Question

QUESTION 2
The management of Ayiku and Son’s company limited, has expressed the need to review the
compensation plan for the salesforce in your department because of some managerial issues that
needs to be addressed. The straight commission in your opinion would be the best model to adopt
under the present circumstances. As the Sales Manager, write a report to management explaining
the model and identifying three (3) in each case when it is best used, its advantages
and disadvantages.

Answer 1

As a sales manager, one will identify a useful model to overcome type issues faced by the company related to the compensation plan for the salesforce. Here is the report to explain the model.

As a sales manager, the best model will be the straight commission model. This model emphasizes a pay package as a commission on selling the number of products. According to this model, salesforce does not get a fixed salary as their compensation amount changes as the number of units of the product sold by the salesperson. For example, if a company provides 20% commissions on selling each unit of product and the product price is considered as $1000; therefore, a salesperson will get $200 if he sells one unit of product, but he will get $400 if he sells 2 units of products, and so on.

1. This model can be used in:

• Sales of electronic products such as mobile, washing machine, air conditioner, and so on.
• Sales of articles written by the writers as the number of articles sold increase; it will increase the writer's commission.
• Insurance companies can effectively use this model as an increase in the number of insurance policies provided to the people by employees, will increase their commission, and so on.

2. Advantages of this model are:

• It encourages employees to sell more products to get higher pay in return.
• It increases the overall sales of the company.
• It improves the services by the salesforce and encourages them to work hard to get the products sold in the market.

3. Disadvantages of this model are:

• It will lead to a decrease in managerial control on the salesforce as it depends only on the individual, whether they are increasing sales or not.
• Sometimes, salespeople can be discouraged as the payment will be done only if the company confirms the transactions.
• Sometimes, firms have to pay relatively higher compensation to the employees than under the fixed salary model.