TLFeBOOK in Software

Generator Code 128B in Software TLFeBOOK

and custom furniture, a multivolume encyclopedia was traditionally a significant purchase The company s authorized in-home sales agents sold within exclusive territories The company provided no other channel to buy the product The company was loyal to its agents to a fault As parents became more sophisticated, the rise of mega bookstores offering multivolume encyclopedias occurred New competitors entered the market including CD encyclopedias, and the in-house sales agents became a sales coverage liability Long past the point of obvious need for change, the company abandoned its use of a single sales channel, almost too late Preferred Solution: monitor sales coverage models actively Preclude sales channel obsolescence by moving quickly to keep sales personnel aligned with buyer populations

The promise of customer relationship management (CRM) is to provide a single-technology platform for tracking and managing the sales processWith a common technology platform, CRM offers the opportunity for assigning and managing elements of the sales process continuum to divergent parties while successfully keeping track of all customer interactions In this respect, CRM can alter sales job content As a company shifts parts of the sales process to other resources, what role does the salesperson perform Remember, the definition of this revised job role is the starting point for effective sales compensation design

Summary

Sales compensation works as part of a complex management process Look to job content as the source for designing effective sales compensation plans Locate the point of persuasion and reward the salesperson for making a difference that is where sales compensation belongs

In this chapter, we will review key sales compensation fundamentals First, we will review variable compensation models and then examine why sales compensation is unique Next, we will discuss the difference between income producers and sales representatives Lastly, we will examine sales compensation design elements

Figure 2-1 depicts four different types of common variable compensation models The horizontal line reflects the target total cash compensation (TTCC) for the jobWe depict the base salary amount as dark shading while variable dollars have no shading Note that the first two variable compensation methods Gainsharing and Add-on have a full base salary with no variable pay below TTCC In the remaining two types Management Bonus and Sales Compensation the base salary amount is less than the TTCC amountWe refer to this difference as the target incentive or the at-risk dollars The characteristics and application of these four common pay systems differ from one another

Gainsharing: Corporate gainsharing plans help drive overall corporate success by tying payouts to corporate results Gainsharing plans have no pay at risk and therefore present no downside cost to the employee Most corporate gainsharing plans tie payouts to a percentage of corporate revenue or profit In this manner, management shares the incremental gain with employees on a prespecified proportional basis Sometimes local management will use a gainsharing plan to help boost productivity Generally, all employees participate in the gainsharing plan with no restriction on the number of employees who can receive a payout Normally, participants earn no

payout unless the company or unit reaches its stated goal Gainsharing plans target between 3 and 8 percent of base salary for payout purposes, although this number varies by company and wage inflation trends These programs tend to surge in popularity every 10 to 15 years Gainsharing plans have a mixed history of success The most successful programs succeed as a result of high-level commitment by corporate leadership Unfortunately, gainsharing plans fail when participants view the program as an entitlement An entitlement perspective produces the following results: Payouts in good years garner only modest satisfaction, while no payouts in bad years produce significant dissatisfaction

Add-on programs: Management uses add-on pay plans in a variety of circumstances While gainsharing plans tend to be all-inclusive, add-on plans target specific work units, jobs, or people Add-on plans provide a target dollar earning or a target percentage of base salary for accomplishment of preestablished goals Some add-on plans are permanent and ongoing, for example, 10 percent of base salary paid to the most productive top 10 percent of customer service representatives Other add-on plans serve short-term purposes such as contests and special program incentive funds (SPIFs) They fit numerous situations and provide additional pay for individual or unit performance Payouts occur only for above-goal performance