COMPENSATING SALES

FORCE

Dr. Sanjeev Prashar

Sales is one of the few jobs where you earn
your money – every day.
 COMPENSATION IS MORE THAN
MONEY
Any type of sales organization can reward sales
performance in three fundamental and interrelated
ways:
1. Direct financial rewards.
2. Career advancement and personal development
opportunities.
3. Nonfinancial compensation.
Why is it important?
• Sales activities are the life blood of most business

• Most misunderstood aspects of running a business

• Tricky – right mix of salary and commissions

• Helps attract potential salespersons

• Sales compensation plan motivates the

sales force which in turn drives the sales

• Also a determinant of status and value

Why proper sales compensation ?
To manage
To retain the
human
sales force
resources
effectively

Attract & Compliance

motivate sales with
force Corporate
Effective Sales Strategy
Compensation
Programme
PURPOSES OF COMPENSATION

• Connect individual with organization.

• Influence work behavior.
• Organizational choice.
• Influence satisfaction.
• Feedback.
• Reinforcement.
 What does pay mean?
For the shareholder- For the employee
• All the costs the • Salary
shareholder incurs to • Benefits
retain an • Money or benefits to
employee(excluding the recognize performance
costs the employee
needs to incur to run • Money or benefits that
the business) help create ownership
 The Equation…
Systems / Measures
Minimum Cost of •Budgets and Industry, geographic
people benchmarks

Delivering •Companies goals cascading to every

Value to Maximum
employee
Shareholder Performance
•Capability and delivery consistency
Maximum Future measurements
Potential
Solving the
Pay Problem •Organizations roles responsibilities and
Equitable pay pay

•Market Parity
Necessary
Creating differentiated •Pay for measured and visible
Value for the benefits performance – differentiation is key –
share holder should extend to development and
Recognition opportunity

•Ways to create belonging and

Ownership opportunity
 The basis for pay
One gets paid for… Based on-
• Attitude + Behavior • Market parameters
+Skills + Competencies • Previous company pay
• Performance • Value the position
• Potential brings to the company
and the value the
company can derive out
of the person occupying
the position
 Compensation / Total Rewards
Common example Reward elements Definition

Intrinsic

Extrinsic – all
things to
which we can
assign a rupee
value
 Determining the basis of pay
potential
visible

Potential Skills Process

competency Behavior End Result
ability experience Result

Performance evaluation

Assessment
 Aims of the Compensation policy
• To recognise the value of a job vis-à-vis all other jobs
within the company.
• To maintain external parity by maintaining balance
with rates paid by similar companies (size, product,
philosophy).
• Ensuring stable earnings to deserving employees.
• To provide individuals a reasonable and practical
opportunity to reach their full earning potential.
• To encourage employees to use their initiative and
practice discretion.
• To encourage work of high quality.
Effects of Pay Dissatisfaction
Performance

P
a y Desire for
More Pay Absenteeism
Dissa
tisfa
ction

Psychological
Grievances
Withdrawal

Job
Job Stress,
Dissatisfaction Anxiety

Poor Mental
Turnover
Health
Individuals are satisfied with the rewards they
receive in the following terms:

• How much reward is actually received in

relation to how much was expected to be
received.
• How the rewards received compare with
what others received.
•Whether the rewards lead to other rewards.
• The level of extrinsic and intrinsic
satisfaction from the rewards.
• The value of different rewards.
 Sales Force Compensation
• A well designed sales compensation program
focuses on activities that support the
company's business objectives, and, in turn,
rewards the salespeople for their
contributions.
• Base salary, commissions, and incentives
typically make up the bulk of a salesperson's
compensation package, but the specifics vary
by industry.
A sales reward system is not the only means of
motivating salespeople, but it is the most
important.

Measuring sales performance but not properly

rewarding it severely limits the achievement level
for salespeople.
 The Concept of Compensation-An
Introduction
• Compensation can be divided into two
components:
• Direct compensation and
• Indirect compensation
• The direct compensation constitutes financial
remuneration, usually in cash
• Indirect component constitutes of PF, pension
schemes, medical and Health insurance, etc.
WHAT TO KEEP IN MIND?
• AGE
– Young
– Middle-aged / Old

• INDUSTRY TYPE
– Predictable products with short sales cycles
– Less predictable products with longer sales cycles

• COMPANY’S STAGE OF LIFE

– Start-up firms
– Settled firms
 WHAT TO KEEP IN MIND?
Motivation
The plan must motivate your sales force to high levels of performance

Equity
The plan must be fair and create relatively equal opportunities for earning
significant incomes

Profit
The business cannot give away too much

Ease of administration
Important to avoid creating an overly complicated plan that will be difficult to
administer.

Easy to understand
Sales people and all other employees have to be able to understand how the
plan works.
 WHAT TO KEEP IN MIND?
Reward
The plan must reward sales personnel in a manner that is consistent
with their production.

Unintended windfalls
Protection against paying for unearned sales (not associated with
effort of sales person) must be built into the plan.

Recruitment and Retention

The compensation plan has to be attractive enough to recruit and
retain top notch talent.

Longevity
A good sales compensation plan will weather large increases in sales
volume and be able to remain in place for long periods of time.
 LEARNINGS: Factors affecting sales
compensation programme
Age of Sales staff:

• Older sales representatives- More stability & less risk: Considerable salary
component

• Younger sales representatives- Willing to work on the edge/career

advancement: Considerable sales commissions

Industry Type:

• Highly predictable products & short sales cycles: Sales staff with a commission-
based compensation package
Ex: Retail, food service, insurance

• Less predictable products & longer sales cycles:

Ex: Technology, telecommunications, and consulting services.
 Factors affecting sales compensation
programme
Company’s Stage of Life
• Startup Companies - take some time for sales staff to develop contacts :
Compensated primarily by salary than by commission

• Mature/Growing companies- have leads & contacts : Considerable sales

commissions

Specific Requirements
• To attract aggressive, independent "hunters” - Pay 100% commission
• To attract more security-oriented "minders ” - Offer a large base salary
• They may not be as driven, but they may excel at service and building
relationships
 Factors affecting sales compensation
programme
Industry standards/ What competitors pay
• When an industry leader sets a certain pay scale, followers or less competitive
participants tend to emulate the leader's behaviour.
• Over time, industry pay norms develop.

External factors: Supply & Demand

• High growth industries, high skilled salesman :Pay levels escalate

Internal Factors: Industry & Company profitability

• High margin industries pay more
Compensation Structure-Influencing Factors
• Job Description
• Job evaluation
• Ability of the organisation to pay
• Supply and demand of labour (retention and acquisition
issues)
• The market rate prevailing at the time (equity issue)
• The cost of living
• Productivity
• How much are the trade unions able to bargain
• Managerial attitudes.
• Psychological and sociological factors
Dimensions determining a salesman’s
income
Features of a good Sales Compensation
Structure
• Provide a secure income
• Fit with the overall scheme of things
• Fair
• Not too complex, should be clear and easy to communicate
• Adjustable
• Must promote good sales profitability
• Focus on top 3-4 sales performance parameter
• Structured to promote consistency/improvement/staff retention
• Easy/Economical to administer
Features of a Compensation Plan
• Secure Income - The plan should provide a living
wage preferably in the form of a secure income.
• Fit with the overall scheme of things -The
Compensation plan should fit in with the
organization's overall motivational programme.
There should not be any conflict between other
motivational factors such as the intangible feeling
of belonging with the overall sales team.
• Fair - Plan should be based on equal pay for
equal work (performance). Sales personnel
should not be penalised for factors beyond
their control.
• Simplicity - A compensation plan should be
simple to understand and follow so that Sales
Executives can calculate their own earnings.
• Adjustments - A sales compensation plan
should adjust to changes in performance, as
and when that happens.
• Economical - Lastly, the compensation plan
should be economical to administer and
should support the overall objectives of an
organisation.
WHAT FORMS THE PACKAGE

• A compensation package that emphasizes salary over

commission will allow you to make greater demands on
your salespeople and how they spend their time.

• A pay package that emphasizes commissions will motivate

your salespeople to spend more time selling and booking
new orders rather than other work that won't result in new
sales.
WHAT FORMS THE PACKAGE
• Base Salaries
– Providing a base salary that assures salespeople a steady income is a good
idea. A guaranteed salary provides salespeople the comfort of knowing
that despite good and bad economies, streaks and slumps, they can
maintain their current lifestyle.

• Incentive Compensation
– The most common way to motivate and reward salespeople for closing big
deals or meeting goals is through bonuses and commission.

– Profit-sharing plans can be used too, but these reward team efforts, not
individual performance.

• Non-financial Incentives
– Awards, recognition, vacation and promotions
ETHICAL ISSUES IN COMPENSATION
• Hire the best salesperson for the lowest possible salary

• Pay at, below or above market salaries?

• Setting a cap on total pay?

• Assigning lucrative sales territories?

• Team vs. individual incentives?

• Frequency of paying commission?

 Devising A Sales Compensation Plan
• Define the Sale Job
• Consider the Company’s general Compensation Structure
 Simple ranking
 Classification or Grading
 Point System
 Factor – Comparison Method
 Job Evaluation and Sales position
• Compensation patterns in Community and Industry
• Determining the Compensation Level
• Provide for the Various Compensation Elements
• Special Company Needs and Problems
• Consult the Present Sales Force
• Reduce Tentative Plan to Writing and Pretest it
• Revise the Plan
• Implement the Plan and Provide for Follow-Up
 Sales compensation components
• Base Salary
• Periodic incentives tied to short-term goals
• Annual Incentives tied to longer-term sales
activities
• Commission-based incentives
• Perquisites to facilitate sales efforts
• Stock options
Typical Compensation Plans
TYPES OF COMPENSATION
3 types of Compensation Plans:

• Straight Salary

• Straight Commission

• Combination Plan
 Straight – Salary Plan
• Simplest form of compensation plan

• Sales personnel receive fixed sums at regular intervals.

• Most suitable when:

The job requires extensive missionary or educational work

Salespeople give technical and engineering advice to prospects or users

They do considerable sales promotion work.

Non-selling tasks take up most of the salesperson’s total time

• Also used for driver-salespeople involved in delivery of products.

 “Base Pay Only” Package
Characteristics
• representatives paid salaries, administered in
same manner as for other personnel
• sales results considered by using as a factor in
appraising performance of representatives
Advantages
• employees are paid on same basis as all others, precluding feeling
of “special treatment” or separatism often experienced
• income is reliable/predictable and costs are known in advance
• different types of sales representatives (technical assistants,
account servicers, etc.) can be utilized without producing large
income differences or “what’s in it for me” reactions
• promotes identification with company and simplifies reassignment
to different territories and product lines
• makes it easy to assign non-selling/missionary work

Disadvantages
• income is not tied to sales results, lessening motivation to sell
• encourages overemphasis on products easiest to sell
• best performers under-compensated relative to reps performing at
lower levels
• compensation costs are fixed and do not vary with revenues
Best Applications
• when selling process is long and involves multiple
contributors
• when support/missionary activity is significant portion
of job
• when personnel are rotated in and out of selling force
• when product features or other factors are responsible
for sale (only product available, market position
dominant, stable customer base, high barriers to
market entry, etc.)
• predominance of house accounts; other accounts are
“nice to have”
• when it is desirable to have costs fixed and known
 “Base Pay only”
Advantages Disadvantages

• Employees are paid on same • Income is not tied to sales results,

basis as all others, precluding lessening motivation to sell
feeling of “special treatment” or • Overemphasis on products easiest
separatism often experienced to sell
• Income is reliable/predictable • Best performers under-
and costs are known in advance compensated relative to reps
• Different types of sales performing at lower levels
representatives can be utilized • Compensation costs are fixed and
• Simplifies reassignment to do not vary with revenues
different territories and product
lines
• Easy to assign non-
selling/missionary work
 Straight – Commission Plan
 Determining the commission base is an important aspect of a straight commission
plan.

 The base is influenced by company selling policies and problems.

Drawing account method: a slight modification of the straight commission plan

 Separate accounts are established for each salesperson, to which commissions are
credited and against which periodic withdrawals are made.

 These accounts resemble salaries.

 Guaranteed drawing account plans to forestall quitting by overdrawn salespeople.

 “Variable Pay Only” Package
Characteristics
• no salary; may be a “draw” against future
commissions
• commission computed as percentages of
sales, gross profits, number of units, etc.,
according to a formula
Advantages
• easy to communicate and administer
• requires no forecasting
• commission can be varied by territory, product sold, new vs.
existing customer, etc.
• expense control; compensation level tied to results
• can be paid on any schedule (monthly, quarterly, annually)

Disadvantages
• no protection against excessive payments unless “cap” is used to
limit earnings
• no protection against loss of income during slow sales (“draw” may
provide short-term income continuity)
• rewards only sales, no credit for support activity or “investing in
the future”
• creates different set of pay practices and raises equity questions by
other personnel
Best Applications
• company feels no obligation to provide guaranteed
annual wage (may be seasonal product, part-time
personnel, etc.)
• “reps” or other non-employees are used as a sales
force
• high variability in income is acceptable (no concern
about supervisor/subordinate earnings relationships)
• there is no mobility between direct selling jobs and
other jobs in the organization
• there is a high variable market demand and/or
customer base
 “Variable Pay only”
Advantages

 Easy to communicate and administer

 Requires no forecasting
 Commission can be varied by territory, product sold, new vs. existing customer, etc.
 Expense control; compensation level tied to results
 Can be paid on any schedule (monthly, quarterly, annually)

Disadvantages

 No protection against excessive payments unless “cap” is used to limit earnings

 No protection against loss of income during slow sales (“draw” may provide short-
term income continuity)
 Rewards only sales, no credit for support activity or “investing in the future”
 Creates different set of pay practices and raises equity questions by other personnel
 Combination Salary & Commission Plan

 Comprises of salary + commission.

 Such plans are developed to capture the advantages and offset the disadvantages of
both the salary and commission systems.

 Main objective of this plan is better control and motivation

 Skillful adjustment of salary and commission is required to in order to see results.

 Combination Salary & Commission Plan

Advantages:

 Sales personnel have both security of stable income and stimulus of direct financial
incentive.

 Management has both financial control over sales activities and the

apparatus to motivate sales efforts

 Greater flexibility for adjustment to changing conditions.

 Development of cooperative spirit between salesforce and the company.

 Combination Salary & Commission Plan

Disadvantages:

 Clerical costs are higher than salary or commission plans.

 The plan may become complicated and not understood by the sales personnel.

 The ratio of base salary to commission is quite risky.

 Mix Of Base and Variable
Compensation
• The base/variable combination approach can
come in an enormous variety of flavors
• Variable component can take the form of
commissions, incentives, bonus etc.
– Commissions vary income in direct relationship to
sales volume
– Incentives are rewards based on pre-determined
criteria and standards
– Bonus is determined after the fact, often on a
discretionary basis, or for specific activities
Advantages

Requires certain level of performance (to earn salary) before income

begins to vary and costs increase
Quotas/targets can be set at different levels by territory and can be
individual or group targets
Can be integrated with sales management and support compensation
programs to produce equitable pay relationships

Disadvantages

Good forecasting is necessary (must determine what level of sales

“earns” salary)
Salary portion of compensation is a fixed cost; if set too high
rewards below standard performance
Fixed costs (salaries) reduce funds available to discriminate between
high and low levels of performance
 Compensation plan design
alternatives
• Straight Salary plans
– Highly Technical Sales
– Extremely large infrequent sales
– Pull through Sales
– Volatile/ Unpredictable marketplace
– New or transitioning salespeople
 “Combination of Base Pay Plus
Variable Pay” Package
Characteristics
• salary only is paid until some quota or target
sales figure is reached
• beyond the target, total direct earnings
increase, according to a pre-determined
formula
 Mix Of Base and Variable
Compensation
• The base/variable combination approach can
come in an enormous variety of flavors
• Variable component can take the form of
commissions, incentives, bonus etc.
– Commissions vary income in direct relationship to
sales volume
– Incentives are rewards based on pre-determined
criteria and standards
– Bonus is determined after the fact, often on a
discretionary basis, or for specific activities
Advantages
• requires certain level of performance (to earn salary) before income
begins to vary and costs increase
• quotas/targets can be set at different levels by territory and can be
individual or group targets
• can be integrated with sales management and support
compensation programs to produce equitable pay relationships

Disadvantages
• good forecasting is necessary (must determine what level of sales
“earns” salary)
• salary portion of compensation is a fixed cost; if set too high
rewards below standard performance
• fixed costs (salaries) reduce funds available to discriminate
between high and low levels of performance
Best Applications
• relationship of compensation with other
personnel is important (considerable mobility
in and out of sales jobs)
• significant portion of job is sales support
(need to elicit multiple behaviors)
• substantial amount of income must be
guaranteed in order to attract and retain
personnel
 Compensation plan design
alternatives cont..
• Straight Commission plans
• Combination of Salary and Incentive Plan
• Other Benefits
– Bonuses
– Fringe Benefits
 Compensation plan design
alternatives cont..
• Salary plus Commission Plan
• Bonus Plan
• Sales Incentive Plans
Need of a good compensation plan:
Designing a good Compensation
Programme
It should equitably and consistently recognize and compensate employees
for superior performance. Ability to use the bonus as a motivational tool.

It must direct individual behaviour toward achieving common company

goals.

It should be designed to affect favourable change within your

organization.

It should allow a substantial portion of compensation to be a variable cost.

It should have some degree of flexibility in order to meet the unique needs
of both your company and employees.
 Process Involved
Define the Sales Job

Consider the Company’s General

Compensation Structure

Consider Compensation Patterns in

Community and Industry

Determine Compensation Level

Provide for the various Compensation

Elements
 Formal Compensation Process

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Performance Policy
Common measures of performance

• Sales Volume
• Customer Satisfaction
• Value – based Model
• Net profit basis
– Increasing sales revenue( to drive the top-line
revenue item)
– Reducing sales expenses( to reduce one of the
cost line items)
– Selling a different mix of products ( focussing
on those products with a higher profit
contribution)
 Process Involved
Special company needs and problems

Consult the Present Sales Force

Reduce Tentative Plan to Writing and

Pretest it

Revise the Plan

Implement the Plan and Provide for

follow-up
Process Involved:

1. Define the Sales Job:

• The first step is to re-examine the nature of the sales job. Up to date written job descriptions
are the logical way to start.
• If there are no written sales job descriptions, they are prepared.
• Sales department objectives are analyzed for their effect on the salesperson’s job.
• Impact of sales-related marketing policies is determined.

2. Consider the Company’s General Compensation Structure:

• Most companies use job evaluation systems to determine the relative value of individual jobs.
• Job Evaluation Systems - It is an orderly approach based on judgement. It focuses on the jobs,
without considering the ability or personality of individuals who do the work.
Job Evaluation Methods

1. Simple Ranking Method

• According to this method, jobs are arranged from highest to lowest, in order of their value or merit to
the organization.
• The jobs are examined as a whole rather than on the basis of important factors in the job
Table: Array of Jobs according to the Ranking Method
Rank Monthly salaries
1. Accountant Rs 3,000
2. Accounts clerk Rs 1,800
3. Purchase assistant Rs 1,700
4. Machine-operator Rs 1,400
5. Typist Rs 900
6. Office boy Rs 600

2. Classification or Grading Method

• According to this method, a predetermined number of job groups or job classes are established and
jobs are assigned to these classifications.
• This method places groups of jobs into job classes or job grades
Job Evaluation Methods ...contd.

Following is a brief description of such a classification in an office.

(a) Class I - Executives: Office manager, Deputy office manager, Office superintendent,
Departmental supervisor, etc.
(b) Class II - Skilled workers: Purchasing assistant, Cashier, Receipts clerk, etc.
(c) Class III - Semiskilled workers: Steno typists, Machine-operators, Switchboard operators,
etc.
(d) Class IV - Semiskilled workers: Daftaris, File clerks, Office boys, etc.

3. Factor Comparison Method

• Under this method, instead of ranking complete jobs, each job is ranked according to a
series of factors.
• These factors include mental effort, physical effort, skill needed, supervisory
responsibility, working conditions and other relevant factors (for instance, know-how,
problem solving abilities, accountability, etc.).
• Pay will be assigned in this method by comparing the weights of the factors required for
each job
4. Point method
Here, jobs are expressed in terms of key factors.
Points are assigned to each factor after prioritizing each factor in the order of
importance.
The points are summed up to determine the wage rate for the job.

Table: Point Values to Factors along a Scale

Point values for Degrees Total
Factor 1 2 3 4 5
Skill 10 20 30 40 50 150
Physical effort 8 16 24 32 40 120
Mental effort 5 10 15 20 25 75
Responsibility 7 14 21 28 35 105
Working conditions 6 12 18 24 30 90
Maximum total points of all factors depending on their importance to job = 540

Table: Conversion of Job Grade Points into Money Value

Point range Daily wage rate (Rs) Job grades of key bank officials
500-600 300-400 1 Officer
600-700 400-500 2 Accountant
700-800 500-600 3 Manager I Scale
800-900 600-700 4 Manager II Scale
900-1,000 700-800 5 Manager III Scale
3. Consider Compensation Patterns in Community and Industry:
• It is important to consider prevailing compensation patterns in the community and industry.
• Management needs answers to four questions:
a) What compensation systems are being used?
b) What is the average compensation for similar positions?
c) How are other companies doing with their plans?
d) What are the pros and cons of departing from industry or community patterns?
• Relation of external compensation practices to that of company needs to be considered

4. Determine Compensation Level:

• Determination of the amount of compensation a salesperson should receive on the average.
• Compensation amount the company can afford to pay
• Plotting each cost estimate on a break-even style chart. When several plots are compared with the
company’s cost goals, sales volume needed to breakeven at each compensation level is revealed.
5. Provide for the various Compensation Elements:
A sales compensation plan has as many as four basic elements:
a) A fixed element, either a salary or a drawing account
b) A variable element ( for e.g. commission, bonus, profit sharing arrangement)
c) An element covering the fringe or plus factor such as paid vacations sickness and accident benefits,
life insurance , pensions and the like
d) An element providing for reimbursement of expenses or payment of expense allowances
• Management selects the combinations of elements that best fits the selling situation.

6. Special company needs and problems

• It is possible to construct a compensation plan that increases marketing effectiveness.
• If a company’s earnings are depressed because sales personnel overemphasis low-margin items and neglect
more profitable products, compensation plan is adjusted to stimulate the selling of better balanced orders.
7. Consult the Present Sales Force:
• Management should consult the present sales personnel, in as much as many grievances have
roots in the compensation plan.
• Management should encourage the sales personnel to articulate their likes and dislikes about
the current plan and to suggest changes in it.

8. Reduce Tentative Plan to Writing and Pretest it

• For clarification and to eliminate inconsistencies the tentative plan is put in writing. Then it is
pretested.
• Amount of testing required depends upon how much the new plan differs from the one in
use. Greater the difference, the more thorough is the testing.
9. Revise the Plan:
• Plan is then revised to eliminate trouble spots or deficiencies
• If alterations are extensive, the revised plan goes through further pretests and perhaps
another pilot test.
• But if changes are minor, further testing is not necessary.

10. Implement the Plan and Provide for follow-up:

• At the time the new plan is implemented, it is explained to sales personnel.
• Management should convince them of its basic fairness and logic. .
• Details of changes from the old plan, and their significance require explanation. All sales
personnel should receive copies of the new plan, together with written examples of the
method used for calculating earnings.
 Job Evaluation Methods
• Simple Ranking – Sorting Job Descriptions (JD) in the
order of worth
• Grading – Grades are categorized on the basis of which
individual jobs are compared
• Point System – Different factors are assigned minimum
and maximum points and for each job a cumulative
point is calculated (this is the most widely used
evaluation method)
• Factor Comparison Method – Utilizes ranking scheme
and evaluation scales which are expressed in monetary
terms and are then evaluated factor by factor
DESIGNING INCENTIVE

Establish Outline the Measure

Objectives Strategy Performance

Select the
Budget Establish the
Perfect
Elements Budget
Award

Administer Celebrate Analyze the

the Program Success Success
Impact of the sales force incentive
plan
Effective incentive compensation Inappropriate incentive
plan compensation plan
Attracts and retains the best people Attracts and retains average people
Pays the market rate Overpays or underpays
Pays for performance Pays the wrong people
Encourages sales force activities that are Encourages sales force activities that are
consistent with corporate strategy inconsistent with corporate strategy
Allocates sales force effort to the right Allocates sales force effort to the wrong
products products
Allocates sales force effort to the right Allocates sales force effort to the wrong
markets markets
Encourages an appropriate balance between Encourages salespeople to call on friends and
new business development and account family
maintenance
Encourages the sales force to meet Encourages overselling
customer
needs
Helps the company exceed its sales and Prevents the company from meeting its sales
profit and profit targets
expectations
 IMPLEMENT LONG AND SHORT-RANGE
COMPENSATION PROGRAMS
The compensation message should contain several
elements:

1. The salesperson needs to know what part the

sales force is expected to take in attaining
the organization’s goals.
2. The salesperson’s role in achieving sales
objectives should be thoroughly discussed.
3. The limitations and weaknesses of the
compensation program should not be hidden
from the salesperson.
RELATE REWARDS TO PERFORMANCE

Rewards and promotions should be tied directly to the

salesperson’s individual contributions to sales force
objectives.
MEASUREMENT OF PERFORMANCE

Companies need to regularly measure individual, sales

group, and organizational performance to determine
whether the compensation program’s objectives are
being met.
APPRAISAL AND RECYCLING

Key questions in terms of the success of a plan:

• Are the compensation objectives being met?

• Is the firm able to attract new salespeople with
this plan?
•What is the relationship of compensation to
turnover?
HOW TO CALCULATE INCENTIVES

Factors on which to base quotas:

• The past year’s sales.
• The sales force’s forecast of the coming
year’s sales.
• Corporate marketing targets.
• A specific net profit target.
• Geographic market potentials.
 FRINGE BENEFITS
Five basic classifications of salespeople’s benefits and
services are:

1. Benefits that are required legally

2. Pension and retirement programs
3. Nonworking time
4. Insurance
5. Miscellaneous services
 THE BOTTOM LINE
Compensation given for certain behaviors have major influences on a sales force’s
culture.
Compensation is one part of the salesperson’s behavioral model.
Money can be an extremely powerful performance motivator if used with the right
compensation program.
Under a combination salary plan, a proportion of the salesperson’s total pay is
guaranteed, and the rest is incentive pay.
Daily expenses of field salespeople are a major part of the sales force budget.
 THE BOTTOM LINE
When developing a new pay plan, managers must consider the nature of the job, the
market, channels of distribution, the caliber of the salespeople, a company’s financial
condition, and suggestions made by sales personnel.
The sales manager can better “sell” the job to prospective salespeople by determining
the dollar value of fringe benefits and presenting pay and benefits as a total
compensation package.
 TATA TELESERVICE

Variable Fixed

Experience Age of
Area Leads Target 80% 20% new
in the customer
Potential Converted Achieved growth acquisition
company in network
 MARICO
• Marico focuses on value & volume target .
There is a fixed pay along with the incentives

The incentive depends on 4 parameters

• Volume Target (which will be in terms of edible oil or hair oil)
• Value Target (which is in terms of rupees)
• Lines – Lines covered is the no. Of SKUs they sell at each retailer point
that they have targeted
• 90% Effective Coverage – This covers the no. Of shops that actually
buy from the company. Out of the total visited they have a target of
nearly 90%
 The Mobile Store

Area operations manager(responsible for 10 stores)

Variable component Fixed

Sales Target of the stores

Store manager

Duty manager

Sales Associate

Source:Mr. Akshay Kher (9818513000) , State Manager ,The Mobile Store

INDUSTRY

IT
• Strategy – Client Profit Planning
• Type of Selling – Consultative / Technical
• Sales Person – Creative Sales person of
Intangible Product
• Compensation Plan - Combination of
Salary and Incentive Plan
 Nucleus Software Exports ltd.
• A CMM level 5 company.
• Provides product and software solutions for
banking and financial institutions.
• Main area of focus is retail banking, credit
cards, trade financing and collections
 Compensation
Compensation mainly consists of 2 components
• Fixed component
• Variable component – average 10%
– Company meeting its targets
– Trainings attended
• Sales Incentive Plan (SIP) is not part of the CTC
 Compensation
• SIP is set according to geographical targets
• A sales person must meet 80% of his target in order to
be eligible for SIP
• SIP takes into consideration the value of the client
being associated with the company
• SIP lays more emphasis on the value of the client
rather than on the volume
• If the threshold target is met, then he is entitled to a
specific percentage of the revenue earned from his
client (Revenue is considered only after complete
payment by the client irrespective of the delivery of
the product).
 Compensation
• Travel Reimbursement
• Miscellaneous Expenses (on the Client)
• Fringe Benefits – Medical Coverage
INDUSTRY

AUTOMOBILE
• Strategy – Persuasion
• Type of Selling – Direct / Commercial
• Sales Person – Inside Order taker /
Outside Order taker
• Compensation Plan - Combination of
Salary and Incentive
Plan
 Honda

• Front-end Sales force at

Dealerships
• Customers directly visit the dealer
showroom
• Sales force facilitates the purchase
of the automobile
 Compensation

Compensation consists of Fixed Salary plus per

car incentive
• Fixed Salary: Rs. 15000 to Rs. 18000
• Commission: Rs. 1000 to Rs.1200 per car
sold
• 70 percent of target must be met in order to
be eligible for compensation
• Conveyance charge is 300 per car sold
which is fixed
• Yellow sale is discouraged and a penalty
upto 2 lakhs can be imposed on the dealer
 Tata motors

• The sales force approach the dealers periodically

• Compensation has two components fixed and variable.
• Fixed components:-
– Basic
– HRA
– CDA
– Executive allowance
– Food/canteen/uniform subsidy
– Car/home loan
 Compensation
• Variable components:-
– Performance bonus
– MPA’s are defined.
– At year start parameters are decided.
– Annual report card is made.
– At year end grading is done(C,C+,B,B+,A,).
– Different levels for employees (TM1,TM2,…TM5)
– Budget is made for incentives and distributed
among all employees (as per level & grade).
 Compensation
• Motivation cum incentives :-
– International conferences for achievers held
annually at places like turkey, pattaya, goa etc..
INDUSTRY

BANKING
& NBFC
• Strategy – Persuasion / Negotiation
• Type of Selling – Direct / Commercial
• Sales Person – Inside Order taker / Creative
Sales person of Intangible
Product
• Compensation Plan - Combination of
Salary and Incentive Plan
 FUTURE MONEY

• The company specializes mainly in

3 types of loans:
– CONSUMPTION LOANS
– MORTGAGE LOANS
– PERSONAL LOANS
 Compensation
Consumption Loans
– These loans are sold by Direct Selling Agents (DSA) who sit at
Future outlets
– Compensation Plan:
• Fixed Component – Rs. 7000/- to Rs. 10000
• Commission – Rs.70 – Rs. 125 per loan processed
• A minimum of 70 to 100 loans must be processed monthly
in order to be eligible for Commission subject to location
of the outlet
 Compensation
Mortgage Loans
– These loans are sold by Direct Sales Teams(DST) / Sub –
Brokers
– Compensation Plan:
• Fixed Component
• Commission – 2.5% to 5% of the loan amount processed
• The credit team must approve the loan in order to be
eligible for Commission
 Compensation
Personal Loans
– The client directly approaches the company
– Compensation Plan:
• Fixed Component
• No Commission and no Incentive
 HDFC
HDFC Bank deals with three key business
segments –
1) Wholesale Banking Services
2) Retail Banking Services
3) Treasury

The bank has been in the credit card business

since 2001
 Compensation
Compensation consists of the following
components:
1) Fixed Component: Rs. 7000 to Rs. 10000
2) Commission: Rs. 70 per Savings Account
opened
The sales person must meet 80% of the target
in order to be eligible for commission
3) Bonuses are given Annually
INDUSTRY

INSURANCE
• Strategy – Persuasion
• Type of Selling – Direct / Commercial
• Sales Person – Creative Sales Person of
Intangible Product
• Compensation Plan - Combination of
Salary and Incentive
Plan
 Future Generali
• Joint venture between Future Group and
Generali Group, the leading Italy-based
Insurance Company
• Both in Life and Non-Life businesses
• Leading player in the global insurance and
financial markets
 Compensation

• Salary structure is mainly commission based

• Sale and compensation is based different channel:
Through agencies channel
Mall channel
Corporate channel
 Compensation
• Incentives – 5-7% per sell of product (in
general)
• Travel allowance is given
• Compensation is in the forms:
Commission
Incentives/monthly or yearly contests
Package deal
 Birla Sun Life Insurance
• Joint venture between Aditya Birla Group, an
Indian multinational corporation, and Sun Life
Financial Inc, a leading global insurance
company.
• First company to begin Business Continuity
Plan.
• Pioneered the unique Unit Linked Life
Insurance (ULIP) solutions in India.
 Product of BSLI
• Protection Plans
• Saving Plans
• Health Solution Plans
• Retirement Plans
• Children Plans
• Rural Plans
• Group Plans
• NRI Plans
 compensation
• Salary structure depends upon Sales Personal:
Sales advisor – Completely commission
based salary
Sales Manager – Completely fixed salary
• Compensation mainly depends upon type of
product sold:
For example: For Children plan, the
commission is different from Saving’s
plan
 compensation
Incentives – 5-7% per sell of product (in general)
Travel allowance is given
Compensation is also in the form of:
– Gifts
– Monetary + non monetary
– Holiday Packages
– Time based
Sales officers:
Fixed: Variable - 60:40

Elements of salary:
• Basic Salary, Housing allowance
• Daily Allowance (on field visit) - 250 Rs/Daily, 300Rs/day if out of territory
• Travel Allowance- either show tickets or on per km basis (Rs 5-7)
• Medical- Reimbursable vouchers for medical expenditures
• Outstation allowance- Rs 500/day
• Mobile- Rs 800/month
• Insurance coverage
• Medical Coverage for themselves & dependents
• No pensions
• PF, Gratuity, LTA & annual bonus, loans
Incentives
• 8-10% on achieving sales targets in their regions.
• Extra incentives for new product launches
• Paid trips on achieving big targets
• Gifts like electronic items

Awards
• Letters of appreciation/awards in annual functions
• Prizes for the top sales achievers in a region

Benefits
• Get DABUR products on a discounted price

Salesmen(Easier/effort based selling process)

• Fixed: Variable- 35:65
• No benefits
• Types of Incentives- on defined targets, targets for new products promotion
FINDINGS
Low salaries:
Low skilled salesforce
“Brand” name sells the product

High variable part:

Highly predictable products & short sales cycles
Established company  Have leads & contacts
Some features:
• Medium Rates
• Mostly govt. organizations as clients
• Environment not very competitive

SALES MANAGERS

Fixed:Variable - 70:30

Elements of salary
• Basic Salary, Housing allowance
• Daily Allowance (on client visit) - 150 Rs/Daily
• Travel Allowance- when they go for sales meetings
• Medical- Reimbursable vouchers for medical expenditures
Incentives
• 5-7% on achieving sales targets.
• Targets like: 10 lacs (in value) for a year or 200 room bookings for a year

Awards
• Letters of appreciation/awards in annual functions
• Prizes for the top sales achievers in a region

Benefits
• Discounts on banquets on personal bookings
• Insurance coverage by Kotak Mahindra
• Medical Coverage for themselves & dependents
• No pensions
• PF, Gratuity, LTA & annual bonus, loans
• No extra incentive for CVGR.
FINDINGS:
Higher fixed part:
Mid-Aged Sales Personnel

Low Variable Part:

Other factors add on to the sales (location etc)
Less competitiveness

Other:
Type of clients defines the competition
No stress on CVGR incentives
Some features:
• Premium Rates
• Mostly private organizations/MNCs/foreign delegates as clients
• Operates in a highly competitive manner
• Prefer young/dynamic professionals

SALES MANAGERS
Fixed:Variable - 60:40

Elements of salary
•Basic Salary, Housing allowance
•Daily Allowance (sales meetings with clients) - not disclosed
•Travel Allowance- not disclosed
•Phone bills- Upto 1000 Rs
•Medical claim on a quarter basis
Incentives
• % not disclosed
• Extra incentives on big accounts & CVGRs

Awards
• Letters of appreciation/awards in annual functions
• Paid training programmes
• Paid vacations

Benefits
• Discounts on personal bookings upto a limited no of visits
• Insurance/medical coverage for themselves & dependents
• No pensions
• PF, Gratuity, LTA & annual bonus, loans
FINDINGS:
High variable part:
Young sales people
High competition level

Types of Clients  personality type & age  variable part

Career Oriented  Trainings for further grooming as reward
Likely to accept vacations as incentives
Some features:
 3-4 yrs in business
 Prefer young/dynamic ‘hunters’

CATEGORY SALES MANAGERS

Fixed:Variable - 60:40

Elements of salary
• Basic Salary, Housing allowance
• Daily Allowance (on client visit) - 150 Rs/Daily
• Food coupons from Sodexo
• Medical vouchers- Rs 1200/month
• Educational Allowance- Rs 200/child
• Conveyance- Rs 800/month
• Telephone allowance- Rs 500/month
Incentives
• 8-10% on achieving sales targets (in tonnes)

Awards
• Letters of appreciation/awards in annual functions
• Prizes for the top sales achievers in a region

Benefits
• Entitled to profit sharing, if they are involved in procurement
• Get insurance coverage & medical Coverage for themselves &
dependents
• PF, Gratuity, LTA & annual bonus, loans

Levels in Hierarchy
• Category Managers  ASMs  Deputy Manager (Sales)
•  VP (Sales)
FINDINGS:
Company in early stage  measures to expand business  offer
profit sharing on procurement service

Sales personnel type: “hunters”  high variable part

Highly predictable products & short sales cycles  high commission based
compensation
Some features:
• Client Servicing – relationship building
• Business Development
• Both effort based & skill based selling
• Competitive environment

SALES MANAGERS

FIXED:VARIABLE - 60:40

ELEMENTS OF SALARY
•Basic Salary, Housing allowance
•Daily Allowance (on client visits in corporates)
•Medical- Reimbursable vouchers for medical expenditures
INCENTIVES
• Incentive only on selling in the defined range above the sales targets
• Incentives on getting bulk bookings (as per the defined standards)
• Incentives on CVGRs

AWARDS
 Letters of appreciation/awards in annual functions

BENEFITS
• Get discounts on personal bookings
• Get medical & insurance coverage
• Uniforms/Blazers for sales visits
• PF, Gratuity, LTA & annual bonus, loans, no pensions

LEVELS IN HIERARCHY:
• Sales Executives/Business Managers  ASMs  Deputy Manager (Sales)  VP
(Sales)
FINDINGS:
The incentives are targeted mainly at obtaining new corporate customers.
The focus is also on maintaining existing relationship with existing customers
Some features:
• Relationship building
• Active/Young/Dynamic Salesforce required
• Patient/Extensive Travelling

SALES MANAGERS

FIXED:VARIABLE - 70:30

ELEMENTS OF SALARY
• Basic Salary, Housing allowance,
• Meal Allowance- 250 Rs/Daily
• Travel Allowance (based on the distance covered)
• Medical- Reimbursable vouchers for medical expenditures
• Outstation Allowance for out of town stay- Rs 550/day
INCENTIVES
• Incentive rate is increased for every 1 lac increase in sales figures, after achieving
targets

AWARDS
• Nothing specific

BENEFITS
• Get medical & insurance coverage
• PF, Gratuity, LTA & annual bonus, loans, no pensions

LEVELS IN HIERARCHY:
• Professional Sales Representatives/Medical Representatives  Area Sales
managers  Regional Sales Managers  Zonal Manager
MEDICAL REPRESENTATIVES
FIXED:VARIABLE - 60:40
ELEMENTS OF SALARY
• Basic Salary, Housing allowance,
• Daily Allowance-150-200
• Travel Allowance (based on the distance covered)-2 Rs/km
• Medical- Reimbursable vouchers for medical expenditures
• Outstation Allowance for out of town stay – Rs 300-400 per day

INCENTIVES
• After crossing the targets, the incentive rate is increased for every 1 lac increase in
sales figures.
• Meeting target of 2 lac- 3%
• Meeting target of 3 lac- 4%
FINDINGS

Younger sales representatives (MRs)  high variable part

Older Sales force (ASM)  high fixed part
High competition  high variable part
Selling is Effort Based (for MRs)  higher variable part

AGE PREFERRED
• MR: upto 25-27 yrs
• Sales Manager- 32-33yrs
• Regional Manager- upto 35 yrs
• Zonal Manager- upto 40 yrs
Some features:
• Effort sales at Salesman level
• Very competitive environment

SALESMAN

• FIXED: VARIABLE: These salesmen don’t have any fixed part in their salary. Their entire
salary is variable salary. Fixed:Variable: 0:100
• There is no bonus & no increments, since there is no fixed salary.

ELEMENTS OF SALARY
• They get certain part on selling every policy.
• They get monthly travelling expense (of Rs 2500) if they are able to sell policies for Rs
15000 per month.
• Meal Allowance- When on training they get paid meals.
• No Medical coverage for them.
BENEFITS/AWARDS
• Once a salesman achieve a target, say 20 lacs for any year, they reach to the level of
‘Achiever’s council’.
• Gets benefits like accidental insurance, cash rewards
• No uniforms
• They get no pensions, Provident Fund, Gratuity, LTA, Bonus- all such facilities are
not there for the salesmen.

INCENTIVES:
• For every policy, they get some % of premium as commission,
• Get commission every time a policy (which they brought) is renewed.

LEVELS IN HIERARCHY:
• Hierarchy: FPA (Financial Planning Advisers) or the salesman  ASMs  Sales
Manager  Sr. Sales Manager  Branch Manager  Branch Head  Cluster
Manager  Zonal Manager  Regional Mgr DSF(Direct Selling Force) Director
Company Director
SALES MANAGERS

FIXED: VARIABLE: 70:30

ELEMENTS OF SALARY
• Basic, HRA, PF, Gratuity
• Travel Allowance- In case they go for sales meetings
• Meal Allowance- For every day spent on field work
• Medical- Reimbursable vouchers for medical expenditures

BENEFITS:
• Extra allocation on their policies & on the policies of their dependents
• Insurance/medical coverage for themselves and their dependents
• PF, Gratuity, LTA, loans & annual bonus given. No pension

AWARDS:
• They are given badges for consistent performance & appreciation letters
• Foreign trips
FINDINGS

Less prominent sales force (sales more due to the brand name)  low
salaries

Effort based selling  high variable part

Low salaried employees  cash rewards (no awards/recognitions)
High salaried employees  trips/vacations, recognitions
 UTI Mutual Fund
• Came into existence on 1st February 2003.
• Sponsored by Bank of Baroda (BOB), Punjab National Bank (PNB)
and State Bank of India (SBI) and Life Insurance Corporation of India
(LIC).
• Managed by UTI Asset Management Company Private Limited
(AMC). UTI AMC is a registered portfolio manager under the SEBI
(Portfolio Managers) Regulations, 1993 for undertaking portfolio
management services and also acts as the manager and marketer
to offshore funds.
• UTI Mutual Fund has a nationwide network consisting 70 UTI
Financial Centres (UFCs) and UTI International offices in London,
Dubai and Bahrain. The fund has a track record of managing a
variety of schemes catering to the needs of every class of citizenry.
• The Sales Team of the company is primarily responsible for getting
the Sales i.e. selling the Insurance policies.
 UTI Mutual Fund
• The Hierarchy: CMD

E2,E1

D2,D1

C2,C1

B2,B1

A2,A1
• At UTI MF, a band system is followed instead of the
traditional hierarchy. The A2 and A1 band
employees are mainly responsible for the field work
 UTI : Compensation
S.No Issues Practice in the company
1 Objectives of the compensation Improving performance

2 Internal consistency; pay dependent on the Customer Customer satisfaction is not considered while deciding
Satisfaction or the skills of the employee the compensation only seniority is the determining
factor

3 External consistency Pay is competitive

4 Package dependent on Seniority or Skills possessed by Depends on the number of years of experience in the
the employees. relevant field

5 Awareness about the package Employees are totally aware of all the component of
the component.

6 Whether contribution by the employee a factor in Employee is paid as per the seniority.
determining his pay or seniority the only factor

7 What factors decide the salary structure: market The employee’s salary in the previous company, job
trend, Worth of the job or Skill of the Employee band and experience.
 UTI : Compensation
S.No Issues Practice in the company
8 Variable Pay is individual or team based Individual targets are given and hence individual
variable pay.

9 Profit Sharing with employees No

10 ESOP to employees No

11 Annual Bonus to employees Yes, Annual bonus is split and given quarterly.

12 Leaves: Days and types CL-8, Ordinary-1/11 working day

13 Mediclaim / Insurance: Individual or all dependent 45L individual Life insurance, Mediclaim for
dependents.

14 Children Education allowances Yes

15 Pension plan Yes

16 Mobile/Laptop facilities Yes

 UTI : Compensation
S.No Issues Practice in the company
17 Loans at discounted rates Yes

18 TA/DA part of the package? TA is yearly

19 Annual entertainment allowances/facility No

20 Any sponsored training program. No

Inference:
UTI MF follows a “fixed + variable” structure in the compensation package. We
see that even though UTI is a PSU, when it comes to sales it behaves more so like
a private company.
Employees get all the benefits which any other private player gives to its
employees. Employees are given quarterly target which are reviewed monthly.
However, we see a difference here that customer satisfaction is not considered as
a part of sales job and a totally different team is responsible for that. Also, the
pay package is slightly rigid in the sense, it is not altered depending on some
critical skills of the employee.
NICHOLAS PIRAMAL INDIA LTD (NPIL)
Pharma Selling process
 Compensation policy

• Combination of a fixed salary and Incentives (lump sum bonus or

commission on achieving specific targets)
“per man return
per month”

• Sales
• Initiatives taken
• Following guidelines and adhering to best practices
• Timely documentation and reporting
Appraisal process is • Implementing new schemes launched by the company
done on a KRA basis
• Use a Forced distribution on a bell shape
curve method
 Incentives: Bonus distribution policy at NPIL

MRs attaining 100% of their annual target -free foreign

trip. Attaining 105% - spouse also.

Cash bonuses on completion of quarterly targets

Area Manager gets a bonus equal to:

• (Avg bonus paid to the MRs under him * 150 %) & similarly to
Divisional mgr ( taking MR’s in the entire division. )

Incentive for the managers to make everybody under

them to perform well.
• For new products, special Incentive schemes -
quick percolation of the product in the
market.

• Doctors are also given various incentives.

– Apart from free Medicine samples, they are given
gifts from time to time e.g Diwali gift
 Fringe benefits
• Sick leaves,
• Accident insurance and group cover
• Educational allowance
• Free samples are also used by the Sales force
along with the Doctors.
Dell India Pvt Ltd
Sales force classification
more than 50%
of their
requirements R (Retention)
from Dell

btw10% and
50% of their req
from Dell
D
(development)

less than 10% of

their
requirements
from Dell A (Acquisition)
 Compensation policy
• Huge chunk of the salary is variable
component
(The reason for Dell being the no 1 hardware
vendor???)
– Adv- During good quarters and boom in the economy the entire sales force
makes a huge amount of money

– Disadv- reverse happens during “bad quarters”

• Policies created to have a win-win situation for

both the company and the sales force
 Variable component

• At times, the variable pay => than that of their

annual package.

– 100% of targets - 100% variable

component payout
– 120% of targets - 150% variable
component payout
– 150% of targets - 200% variable
component payout

– SPIS (Sales performance Incentives) schemes are followed during launch

of new products.
 Fringe benefits

• Industry standard medical and insurance

benefits
• Top 10% sales people in each quarter
rewarded handsomely for eg LCD TV, Swatch
watch
• promotion schemes -various weekly prizes/
Gift vouchers like Sodexho Coupons.
• Best Sales people annually -foreign trips
 XEROX INDIA LIMITED
Compensation

Fixed component Variable component

Monthly Salary Annual Bonus Other Incentives

Based on target Achieved Based on

New customer
added

Relationship built
Development of key
accounts

Monetary Gifts, prizes,

holiday tours, etc
Monthly Salary
• The ARM’s receive a fixed monthly salary independent of any sales
performance

Annual Bonus
• The annual bonus awarded to the ARM’s depends on the percentage of
sales target achieved.
• ARM receives a bonus of Rs. 2.75 lakhs on achievement of 100% of the
revenue target.
• An ARM is eligible for the annual bonus only if he/she has achieved at
least 70% of their quarterly targets in all four quarters.
• On over achievement of target beyond 150% of the annual target, the
ARM receives a bonus of Rs. 100 per lakh.

Other incentives
• This component -very subjective and depends on the ARM’s performance
evaluation by his/her boss i.e. RCSM.
• Incentives like gifts (Refrigerators, Digital Camera’s, etc.), cash prizes, and
holiday tours to exotic locations in India and abroad.
 MAX NEW YORK LIFE
Two slabs of commission policies being utilized at Max.

1. Commission on multi year premium policy:

5-8% for the first year depending upon the tenure of the policy. Longer
tenure: higher commission and vice versa
• First Year(term<15) - 5.0%
• First Year(term<20)- 6.0%
• First Year(term<25)- 7.0%
• First Year(term>=25)- 7.5%
Subsequent years: (for multi year premium policy only)
• 2nd year: 3%
• 3rd year: 3%
• 4th year: 2%
• 5th year: 2%
Commission on ULIP (Unit Linked Insurance Plan): 20% - 30%
• higher commission for ULIP - it is newly introduced system of insurance
policy working on lines of insurance cum mutual fund
Commission on single year premium policy: 30%
• Commission on multi year premium policy: 20%-27% for the first year depending upon the tenure of the policy
and the premium amount being paid.
• First Year(term<15)-20.0%
• First Year(term<20)- 22.5%
• First Year(term<25)- 25.0%
• First Year(term>=25) - 27.5%

Subsequent years :( for multi year premium policy only)

• 2nd year: 10% , 3rd year: 5%, 4th year: 5%, 5th year: 2%
MARICO LTD.
• Sales force structure modern trade
 Sales Compensation at Marico
• Marico focuses on value & volume target.

There is a fixed pay along with the incentives

The incentive depends on 4 parameters

• Volume Target (which will be in terms of edible oil or hair oil)
• Value Target (which is in terms of rupees)
• Lines – Lines covered is the no. Of SKUs they sell at each retailer
point that they have targeted
• 90% Effective Coverage – This covers the no. Of shops that actually
buy from the company. Out of the total visited they have a target of
nearly 90%
google
Job Position: AdWords Representative – Online Sales

Components:
o Base Salary – 8,000
o Allowances – Medical, HRA, LTA – 12,000
o Bonus – dependent on performance (15% of the total
salary)
o Shares – dependent on position in company
For example: Entry level employee gets 12 shares.
Currently the Google share is worth $464
INDIAMART
Job Position: Assistant Manager

Components:
o Base Salary – 12,000
o Allowances – Medical, HRA, LTA – 4,000
o Marketing Incentive – 20,000
o Additional Incentive – based on number of clients and job
position
For example: Deal with 5 clients in a month for Assistant
Manager earns him extra 12,000
siemens
Job Position: Sales Executive

Components:
o Base Salary – 14,600
o Allowances – Medical, HRA, LTA – 19,400
o Performance Bonus – 20% of the total pay package
Windmoller & holscher
Job Position: Sales Engineer

Components:
o Base Salary – 50% of the salary
o Allowances – Medical, HRA, LTA
o Bonus – not mentioned in the CTC (up to 50% of the
salary)
o Company car and phone
o No PF, no gratuity
LG
Job Position– Store Sales Executive
Components:
o Fixed Income = Rs 6000
o Allowances – Nil
o Bonus – Festival bonus dependent on the company and sales performance

Per Point Rupee

Targets Value Product Points
Below 30% No Incentive 22' LCD 10
30-60% Rs 6.4
42' LCD 30
61-80% Rs 7.2 Side-by Side
81-100% Rs 8 refrigerator 50

101-120% Rs 9.6 Home theatre 100

Sales Executives

FIXED: VARIABLE: 60:40

ELEMENTS OF SALARY
• Basic salary
• Housing allowance
• Medical vouchers
• Educational allowance
• Conveyance
• Cellphone allowance
FINDINGS:
The variable part is targeting mainly at selling of new value added services to
existing customers.

Incentives are provided for getting CVGRs through selling of CUG plans in
corporates and institutions.
 Incentives

 Cash

 Kind

 Recognition
 SALESMAN INCENTIVE PLAN
Target
Achievement

SDO Brand
Incentives
incentive Incentive

Turnover
incentive

• Incentive on pre-decided no. of flavours sold per bill

• Incentive on pre-decided no. of brands sold per bill
• Incentive on focus brands sold. For eg. At present, it is on Aliva, Rajma Kurkure.
• Incentive on May-Jun(when sales are generally low) for both DB and salesman.
Sales Executives

FIXED: VARIABLE: 40:60

ELEMENTS OF SALARY
• Incentives in the form of CVGR bonuses
• Tours on meeting targets
• Insurance coverage

HIERARCHY
General manager -> Assistant general manager -> Regional
manager -> Zonal manager -> Center manager -> Sales
trainee
FINDINGS:
The compensation structure is focused on increasing the market share.

It is aimed at encouraging to increase the volume of sales in a given territory.