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Sales Compensation : Retaining your Sales People

Intense competition from the global market forces the companies to discover new innovative ways of capturing the market. This requires the support and aid of eminent sales force who are experts in their field. For the retention of the existing key players and attracting the cream, the management has to provide attractive pay package to motivate the employees to perform better.

The pay package must be attractive and high enough to induce better action. The company must follow the trend set by the market before introducing the variations in the compensation plan. The sales representative must be well informed about the compensation program that the company wishes to follow and clarify any ambiguities in the matter. The company must select the criteria for payment on the basis of the type of the business, the sales territory, the current market penetration, etc. As the sales representatives have a direct hand in the profitability of the concern, the pay system must be capable of directing the actions of these people to the attainment of the company objectives. The effort and pains taken by the employee must be well rewarded.

Demarcation of the role to be performed by the sales people must be initially performed. They might be asked to sell the product or service through direct contact with the customer. But in other cases the employee will be asked to work for a better relationship with the customer through getting orders, verifying the progress in the delivery of the product, clearing the customer apprehensions related to the product or service that is to be delivered, etc.

In most cases the management remunerates the employee by paying commission on the revenue achieved over a basic pay. But in certain circumstances the pay would be in the form of a commission on the gross profit. However this has certain disadvantages. If the commission is paid on a monthly basis, the employee will be concentrating his efforts for gaining business for a shorter term which can yield him his income on its implementation. This can lead to the loss of business on the long term point of the business wherein a delay in the closing of the deal is inevitable.

When the commission is paid on the gross margin of the product it fails to motivate the employee as once the sales deal is closed, with the matters beyond his personal control, a loss on the margin results in the demotivation of the employee effort. For example, with the margin hit by the dollar rate, a lower income may fail to hold the employee within the business.

Before defining the remuneration to the sales representative, the company must analyse the degree of market penetration that can be made in the employee’s territory. Some areas of business or territory are very difficult to penetrate which could be on account of the past performances with the client or on account of the presence of competitors. A uniform rate of commission based on the revenue might fail to retain the employee within the entity as the employees in the easily penetrable market succeed in getting better income. The targets to be achieved must be decided after taking into consideration the level of penetration possible and the current market segment. The targets must be realistic and attainable if to inspire the employee into action. If the sales person sticks to a place where he is comfortable in a penetrable market and if the company follows a fixed method of remuneration, this can end up in a higher rates of people erosion in the entity.

Some companies reward the sales people by sponsoring a vacation as a token of gratitude. The sales members are also given the membership in premium clubs which besides providing a platform to meet potential clients, help in employee relaxation. A policy of remunerating the team who display excellence in performance adds as a motivation.

The remuneration to the members in the sale, in short, must be attractive to the employee along with making significant contributions to the business.

Comments Listing
Posted: 04/05/2011 16:54:21

I agree that you must have a great sales compensation program in order to recruit and keep a well qualified sales team. For someone who is just starting their own small business and is looking to create their own sales team, what sort of personality traits would indicate a successful salesman?

Annette C.
Sales Compensation

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