Introduction and Thesis:
Paying on commission is the way in which most employers compensate their salespeople. Under commission arrangements, salespeople receive an agreed upon percentage of revenue brought in by their sales. This percentage often varies from product to product. Ultimately, these plans reward employees directly for their performance. The more they sell, the more money they make. Common commission salary jobs include selling real estate, automobiles, technology systems, and retail. Many employers believe that commission motivates salespeople to work harder, which in turn, creates higher profit margins. However, this is a common misconception. Sales commissions actually foster negative behaviors and emphasize short-term outcomes, encourage salespeople to focus on themselves rather than the goals of the company, and promote unproductive competition. In order to address the problem, businesspeople need to understand the different types of commission, the changes throughout history that have made commission sales irrelevant, analyze the reasons why companies should eliminate sales commissions all together, and incorporate a replacement compensation strategy.
Types of Commission:
The two main types of commission sales plans are very different. The first is a “commission only”
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Daniel Pink, the author of To Sell Is Human: The Surprising Truth About Moving Others, set out to prove whether or not this was still true. He sent out survey asking the question, “When you think of ‘sales’ or ‘selling,’ what’s the first word that comes to mind?” He then looked at the responses and ranked them by the frequency in which people used them. The results provided some insights into the perceptions people have of salespeople. For example, the most common adjectives used were the words “pushy,” “yuck,” “ugh,” “hard,” “difficult,” “annoying,” “sleazy,” “slimy,” and
Sales reps salary in the first year is 70,000 and commission is capped until, they exceed the sales revenue in $70,000. Anything over $70,000 in sales Reps will receive 10 % commission on all sales life, disability, and Long-term care. The reasoning behind the $70,000 salary is Dan Price the CEO of Gravity payments decided to pay all of his employees $70,000 based on a 2010 Princeton study that basically says if you make less than $70,000 there will be compromises in your life that will effect your work productivity and positivity almost every single day (Weise, 2015, para. 12). $70,000 is a healthy amount of income for these reps, but it is also their sales quota as well. To reach that quota reps will be working long hours from 7am to 5pm or later based on
At nine fifteen there was a sales meeting, sales associates meet to discuss sales calls and sales revenue. Associates talk about different venues to sell to, states commission and also talk about different companies and corporation they sell to or try to sell to. Each sales associate spends about three to four minutes each discussing sales about previous week, commissions ranging from $40.00 to $8000.00.
A strong way to motivate a sales person is to tie their work performance directly with their compensation. For the sales organization I encourage a lower base salary with sliding scale commission structure that will drive for results targeting healthy margins. This type of sales structure is low risk for companies as compensation is directly linked to profitable sales. This Performance-Based Pay as Lam explains is also consistent with what Vroom calls the expectancy theory (2014, pg. 164). Here we understand that these extrinsic motivators of finical rewards are key drivers for sales representatives. With commissions structures clearly identified, the sales reps know what compensation they will receive ahead of time and this is what Lam (2014) identifies as incentive pay. For the sales leaders, I also recommend that the 1/3 performance reward should be linked to the sales success of the their direct teams, 1/3 should be linked to the PBIT of their department helping to control costs, and the final 1/3 should be based on the employee retention. I personally believe that all mangers should have an element of their performance rewards tied to employee retention, as this would drive better behaviours of our leaders to care, coach and train our employees for success. This type of leadership is known as transformational leadership where the leader influences, inspires, challenges, and listens to the employee. This helps to build trust and elevate both the leader and employee to a higher level of values and motivation (Lam 2014, pg.
Murphy, B. (1999). “Personality wins the day”: Death of a Salesman and popular sales advice literature. South Atlantic Review, 64(1), 1-10. Retrieved from http://www.jstor.org/stable/3201741
Personal selling will be measured in both qualitative and quantitative terms. Salespersons will have to fill reports regarding the interlocutors behaviour and product knowledge.
A high commission rate won’t matter if your sales figures are inconsistent at best and nonexistent at worst. If that is ...
People make purchases on the basis of emotion rather than logic. I believe out of my experience that people decide to buy something not because it serves them a purpose but because it feels right to them. After this first stage of buying I know for sure that people start to think of logic to justify their decision to themselves. So it becomes extremely important for a salesperson to make an emotional connection between their prospects and themselves. I make sure that every time I have a prospect I will make a personal connection with that particular prospect. The whole idea behind it is used to generate an interest that touches them internally. This way I made sure that my time is not wasted and I am able to sell more over a selling spree. Therefore, it becomes extremely important for you as a salesperson to close deals on the basis of the emotions rather than selling with logic.
The sales incentive plan was a critical part of G.E.’s sales force plan. Each salesman had a portion of his earnings dependent on his performance with respect to quota as well as Barr being awarded a bonus based on the sales performance of his district.
"We Are All Salesmen Now." The Economist. The Economist Newspaper, 17 Mar. 2012. Web. 09 May 2014.
Cooke, EF 1999 'Control and Motivation in Sales Management through the Compensation Plan', Journal of Marketing Theory and Practice, vol. 7, no. 1, pp. 80-83.
Experienced sales professionals are adept at answering common interview questions; they are skilled in the art of selling products and services, and also authorities at selling themselves. If you want to go beyond the surface, uncover the applicant's true identity, and evaluate their behavioral or soft skills, ask a few out of the box, unconventional questions. The answers may surprise you and
Corporations are looking for new ways to improve employee performance as well as remain competitive. Pay for performance is one method some businesses are utilizing to improve employee performance. Performance-based compensation exists when compensation is tied directly to that portion of an individual’s performance that can be effectively measured. There are a number of ways in which this may be accomplished and a number of examples as well how it is applied. One of the oldest examples is taken from the ancient Egyptians, where slaves working in the pyramids were given bread for superior performance. Payment of commission for sales production is one of the methods used today.
Most people who touched on the topic sales have received a hefty dose of a freaking metaphor. More specifically, sales funnel.
The motivational impact may vary, but those sales people driven by income tend to go after more prospects and work more deligently to get sales if pay is connected to success” (Kokemuller n.d paragraph 2). Two, managers can effectively control labor costs or ensure optimized selling efficiency by only paying workers for the results that they provide” (Kokemuller, n.d paragraph 3). Three, payroll planning: “commission pay can benefit your business because it means your payroll costs are largely tied to the business you receive” (Kokemuller, n.d paragraph 2). The disadvantages are one, uneasiness and discomfort; “the uncertainty with commission pay can lead to budget challenges, especially if you sell on account to buyers. If you pay commissions shortly after the purchase but don’t collect payments for an extended period, you have a lack of alignment in revenue and compensation. Some salespeople also struggle with the uncertainty of a commission plan” (Kokemuller n.d paragraph 4). Two, there are no financial guarantees at all: “if your own straight commission and you sell nothing, you earn nothing. Zero sales means no pay check and low sales means a very small paycheck” (Rambauskas, 2010 paragraph 19). Three, questionable security: “unlike a regular employee, you won’t have any severance pay or other
A sales manager has many responsibilities such as spreading product to customers, setting sales areas, goals, and analyzing sales data (“Sales Manager” What’s para. 1). Although a sales manager performs many duties, people in this position will also set a sales goal for the year, and will build a sales outlook on what they will do in the upcoming years (“Sales Manager” Sokanu para. 1).A person in this position will also manage where the goods and products their company will be distributing by giving certain sales area where a salesman will work and sell the product (“Sales Manager” Sokanu para. 2). During work time, a sales manager may be asked to hire and train a new salesman added to his team (“Sales Manager” Sokanu para. 3). Occasionally, a sales manager will interpret sales statistics in a specific area when looking where to assign certain salesman to a sales territory (“Sales Manager” Sokanu pa...