Sales Management: A Global Perspective

• Compensation in the global market is an extremely important managerial area
• This is because the compensation plan:
– Helps attract potential salespersons
– Impacts a salesperson’s motivation
– Is a determinant of status and value
– Determines lifestyle and purchasing power

• Compensation package is complex and affected by multiple forces:
– A balance between company policies and country-specific elements
– Total compensation package includes financial
• Salary, commission, bonus, stock options, benefits
– and non-financial incentives
• Awards, recognition, vacation, and promotion

• Hard to compare compensation plans because of their differences
– Lower salary, but higher deferred components
– Cannot simply transfer a compensation plan from one culture to another
• What works in one culture will not work in another!
– Compensation should motivate sales force to accomplish goals set by management
• Compensation may be changed to meet firm goals

• Salesperson paid a set amount of money based upon hours or days worked
– Often adopted when salesperson must devote significant amounts of time to other duties
• Market research, customer service, administration
– Simple to administer by sales manager
– But, no direct link between performance and reward!
• More commonly used in Europe and may be difficult to change by global sales managers

• Adopted by performance-oriented firms that pay salesperson for their achievements
– Each person is paid a percentage of their total sales
• Easy to evaluate performance
• Plans encompass an element of insecurity
• Not believed acceptable in some cultures, like EU
• Some evidence of acceptance in Japan
• Can lead salesperson to shirk duties or pressure customers to buy

• The combination plan is the most popular
– Employed by more than 80% of US firms
– May appear in many forms:
• Salary, commission, individual and group bonuses
– Basic security bestowed by set salary
– Motivation introduced by commission/bonus
• Combination plans more time consuming for sales managers to oversee

• Major dilemma – hire the best salesperson for the lowest possible salary. Other dilemmas include:
– Pay at, below or above market salaries?
– Setting a cap on total pay?
– Assigning lucrative sales territories?
– Team vs. individual incentives?
– Frequency of paying commission?
– Pay discrimination?

• What are the advantages of each pay plan?
The disadvantages?
• Which pay plan would work best for a software firm that is a market leader?

• Sales contests are short-term incentive programs implemented to motivate salespersons to achieve specific goals or activities
• For sales contests to be successful:
– Objectives must be specific and clearly defined
– Contest theme must be exciting and clearly communicated
– Each salespersons must believe they can win
– Awards must be attractive to participants
– Contest must be promoted and managed properly

• Contest Objectives
– To increase total and product sales most common
– Sales force must be given sufficient time
– All contest information and rules must be clear
• Theme
– Contests receive a theme to create excitement
• Chance of winning
– Compete against self, others, or as a team?
• In U.S. salesperson has about a 40% chance of winning

• Sales contests can offer many types of reward in the form of:
– Cash, prizes, or travel
– Perceived value very important as it must be of sufficient value to motivate additional effort
• Promotion of contest important
– Launched as a special event with handouts
– Large scorecards to communicate progress
– Newsletter articles or interim prizes can keep motivation up

• A number of concerns have been raised about sales contests
– When not properly designed contests take a lot of managerial time to administer
– Improper contests can actually de-motivate
– Do sales contests generate additional sales?
– Should sales force be paid twice for doing job?
– If contests are for short-term, then why have a
“never-ending” sales contest?

• How might a sales contest motivate sales personnel to greater efforts?
• Does a sales contest take into consideration the needs of the buyer?
• Is it possible sales contests have become a part of the compensation system? If so, what does this tell us?

• Human needs require approaches other than compensation to remain satisfied
– Ability to grow
– Recognition programs
• Salesperson of the year, President’s Club
– Opportunity to travel
– Educational assistance

• Linked to salary in some ways
– Globally, firm may pay salesperson’s expenses to live overseas that include family
– Expatriate expenses are significant
• Expense plans include
– Unlimited
– Per diem
– Limited expense plan

• All legitimate expenses are reimbursed
• Plan has a number of advantages
– Communicates trust to the sales force
– Sales manager can focus on more important issues
– Salesperson cannot complain that resources not available to make sale
• Sales force must be given guidance and expenses must still be monitored to insure sound judgment
– Reimbursed expenses vary by country – e.g. entertainment and alcohol

• The salesperson is given a set amount of money for each day s/he is in the field
– For example, US$250 per day
• Budget can be set by multiplying rate times total days sales force expected to travel
• Single rate unlikely to work in all locales due to varying costs
• Sales manager must adjust per diem rates regularly as prices expand or contract

• The firm sets a maximum daily amount paid for each category of expense
– That is, US$125 for lodging, $50 for meals, $30 for auto rental, and $20 for miscellaneous
• Limits firm’s upper travel expense limit
• Must be updated and will vary by location
• When actual costs exceed plan, salesperson may try to save in some areas to meet expenses in other
• Salesperson’s attention may be diverted from client

• Is there a connection between the ethical practices of sales managers, regarding pay matters, and the ethical behavior of salespersons?
• What is the purpose of expense plans?
Compare and contrast the advantages and disadvantages of the three expense plans covered in this chapter

• Compensation plan helps attract and maintain quality sales force
– Compensation is culturally influenced
• Sales contests can provide short term motivation
– Must be properly planned and managed
• Expense plans important
– Cover legitimate expenses, but always remember that
Sales – Expenses = Profits
• Rules for sales force compensation, contests, and expenses must be simple and unambiguous!