Page 528 - Foundations of Marketing

Personal Selling and Sales Promotion | Chapter 17 495

Figure 17.2 Average Salaries for Sales Representatives

Base
Top-performing reps
$170,000 Bonus

Executives
$150,000

Mid-level reps
$100,000

Low-level reps
$75,000

*Average salary: $130,000

Source: Adapted from Joseph Kornik, What’s It All Worth? Sales and Marketing Management , May 2007, p. 29.

Sales compensation programs usually reimburse salespeople for selling expenses, pro-
vide some fringe benefits, and deliver the required compensation level. To achieve this, a
firm may use one or more of three basic compensation methods: straight salary, straight com-
mission, or a combination of the two. Table 17.2 lists the major characteristics, advantages,
and disadvantages of each method. In a straight salary compensation plan , salespeople are
paid a specified amount per time period, regardless of selling effort. This sum remains the
same until they receive a pay increase or decrease. Although this method is easy to admin-
ister and affords salespeople financial security, it provides little incentive for them to boost
selling efforts. In a straight commission compensation plan , salespeople’s compensation
is determined solely by sales for a given period. A commission may be based on a single
percentage of sales or on a sliding scale involving several sales levels and percentage rates
(e.g., sales under $ 500,000 a quarter would receive a smaller commission than sales over
$ 500,000 each quarter). Although this method motivates sales personnel to escalate their
selling efforts, it offers them little financial security, and it can be difficult for sales manag-
straight salary compensa-
ers to maintain control over the sales force. Many new salespeople indicate a reluctance to
tion plan Paying salespeople
accept the risks associated with straight commission. However, more experienced salespeo-
a specific amount per time
ple know this option can provide the greatest income potential. For these reasons, many firms period, regardless of selling
offer a combination compensation plan in which salespeople receive a fixed salary plus a effort
commission based on sales volume. Some combination programs require that a salesperson
straight commission
exceed a certain sales level before earning a commission; others offer commissions for any
compensation plan Paying
level of sales. salespeople according to the
When selecting a compensation method, sales management weighs the advantages and amount of their sales in a given
disadvantages listed in the table. Researchers have found that higher commissions are the most period
preferred reward, followed by pay increases, yet preferences on pay tend to vary, depending combination compensa-
26
upon the industry. The Container Store, which markets do-it-yourself organizing and stor- tion plan Paying salespeople
age products, prefers to pay its sales staff salaries that are 50 to 100 percent higher than those a fixed salary plus a commis-
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offered by rivals instead of basing pay on commission plans. sion based on sales volume

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