Sales ManagementSales QuotasTopic 11
3 Powerful ToolsQuotasCompensationCompany Policy
Effective QuotasAttainableEasy to UnderstandComplete
DisadvantagesTeam SellingUncontrollablesTerritory FairnessTime Consuming
Three Quota TypesSalesFinancialActivity
Sales QuotasMost PopularAdvantagesDisadvantages
Activity QuotasAdvantagesDisadvantagesUse in Training
Price Setting IssuesSales Commissions are Dangerous with Pricing AuthorityNot a problem with Gross Margin CommissionsArgument is Equally Valid when Incentive Pay is a Bonus
Price Setting ExampleBrand is priced at $100Direct Unit Costs = $60Gross Margin = $40Compare 4% sales quota versus a 10% gross margin quota.
4% SC vs 10% GM CommissionInitially both have $4 earned on a $100 unit sold.But, suppose you cut the price $10 to get an order what happens?
4% Sales Commission$10 price cut so new price is $90Sales Commission is .04 x $90 = $3.60But company margins are now:$90 - $60 unit cost - $3.6 commission = $26.4Versus $100 - $60 - $4 = $36
10% GM CommissionSame $10 price cutCommission = ($90 - $60) x .1 = $3Company margin = $90 - $60 - $3 = $27Price cut 10%, and commission fell by 25% ($4 vs $3)Incentive to cut price is lessened.