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Salespeople can be compensated in a number of different ways. With some compensation plans, they can earn additional incentive pay in the form of commissions or bonuses that a company offers in an attempt to motivate them. Salespeople may also be paid on a straight salary basis in which there is no opportunity to earn incentives. A straight salary plan can be advantageous in certain situations.
Focus on Service
A straight salary can work well for sales positions for which a high focus on service is required, such as a salesperson who calls on retail stores on a regular basis to take orders and stock merchandise. Because there is no incentive to push products, the salesperson can be more concerned with meeting the needs of the customer and building a long-term relationship, which is important in a situation in which repeat visits are part of the job.
The salesperson experiences a high level of security with a salaried sales position. Unlike a heavily commission-based position in which income relies on sales volume, the salesperson earns the same amount of compensation regardless of how much she sells. As a result, she avoids the high degree of stress and uncertainty that comes with pay-for-performance compensation. Because her income is stable, planning and managing her personal finances is easier.
In some organizations, selling is a collaborative effort. A salesperson makes the initial contact and sets the stage for the sale, while others such as product experts or management personnel are brought in to help him close the deal. In these situations, it can be difficult to determine who contributed most to attaining the sale, making a commission plan difficult to administer. A salaried compensation plan can help promote a sense of teamwork needed to close these more complex transactions.
For a new salesperson, a salary provides a steady income during the training period when he is still learning the sales methods and products of the company. A straight salary can also benefit an experienced salesperson who is transferring to a new territory where the company and its products may be completely unknown. Once the salesperson has established himself in the area, the company can then switch to a performance-based compensation plan if desired.
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