Chapter 16.
Indirect Incentives

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• Building Relationships Incentive Programs
  We must motivate to strengthen relationships with customers in addition to increasing sales Incentive programs are playing a critical role in transforming the way companies sell
  Example: Reynolds Metals Consumer Products Div
  New incentive program categories
  Consultative Selling	in-depth knowledge of customers Multiple contacts at the customer's firm
  Annual Planning	The ability to incorporate plans based on customer objectives
  Management of Promotion Funds	The ability to determine weekly sales rates of customers
  Sales	individual sales increases district sales increases
  The program provides specific guidelines to follow to focus on customer relationships

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• Introduction

  Incentives can influence the behavior of the sales force

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• Expenses

  the purpose of a sales department is to sell Selling cost must be controlled in order to be profitable expenses can get out of control

  Factors to consider when designing expense plans

  Expenses should be seen as an investment Salespeople should not make or lose money on legitimate expenses Company controls should keep expenses in line with revenue Expense accounts are not used to supplement income for salespeople Expenses need to be reimbursed quickly and fairly The plan must lay out exactly what will be paid and what will not Need flexibility for special situations Plan should be easy and inexpensive to administer

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• Methods of controlling expenses

  "Pay All Own" Expenses

  Commission only salespeople with a high percentage Inequities across territories No clerical expenses Good for independent contractors and manufacturer's reps

  Expense Quota Plan

  Determine the optimum ratio of sales volume to expenses Salesperson may have to "eat" higher levels Salesperson may get a bonus for lower levels Reminds everyone that expenses need to be kept in line with sales

  The Flat Allowance

  Everyone gets the same amount each month or per diem The only limit is the total (salesperson can swap around) Records must still be kept Can set different totals by territory Not very flexible Takes a lot of administrative time to come up with equitable amounts

  Limited payment plans

  Limited amounts on each expense area mileage meals lodging etc Eliminates flexibility Encourages cheating Gives company maximum control Inequitable unless done by territory Good for routine sales jobs where costs can be predicted

  Unlimited payment plan

  All legitimate expenses reimbursed No limits on individual areas Flexible Easy to administer Salespeople can "pad" the account. Good when in non-routine situations where "penny-pinching" would hurt.

  Controlling expenses under inflation

  Consult Sales and Marketing Management's Budget planner Perform an overall marketing audit. Get rid of unprofitable products customers territories Consider inside sales Downsize to more fuel efficient vehicles Look for discount packages on lodging Keep company objectives in mind - don't get too cheap

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• Sales Contests

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• Sales Contests
  Salesperson's objectives
  Salary and Commissions	Meet basic income needs
  Contests can help	Have some "luxuries" Receive some recognition for their efforts Have challenges from the job Gain a sense of achievement Enjoy activities - Have fun
  incentive preferences information incentive Travel  information
  Contests from the company's perspective
  Generates enthusiasm Shows that the company "cares" about the sales force
  Good incentive programs cost nothing As long as the goals of the program are worth more than the prizes

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• Planning for a sales contest
  General Guidelines
  Gear contest to realistic objectives tied into current plans Set reachable objectives Tie contest into overall company theme Have payoff based on accomplishment Have top quality prizes. Don't misrepresent Include the families Keep it simple and straightforward Appoint one manager to watch the details Keep first level managers away from the paperwork Have a "Kick off" meeting to generate enthusiasm ]Follow up with mail, phone, and e-mail to generate enthusiasm Provide frequent updates of relative standings to reinforce Announce results as soon as the contest is finished Publicize the results
  Choose prizes that	you can promote generate excitement they dream about they would not buy for themselves
  Everyone must know	Opening and closing dates Rules of eligibility Basis for the awards How sales are recorded and validated How and when prizes are awarded
  Objectives
  Prospecting New customers Move slow items Number of  orders Build multiple sales Get out the displays Off season business Gross dollar volume	Higher sales per unit Sign up dealer tie-ins Switch to your brand Selling skills upgrade Training exam scores New product introduction Resurrect dead customers Reduce selling to cost ratio Increase sales demonstrations Balanced product line selling
  Potential Problems if salespeople	Hold sales from one month to make the next look good Overstock customers Sell to bad credit risks
  Budgets
  Estimate results Estimate added profit (or value) Determine how much profit to put back into the contest Estimate how many will win How much to promote the contest How much per winner
  Contest rules
  Theme
  Theme should be			Some theme suggestions
  Clever Add excitement Add Challenge Can be dramatized Get attention Light and lively Suggest luxury Tie in with objectives			Mystery Weekend Farming for fortunes Manhunt Sales Safari Roman Holiday Break Par Championship Race Mexico Fiesta
  Contest Prizes
  Vary the prizes Prizes should make winners feel like winners Unique prizes are the best motivators
  Cash
  Advantages		Simple Short lead time needed Some people like cash best Can be effective if it is not put in the paycheck
  Disadvantages		Tax problems Might just go toward old bills Hard to romance If cash is more than the salesperson wants or needs then they may take time off once they hit their goals
  Trading stamps or points		Can be used at the winners discretion Harder to promote
  Merchandise		Can be dramatized Residual pride because salesperson gets to keep looking at it Longer to plan and promote
  Travel		Can be very romantic Attractive to spouse may not motivate salespeople that travel a lot. Trips happen and then are gone Bad weather can make it less than memorable.
  Awards		Trophy Plaque Certificate Parking spot
  Contest Duration or Length
  Six to eight weeks is typical Longer contests should earn bigger prizes
  Contest Promotion
  Understand salesforce demographics and Psychographics Start with a "Kick Off" meeting or event Involve the spouse and family Send the material home Explain how the family can help Keep the family up to date
  Contest Evaluation
  Did the contest meet objectives at the costs projected? Did results happen that would not have happened without the contest? Sophisticated tracking is in order
  Advantages of contests
  Motivate in the short term Generate enthusiasm for long term Can generate important recognition
  Disadvantages
  Salespeople cheating (poor management) Product mix can suffer Too many contests can make salespeople run out of steam

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• Summary

  Indirect incentives are motivational tools used to increase and manage motivation Indirect incentives should cost nothing Keep changing incentives as needs of the company and salespeople change