“The incentive plan needs to align the salesperson’s activities with the firm’s objectives.”
[Zoltners, A.; Sinha, P.; and G. Zoltners (2001). ''The Complete Guide to Accelerating Sales Force Performance.'' New York: AMACON. ] Toward that end, an effective plan may be based on the past (growth), the present (comparison with others), or the future (percentage of goal achieved).
[Farris, Paul W.; Neil T. Bendle; Phillip E. Pfeifer; David J. Reibstein (2010). ''Marketing Metrics: The Definitive Guide to Measuring Marketing Performance.'' Upper Saddle River, New Jersey: Pearson Education, Inc. . The ]Marketing Accountability Standards Board (MASB)
The Marketing Accountability Standards Board (MASB), authorized by the Marketing Accountability Foundation,MASB''Marketing Accountability Foundation (MAF)''. ited 8 December 2010/ref> is an independent, private sector, self-governing group of acad ...
endorses the definitions, purposes, and constructs of classes of measures that appear in ''Marketing Metrics'' as part of its ongoin
Common Language in Marketing Project
Purpose
The purpose of the sales force compensation metric is to determine the mix of
salary
A salary is a form of periodic payment from an employer to an employee, which may be specified in an employment contract. It is contrasted with piece wages, where each job, hour or other unit is paid separately, rather than on a periodic basis.
...
, bonus, and
commission that will maximize sales generated by the sales force. When designing a compensation plan for a sales force, managers face four key considerations: level of pay, mix between salary and
incentive
In general, incentives are anything that persuade a person to alter their behaviour. It is emphasised that incentives matter by the basic law of economists and the laws of behaviour, which state that higher incentives amount to greater levels of ...
, measures of performance, and performance-payout relationships. The level of pay, or compensation, is the amount that a company plans to pay a salesperson over the course of a year. This can be viewed as a range, because its total will vary with bonuses or commissions.
Construction
Managers enjoy considerable freedom in designing compensation systems. The key is to start with a forecast for sales and a range within which each salesperson's compensation should reside. After these elements are determined, there are many ways to motivate a salesperson. Key formulas in this area include the following:
:Compensation ($) = Salary ($) + Bonus 1 ($) + Bonus 2 ($)
:Compensation ($) = Salary ($) +
ales ($) x Commission (%)ref name=Marketing_Metrics />
Break-even number of employees
After a sales compensation plan has been established, management may want to reevaluate the size of its sales force. Based on forecasts for the coming year, the firm may have room to hire more salespeople, or it may need to reduce the size of the sales force. On the basis of a given value for projected sales, managers can determine the break-even number of employees for a firm as follows:
:Breakeven number of employees (#) = ÷ ()
See also
*
Performance-related pay Performance-related pay or pay for performance, not to be confused with performance-related pay rise, is a salary or wages paid system based on positioning the individual, or team, on their pay band according to how well they perform. Car salesmen o ...
References
{{reflist
External links
MASB Official Website
Marketing analytics