It has long been held that monetary rewards are the most effective way to motivate salespeople (Ford, Churchill and Walker 1981). Unfortunately, there is no general agreement concerning the level, frequency, and determinants for the distribution of this money. A majority of small business owners contacted in a recent survey report that their sales compensation plans fail to adequately motivate salespeople. A near majority report that the plans overpay poor performers (Ricklefs 1990). While most practitioners and researchers agree that a well designed plan should be good for both the company and the salesperson, the goal of defining such plans in a broad spectrum of market conditions has been rather elusive. However, poorly designed plans may not only prevent firms from reaching sales targets, but may also increase a firm’s selling costs if it overrewards, or increase turnover if it underrewards.
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- The Effects of a Salesperson’s Utilities on Optimal Sales Force Compensation Structures in Uncertain Environments
René Y. Darmon