Question

Read the attached case and answer the following questions

After 10 years in business, John Shurtman has determined that it is time to hire a sales representative. As the founder and president of United Fleet Service (UFS), John has been the main driver of new business sales for the company. However, as UFS has grown, John has found that he must spend more time on planning and administration, leaving little time to generate new sales leads or call on potential customers. UFS provides maintenance, mechanical repair services, and body repair services to organizations that maintain fleets of large vehicles. UFS customers include mostly school districts that own bus fleets and municipalities that own fleets of fire and police vehicles. While UFS has a strong hold on these public sector organizations, John sees many opportunities for expansion through targeting other potential customers such as utility companies and commercial trucking companies. UFS has several competitors in its geographic area, but none provide as comprehensive a service as UFS. For example, several competitors provide mechanical repair services, but do not provide body repair services; on the other hand, several competitors provide body repair services, but do not provide mechanical repair services. UFS also has a reputation for high-quality repairs and fast turnaround times on service. With these strengths in mind, John is convinced that an effective sales representative that can take the time to contact and develop relationships with potential customers can help lead the organization to expansion. John has experienced steady growth over the past 10 years, acquiring just two or three new customers each year. Leads on potential new customers have come primarily through referrals from current customers. John personally called on the leads to secure sales. Once a target was established as a customer, John handed the customer account over to a service advisor. The service advisor’s role is to process incoming vehicles and communicate work progress with customers. Service advisors are also encouraged to generate new sales from current customers by suggesting add-on services or establishing ongoing maintenance schedules. Due to increased volume growth, the service advisors have had little time to develop more significant relationships with customers. Because of this, UFS has missed out on many add-on sales opportunities. Therefore, John plans to hire a new sales representative to both call on new customers and develop better relationships with current customers. Cultivating new customers will require cold-calling on

potential customers as well as following up on referrals from current customers. Because most companies that have vehicle fleets establish contractual relationships with mechanical service providers, some new customers may take a long time to acquire. That is, the sales representative may have to interact with a potential new customer over an extended period of time until the company’s contract with another service provider expires. Working with current customers will require significant interaction with the service advisors to understand each customer’s past history of services and identify opportunities to increase the number and frequency of services provided. Growing business from current customers will also require spending time developing relationships with each customer. Before he begins recruiting for this position, John must determine how to compensate the new sales representative. He’s researched market rates for sales representatives in his industry and has a targeted salary range, but he wants to make sure that the compensation plan provides enough incentive to both secure new sales and spend time developing relationships with current customers.

Source: Martocchio J (2018), Strategic Compensation, 9th Ed. Pearson International

Questions:

2. Design a sales compensation plan for UFS based on John’s requirements. Also, please justify the reason behind using specific type of sales incentive pay plan (50 Marks; word limit- 500 words )

Answer 1

Answer: A sales compensation plan for UFS dependent on John's necessities

Motivating force compensation programs originate from the guideline recognized in the hypothesis of operant molding that on the off chance that one needs specific conduct to happen or proceed, one should remunerate it and that on the off chance that one needs conduct to stop, one ought to overlook it or rebuff it. Impetus compensation programs empower associations to deliver focused on results by remunerating workers who are liable for those outcomes. No place is this standard preferable outlined over with sales compensation programs, where the endeavors of sales agents contribute straightforwardly to the organization's main concern.

• Business Case: Pay for execution requires broad arranging, checking, and reexamination after some time. Remunerating superior workers, and overlooking or rebuffing low entertainers, corresponds unequivocally to upgrading sales impetus compensation plans.
• HR's Role: The job of HR concerning structuring and dealing with a sales compensation program can have numerous angles. The most fundamental job an HR proficient plays is being in a situation to illuminate the board regarding the advantages, expenses, and cluster of alternatives in creating, propelling, or improving a sales compensation program.
• Different Incentive Vehicles for Sales Compensation Plans: Commissions, rewards, stock-based plans, and prizes are the vehicles businesses regularly use to boost the execution of salespersons. Every vehicle has its arrangement of characteristics that may make it pretty much fitting for a specific qualified activity, individual, or association. Numerous sales compensation designs generally incorporate a blend of motivating force pay choices.

Making arrangements for and Designing a Sales Compensation Program

A few variables go into planning a sales motivating force compensation plan. Since sales compensation plans are characterized by the measures, mechanics, and strategies distinguished for every sales job, businesses should mull over the accompanying inquiries when arranging and structuring a compensation plan:

• Getting objectives and destinations: Goals are the establishment of a sales compensation plan structure. Most associations follow a top-down way to deal with objective setting. Despite the methodology a business utilizes, the objectives must be clear, feasible, and quantifiable.
• Utilizing market information: Offering a serious compensation bundle guarantees the business' capacity to enroll and hold top sales representatives. Pay reviews for sales representatives report base compensation, target pay in danger (variable), complete objective compensation, and genuine all-out compensation at different degrees of accomplishment. Just those compensation reviews explicitly intended for sales capacities give the important information to recognize showcase serious midpoints, create pay structures, and think about sales practices of contemporary associations.
• Plan demonstrating: Given the unique needs of shifting offices and divisions, it is a smart thought to structure a couple of various plans and to test them against imagining a scenario in which situations to guarantee the arrangement meets the association's business needs. Finding out how different degrees of sales results will influence the all-out commission financial plan is vital.
• Qualification: One of the initial phases in planning the sales motivating force plan is to figure out who will be qualified for interest. The arrangement ought to state which employment titles or jobs will be qualified. These sales employments ought to be the ones basic to the association's development and achievement. For the most part, just those jobs including direct client contact—obligation regarding convincing clients to buy items or administrations—ought to be qualified for the sales motivating force plan.
• Setting complete objective compensation/compensation blend: For the most part, sales individuals are normally remunerated with a blend of fixed profit—their pay—and variable income—their payments and rewards. The arrangement ought to be intended to give a more prominent bit of the all-out compensation blend through commissions in which sales delegates have a more prominent degree of impact over the purchasing choices of clients. Base compensation ought to contain a more prominent level of the blend when sales delegates don't apply a lot of authority over client purchasing choices.
• Regions: Territories for sales workers can be set up from multiple points of view, yet a sound methodology gives adequate sales inclusion to the most profitable sales with the least conceivable expense.
• Execution quantifies: The way into a fruitful sales motivation plan is understanding the presentation targets for every job and how they bolster the general business system. The general guideline is to utilize three or fewer execution measures. Sales experts can without much of a stretch lose their concentration on the off chance that they are required to perform against a lot of execution gauges that are excessively expansive.

Assessing adequacy

Continuous investigation of genuine versus displayed brings about terms of both expense and income guarantees that compensation plans stay viable and moderate. On the off chance that important, associations ought to alter their arrangements midyear or because of basic outer or inner changes, for example, new serious contributions, mergers, and acquisitions, major administrative industry changes, or the presentation of new items. Interpreting plan alterations into selling conduct expects organizations to tenaciously convey any arrangement changes to the sales group.

----------------------------------------------------------------------------------------------------------------------------------------

"If you liked the answer please give an Up-vote, this will be quite encouraging for me, thank you!"