12 Motivation - Bob McDonald
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Transcript 12 Motivation - Bob McDonald
Sales Management 12
Motivation and Rewards
Motivation: Intrinsic vs.
Extrinsic
Intrinsic
When doing
the job is
inherently
motivating
Extrinsic
When rewards
such as pay
and formal
recognition act
as motivators
Motivation
Types of Sales Force Rewards
Intrinsic
Sense of
Accomplishment
Extrinsic
Pay
Job security
Personal Growth
Opportunities
Promotion
Recognition
Motivation
Aptitude:
Enduring personal characteristics that
determine individual’s overall ability to
perform a sales job
Variables
Intelligence
Cognitive Abilities
Verbal Intelligence
Math Abilities
Sales Aptitude
Personality
Enduring personal traits that reflect an
individual’s consistent reactions to
situations encountered in the
environment.
Variables
Responsibility
Dominance
Sociability
Self-Esteem
Creativity/Flexibility
Need for Achievement/Intrinsic Rewards
Need for Power/Extrinsic Rewards
Skill
Individual’s learned proficiency at
performing necessary tasks.
NB: Skills can be trained!
Variables
Vocational skills
Sales Presentation skills
Interpersonal skills
General Management
Vocational Esteem
Sales Role Perceptions I
Role Accuracy:
Role Conflict:
Role Ambiguity:
Knowing what is expected
Incompatible demands from different
role partners (firm, boss, customer, family)
Believe that they don’t know what
is expected, how they should meet expectations, or how
they will be evaluated & rewarded
Sales Role Perceptions II:
Consequences
Role Inaccuracy, Conflict, and Ambiguity
lead to:
Dissatisfaction
Mental Anxiety
Salesperson Turnover
Absenteeism
Poor Job Performance
Sales Role Perceptions III:
Improvement
Close (not stifling) supervision
Training
Salesperson experience
Include salesperson when establishing
expectations
Sales Quotas
Goals
assigned to salespeople for
specific time period.
Three
Purposes
Motivate
salespeople
Evaluating performance
Controlling salespeople’s effort
Problems with Quotas
Not apples/apples
Different levels of difficulty in different territories
May be tough to apply to teams
Can be expensive to establish
If not done well, may focus efforts too
much in one area.
Characteristics of Good
Quotas
Attainable
Motivation
requires reasonable
chance of attainment
Easy to understand
Too complex suspicion and mistrust
Complete
Cover all criteria to avoid imbalance
Types of Quotas
Volume
Activity
Units, Dollars, Points
# cold calls, proposals, displays, service
calls, meetings, collections, demonstrations
Financial
Expenses, Gross Margins, Net Profit
How to Set Quotas
Volume
History
Territory Potential
Activity
Sales reps and managers; sales reports;
research
Financial
Based on financial goals of firm
Adjust to meet needs
Performance Criteria
Total Sales Volume; Increase over last year.
Percentage of Quota Attainment.
Selling Expenses; Decrease from last year.
Profitability of sales; Increase over last year
New Accounts
Improved administrative duties (paperwork)
Improvements in customer service
Rewards I
Money: salary, bonus, commission
Promotion
Non-financial: (Contests, travel, prizes, etc.)
Special Recognition (clubs, awards, etc.)
Job security
Rewards II
Feeling of self-fulfillment
Feeling of worthwhile accomplishment
Opportunity for personal growth and
development
Opportunity for independent
thought/action
Motivation
Motivation leads to effort.
Effort leads to performance.
What leads to motivation?
Motivation
Expectancy Theory
Expectancy
No
Yes
Instrumentality
No
Yes
High
Valence
Motivation
Low
Unmotivated
Expectancy Theory
Expectation
Instrumentality
Outcome Reward
Valence
Effort Outcome
Reward has Value
Must have all 3 to be motivated!
Expectation
Must expect that
effort will lead to
performance outcome
Practice ≠ Jimi
Studying = Knowledge
Instrumentality
Results must be
instrumental in
achieving reward
Valence
Low Valence
High Valence
Expectancy Theory in Sales
If I make ten cold calls/day, I will get 2-3
new customers per week, leading to higher
sales.
If I get 2-3 new customers/week and have
higher sales, I will make more
commi$$ion$.
I like money. I want to make more, so I
am motivated to make the cold calls.
Note: People have different values, so they are
motivated by different rewards.
Compensation and Incentive Programs
Major Issues
People have different personal characteristics
and different valances for various kinds of
rewards.
Ideally want to have unique compensation
program for each person.
It ain’t gonna happ’n!!!!
Too complex to administer
Question of fairness
Changes over time
Need to update continuously
Designing a Compensation
Plan
Compensation plan is intended to have the
sales force do what management wants,
how it wants it, and within the desired time.
First, need to decide what it is that
management wants.
Assessing Situation/Objectives
How are salespeople allocating time?
How good are the current outcomes?
Job Analysis
Recruitment and selection
Company records
Company marketing & sales objectives
Account management
What do you reward?
Performance outcomes
Behaviors
Need to align the sales forces’
objectives with that of the company.
Can strive to achieve multiple
objectives, but not too many at once.
Use mixed-incentive plan
Behaviors & Activities to Reward
Higher $ volume sales
Increase sales of more
profitable items
Push new products
Higher penetration:
products, customers
Larger average order
size
New customers
Service/Maintain
existing customers
Retain customers
Encourage team
cooperation
Balanced (full-line)
selling
Lower sales costs
Increase calls
Prompt paperwork
Valance
Need to determine what drives the
current sales force at this time.
Survey
Conjoint analysis
Managers don’t necessarily have an
accurate perception of their
salespeople’s valances for different
rewards.
Appropriate Compensation Mix
Determine gross amount necessary to
attract, retain, and motivate right type
of salespeople.
Then allocate to salary, commission,
bonus, benefits, prizes.
Varies with type of sales job, size of
company and sales force, and policies.
What do competitors pay?
Pay low, high, or average?
Dangers of Paying Too Much
Increases selling costs lowers profits
Can cause resentment and low morale
among non-sales employees and
managers
Not necessarily a motivator
Maslow
Prospect Theory
Dangers of Paying Too Little
You get what you pay for.
Attract only weak people
Leads to poor results
High turnover, especially among good
people. Only the less capable will stay.
Leads to higher costs for recruiting, and
training.
Lost sales
Managers always recruiting and hiring
Compensation Components
1.
Commission
2.
Salary
3.
Incentive/Bonus
4.
Benefits
5.
Sales Contests
Compensation: Commission
Payment based on short-term results
Usually a % of $ sales, or $/volume
Direct link between performance and
payment
Motivates high level of selling effort
Encourages sales success
Compensation: Salary
Fixed sum of money paid at set intervals
How most of the country is paid
Function of experience, competence,
tenure, past performance
Motivate effort on non-sales activities
Adjust for differences in territory potential
Motivate investment in long-term sale
Compensation: Incentive/Bonus
Additional commission tied to sales or
profitability (e.g. + 1% after
$2,000,000)
Bonus for meeting or exceeding target
Direct effort to strategic objectives
Provide additional rewards to top
performers
Encourage sales success
Compensation: Sales Contests
Encourage extra effort at specific shortterm objectives
Can offer:
Cash
Merchandise (TV, Car, Shopping, Golf, Dinner)
Travel (Can also be a team building event)
Offer multiple opportunities for prizes
Needs to be achievable to be motivating
Cannot be too easy, or won’t be motivating
Compensation: Benefits
Health insurance, sometimes disability and
life insurance
Pension plan
Not everyone offers, especially if contract
(real estate agent) or manufacturer’s rep
Salespeople are then forced to buy plans
through professional associations
Provides security, especially important to
people with families, or getting older
Compensation Plans
Straight Salary
Straight Commission
Combination Plan (most common)
Straight Salary Advantages
If non-short-term sales goals are
important
If difficult to measure individual’s
contribution to the sales effort
(missionary, team selling)
Provide salespeople with steady income
Easy to manage and administer
Straight Salary Disadvantages
$ not tied to performance
Lowers/clouds instrumentality
No motivation to perform
Straight Commission Advantages
Direct link between selling and reward
Motivating
Inherently fair: rewards to best
performers
Usually easy to compute/administer
Vary directly with sales volume & $
Straight Commission Disadvantages
Lose control over sales force
No motivation for non-selling activities
Milk existing customers, no service
Unstable income, tough to predict
Can establish draw, but may be deep hole
Combination Plans
Most common form
Smaller commissions, but with base salary
Can also offer bonuses for reaching target
(e.g. % of quota)
Can manipulate (not often, or too much)
to motivate performance or activities
Gives salespeople both security and
incentive to work hard and perform
Other Issues
Appropriate size of incentive/base (25%+)
Incentive Ceiling: Arguments on both sides
When is a sale a sale?: order acceptance, allowances
or returns, shipment, payment?
Group incentive? Allocation? Can pay both
group and individual components: Linkages
How often to pay incentive? Monthly (52%),
Quarterly (24%), or Annually (21%)
Sales Contests Criteria for Success
Clearly define and specify the objectives
Have an exciting theme
Have a reasonable probability that
most/all salespeople can win a prize.
Attractive prizes
Promotion and follow through
Sales Contests Disadvantages
Borrowed sales
Hurt cohesiveness & morale
Necessary?
Non-Financial Rewards
Promotion
Career Development
Valence declines with age
Add perquisites (perks) with position:
Car
Better working conditions (hours, facility)
Compensation, Profit-sharing