Salesforce Compensation Plan: Definition, Types, Objectives, and Features

What is Salesforce Compensation Plan?

A Salesforce compensation plan is a payment strategy of the sales organization to its salespeople which includes salary, commission, bonus, incentives, and different pay ranges.

A compensation plan plays a crucial role in motivation and increment in the performance of the salesforce. The plan is designed considering the objectives of the firm, resources, ability of salespersons, and the emerging external environment.

The sales manager is responsible to develop an effective sales force compensation plan. Salespeople devote their efforts to the firm, they should be compensated fairly. Thus, the sales manager should make plans that best meet the need of salespeople at the same time increase the closing and profits of the sale of the firm.

The main objective of the compensation plan for salespeople is to best motivate sales teams, make them give their best, retain them, and ultimately secure the future of the firm.

Objectives of Salesforce Compensation Plan

It has already been mentioned earlier that compensation is one of the motivating factors for salespersons. Sales managers, therefore, should develop compensation plans with particular care and attention.

The major objectives of the salesforce compensation plan can be pointed out below.

  • Motivate a salesforce by linking achievement to monetary reward.
  • Attract and hold successful salespeople by providing a good standard of living for them, rewarding outstanding performance, and providing regularity of income.
  • Design compensation schemes, which allow selling costs to fluctuate in line with changes in sales revenue.
  • Direct the attention of sales personnel to specific company sales objectives by paying for higher commissions on product lines, and
  • Motivate salespersons to give the best customer satisfaction, which in turn creates repeating customers, they may further refer others, which leads to long-term success.

Characteristics of Salesforce Compensation Plan

Major features of the salesperson’s compensation plan are:

Secure Income: The plan should provide a living wage that can secure the income of salespeople. No breaching of it. They should not worry about money matters while doing their jobs.

No Conflict With Other Motivational Factors: The compensation plan should fit with other motivational factors. There should not be any conflict while fitting in with them.

Fair: Here, fair means the compensation plan should not penalize sales personnel because of factors beyond their control.

Easy to Understand: The compensation should be easy to understand so that they can easily calculate their earnings.

Flexible: The compensation plan should be flexible. If sales performance changes pay also should be adjusted.

Economical To Administer: The compensation plan should be economical to administer. It should not be expensive to implement.

Attainable to Sales Objectives: The compensation plan should also help to meet the sales objectives.

Types of Salesforce Compensation Plan

Most commonly there are three types of compensation plans for salespeople they are straight salary plan, straight commission plan, and salary plus commission plan.

Straight Salary Plan

It is the most common compensation plan. We all know most companies pay their employees on a monthly basis and the salary amount is fixed.

Here, salespeople get payment regular in a specified interval of time, which may be a week or a month. Their efforts are not considered such as how many sales they made, how many customers they attracted & drive-in, only their presence on regular working days is considered.

Straight Commission Plan

The commission plan has no relation to the straight salary plan, here it assumes, if you do not work, you will not get paid.

The rate of commission is fixed on the products, number of products, number of sales closed, or there be many other factors. In general, the more sales a salesperson makes, the more sales commission he will enjoy.

Salary Plus Commission Plan

It is the combination of above mentioned two salespeople’s compensation plans. It is designed to overcome the weaknesses of those plans. In this compensation plan, the salespeople will enjoy the benefits of both a straight salary and commission plan, so enjoyed the benefits, in some circumstances, they will also have to face this plan’s drawbacks too.

Leave a Comment

%d bloggers like this: