What are the four elements of salesperson compensation? Give an example to show how these elements motivate salespeople in different situations

Question

What will be an ideal response?

Answer 1

Compensation consists of four elements: a fixed amount, a variable amount, expenses, and fringe benefits. The fixed amount, usually a salary, gives the salesperson some stable income. The variable amount, which might be commissions or bonuses based on sales performance, rewards the salesperson for greater effort and success. Management must determine what mix of these compensation elements makes the most sense for each sales job. A sales-force compensation plan can both motivate salespeople and direct their activities. Compensation should direct the sales force toward activities that are consistent with the overall sales-force and marketing objectives. For example, if the strategy is to acquire new business, grow rapidly, and gain market share, the compensation plan might include a larger commission component, coupled with a new-account bonus to encourage high sales performance and new account development. In contrast, if the goal is to maximize current account profitability, the compensation plan might contain a larger base-salary component with additional incentives for current account sales or customer satisfaction.