (full-line) selling • Lower sales costs • Increase calls • Prompt paperwork

37. Valance • Need to determine what drives the current sales force at this time. • Survey • Conjoint analysis • Managers don’t necessarily have an accurate perception of their salespeople’s valances for different rewards.

38. Appropriate Compensation Mix • Determine gross amount necessary to attract, retain, and motivate right type of salespeople. • Then allocate to salary, commission, bonus, benefits, prizes. • Varies with type of sales job, size of company and sales force, and policies. • What do competitors pay? • Pay low, high, or average?

39. Dangers of Paying Too Much • Increases selling costs  lowers profits • Can cause resentment and low morale among non-sales employees and managers • Not necessarily a motivator • Maslow • Prospect Theory

41. Dangers of Paying Too Little • You get what you pay for. • Attract only weak people • Leads to poor results • High turnover, especially among good people. Only the less capable will stay. • Leads to higher costs for recruiting, and training. • Lost sales • Managers always recruiting and hiring

45. Compensation Components • Commission • Salary • Incentive/Bonus • Benefits • Sales Contests

46. Compensation: Commission • Payment based on short-term results • Usually a % of $ sales, or $/volume • Direct link between performance and payment • Motivates high level of selling effort • Encourages sales success

47. Compensation: Salary • Fixed sum of money paid at set intervals • How most of the country is paid • Function of experience, competence, tenure, past performance • Motivate effort on non-sales activities • Adjust for differences in territory potential • Motivate investment in long-term sale

48. Compensation: Incentive/Bonus • Additional commission tied to sales or profitability (e.g. + 1% after $2,000,000) • Bonus for meeting or exceeding target • Direct effort to strategic objectives • Provide additional rewards to top performers • Encourage sales success

49. Compensation: Sales Contests • Encourage extra effort at specific short-term objectives • Can offer: • Cash • Merchandise (TV, Car, Shopping, Golf, Dinner) • Travel (Can also be a team building event) • Offer multiple opportunities for prizes • Needs to be achievable to be motivating • Cannot be too easy, or won’t be motivating

50. Compensation: Benefits • Health insurance, sometimes disability and life insurance • Pension plan • Not everyone offers, especially if contract (real estate agent) or manufacturer’s rep • Salespeople are then forced to buy plans through professional associations • Provides security, especially important to people with families, or getting older