Sales and Distribution Management

(Sales force Motivation: Nature, Importance, factor's influencing the motivation - of - sales -force.
Compensations: Types, compensations plan.)

Salesforce motivation is essential to drive sales growth and success. When

salespeople are motivated, they can achieve their targets and contribute to the overall
success of the organization. However, motivating a sales team can be challenging, especially
when they face rejection, missed targets, and burnout. As an MBA student, you will learn
about various motivational theories, but how do you apply these theories in a practical
setting to motivate your sales team? In this blog, we will share tips and strategies to help
you motivate your sales team effectively.
Understanding Motivation in Sales

Motivation is the internal drive that energizes salespeople to take action and achieve their
goals. Understanding the needs, wants, and goals of your sales team is crucial to motivate
them effectively. Maslow’s hierarchy of needs and Herzberg’s two-factor theory are two
popular motivational theories used in sales management.
Maslow’s hierarchy of needs states that individuals have five levels of needs – physiological,
safety, love/belonging, esteem, and self-actualization. Sales managers can motivate their
sales team by addressing these needs. For example, providing job security and recognition
can meet their esteem needs.
Herzberg’s two-factor theory states that there are two types of factors that affect
motivation – hygiene factors and motivators. Hygiene factors are essential to prevent
dissatisfaction, such as salary and working conditions, while motivators such as
achievement and recognition can enhance motivation.

Most effective way for Salesforce Motivation

1. Set clear goals and expectations: Salespeople need to know what is expected of
them to perform well. Ensure that their goals are specific, measurable, achievable,
relevant, and time-bound (SMART).
2. Offer incentives: Incentives are a great way to motivate salespeople. They can be
monetary or non-monetary, such as recognition, awards, and promotion
opportunities.
3. Provide training and development opportunities: Salespeople want to learn and
grow in their roles. Offer them training and development opportunities to improve
their skills and enhance their performance.
4. Give regular feedback: Feedback is essential to help salespeople know how they are
performing and what they can do to improve. Provide regular feedback, both
positive and constructive, to keep them motivated.
 5. Foster a positive work environment: A positive work environment can enhance
motivation and productivity. Encourage teamwork, provide a comfortable
workspace, and recognize and reward good performance.
6. Lead by example: As a sales manager, you need to lead by example. Show your sales
team how to be motivated and passionate about their work.

Sales Leadership is about inspiring and motivating sales teams to achieve their goals.
The role of a Sales Leader is to set a vision and direction, create a positive culture, and
develop and execute strategies to achieve success. Effective Sales Leadership can result in
motivated salespeople, higher sales productivity, and increased revenue.
The Pygmalion Effect
The Pygmalion Effect is a psychological phenomenon in which higher expectations lead to
better performance. Sales Leaders who set high expectations for their team members are
more likely to see positive results. When Sales Leaders believe in their team’s abilities and
show confidence in them, their team is more likely to perform well.
Need-based Motivation
Need-based motivation involves understanding what motivates individual sales team
members and tailoring motivation strategies to meet their needs. Sales Leaders must
understand that what motivates one salesperson may not motivate another. By
understanding individual needs, Sales Leaders can motivate their team members more
effectively.
Sales Coaching
Sales Coaching is the process of providing individualized guidance and support to sales team
members. Sales Leaders can identify areas where salespeople need improvement and
provide training and development opportunities to help them improve their skills. By
providing regular feedback and coaching, Sales Leaders can help their team members
become more effective salespeople.
Sales Counselling
Sales Counselling involves providing emotional support to sales team members who may
be struggling. This can include listening to their concerns, providing advice, and offering
resources to help them overcome challenges. Sales Leaders who are empathetic and
supportive can build trust with their team members and create a positive work
environment.

Conclusion
Effective Sales Leadership is essential for managing successful sales teams. By
understanding the Pygmalion Effect, need-based motivation, sales coaching, and sales
counselling, Sales Leaders can create a culture of success and motivate their team
members to achieve their full potential. By investing in their team members, Sales Leaders
can drive increased sales productivity and revenue for their organization.

CONCEPT OF MOTIVATION
Motivation is a stimulus which impels an individual to respond. If the motivation is positive,
a person is likely to give his/ her full strength to a given work. Some scholars have tried to
define motivation, few of them are as follows:
According to Vitiles, “Motivation represents an unsatisfied need which creates a state of
tension or disequilibrium, causing the individual to make in a goal-directed pattern towards
restoring a state of equilibrium by satisfying the need.”

According to Memoria, “A willingness to expend energy to achieve a goal or reward. It is a

force that activates dormant energies and sets in motion the action of the people. It is the
function that kindles a burning passion for action among the human beings of an
organisation.”
According to Dubin, “Motivation is the complex of forces starting and keeping a person at
work in an organization.”

According to Vance, “Motivation implies any emotion or desire which so conditions one’s
will that the individual is properly led into action.”

According to Lillis, “It is the stimulation of any emotion or desire operating upon one’s will
and promoting or driving it to action.”

According to the Encyclopedia of Management, “Motivation refers to degree of readiness

of an organism to pursue some designated goal and implies the determination of the nature
and locus of the forces, including the degree of readiness.”

According to Berelson and Steiner, “A motive is an inner state that energizes, activates, or
moves and directs or channels behaviour goals.

DYNAMIC NATURE OF MOTIVATION

Motivation is the driving force that stimulates a person to act. Motivation is considered to
be dynamic in nature which means it keeps on changing with respect to the changing
circumstances. Needs and wants of a person constantly changes due factors like the
person’s physical condition, environment, social network etc.

When a person achieves or fulfills one goal or need, he/ she tries to achieve or attain the
new goals. Some psychologists have put forward certain reasons for the varying needs and
advocated that “needs and wants are constantly changing” because:

a) An individual’s existing need is never completely satisfied, which keeps on

stimulating him to achieve complete satisfaction.

b) Once a need is satisfied, the next higher- level need arises.

c) An individual is said to set up new higher goals once he fulfills the basic goal
MOTIVATION AND NEED
The desire to fulfil a conscious or unconscious need drives a person to take action. The
energy of this which drives a person to perform or make choices is known as motivation.
For instance, a person is feeling hungry. This need (hunger) will result into physiological
discomfort to the person, known as drive (discomfort). As a result of which, a person gets
motivated to buy food. The below figure well demonstrates this process:

Need

(Hunger)

Drive
(Physiological
discomfort)

Motivation
(Buy food)

Figure: Process of need, drive and motivation

A marketer may plan to direct or influence the energy (motivation), generated through the
need, towards his offerings. For instance, A marketer wants to advertise for his newly
opened yoga centre. The marketer will probably come across a number of motives for which
people will come to a yoga class. Some of the motives will be attainment of spirituality,
making social circle, lose/ maintain weight etc. In this case the marketer must try to plan
such promotion campaign that congruent to the majority of the people’s motive to join a
yoga centre. The marketer may aim at targeting the physical well- being as its advertising
agenda. Alternatively, the marketer can plan to target a niche market by communicating the
agenda of spiritual fulfilment.
MASLOW’S THEORY OF NEED HIERARCHY
Maslow need hierarchy theory of motivation was given by an American psychologist, Abraham
H. Maslow in the year 1943. This theory explains the underlying human motivations with
respect to the different level of human needs. The theory states that a person tends to fulfill
his needs in a hierarchical manner starting from a basic need and advancing to higher level
needs. In other words, higher level needs are not likely to motivate a person unless his basic
needs are fulfilled. Maslow have categorized these needs into 5 categories (Figure 1)

Maslow need hierarchy pyramid

1. Physiological needs: Physiological needs are the basic needs a person requires in
order to survive. Some examples of physiological needs are water, food, shelter, sleep
etc. If these needs are not fulfilled or satisfied, it will become difficult for a person to
survive.

2. Safety needs: The second level of need is safety needs. Once the physiological needs
of a person have been satisfied, he/ she asks for safety or security in life. The safety
or security needs are concerned with job security, financial security, good health, and
personal security etc.
3. Social needs: Social need is the third level of need. Social need is concerned with the
love and belongingness. A person needs to feel a sense of belongingness and love
either from a large group of social networks or a small group of connected people like
family or friends. This connection can also come from association with some
professional group, social media, religious group etc.
 4. Esteem needs: The fourth level of the need hierarchy is esteem needs. These needs
are concerned with a person esteem that is respect, status, prestige, and validation
by others etc. It is also termed as self- esteem which means how a person feels for
himself. Lack of this esteem may result into inferiority complex or low confidence
level.

Self- actualization needs: Self- actualization needs are the most advanced or highest level of
needs of a person. At this level a person feels that his full potential has been utilized and
he/she has reached to the best of his/ her capabilities. However, this self- actualization feeling
is transient since people tend to strive for personal growth throughout their lives.

MOTIVATIONAL TECHNIQUES FOR THE SALESPERSONS

A firm is unlikely to build successful sales even with the best of the product or a service, if its
salesforce is not motivated to make sales. Therefore, marketers must aim at keeping their
salesperson motivated, enthusiastic, and encouraged. The marketer may develop or adopt
certain tools or techniques to keep his salesforce motivated. Some tools and techniques of
motivation are discussed below:

FINANCIAL MOTIVATORS
A person can be motivated using both financial and non- financial tools. Some of the financial
tools of motivation are as follows:

1. Remuneration: Remuneration is the salary or pay given to the employees.

Remuneration is given according to the level or position at which an employee is
working. Firms use remuneration as a tool to keep their employees motivated. They
often offer regular yearly increment in the salary or pay to motivate their employees.

2. Bonuses: Bonus is another tool used by various firms to keep their employees
motivated. Bonus is a form of extra income that an employee gets above his basic
salary or pay. For instance, a firm declared an INR 10000 bonus over the basic salary
to the top 5 salespersons of the year. This way the salesperson is motivated to sell
 more so as to get bonus in the end.

3. Commission: Some firms offer commissions to their employees to keep them

motivated. A commission is an additional percentage of pay over the basic pay. For
instance, a marketer announced that the salesperson will be given a 10% commission
on the profits earned by the firm on the car sold by them.
4. Promotion: Promotion refers to an increase in the authority and responsibility of an
employee along with an increase in the pay or remuneration of the employee.
Promotion is used as a motivational tool by the employees.
5. Fringe benefits: Apart from the above monetary benefits, firms often offer other
monetary benefits to the employees in the form of fringe benefits. Fringe benefits
involve benefits like free car parking, accommodation by the company, holiday
allowance, mobile phone by the company, etc.

NON- FINANCIAL MOTIVATORS

Some non- financial motivators are as follows:

6. Job security: Job security is a significant tool of motivation. A temporary worker or

employee is motivated the most with job security than any other tool of motivation.
A worker or employee no matter what monetary and other fringe benefits they are
getting, if they do not have a secure job there is always a risk of losing the job which
demotivates an employee to perform at his/her full capacity.

7. Challenging work: Challenging work always motivates a dynamic employee or worker

as they may not order doing routine job. A firm should always focus at making a work
challenging through job enlargement and job redesigning.
8. Recognition: An employer must appreciate his employee or worker for his hard work.
A mere token of appreciation or few words of appreciation can boost the morale of
the employee to perform even better in future.
9. Opportunities for Advancement: An employer must ensure that there is no stagnation
in the growth of his employee specially at the prime time of the employee’s career.
Management must give opportunity to their employee to grow so as to keep them
motivated.
 10. Empowerment: The management must ensure a representation of the workers or
employees in the critical issues of the firm. They must try to avoid unilateral decisions.
Workers or employees must be involved in the decision- making process as this will
provide them a feeling of belongingness with the company or firm.

The key factors that influence sales force motivation

One of the most crucial aspects of marketing success is the ability to motivate the sales force
to perform at their best. Salespeople are the frontline representatives of a company, and their
performance can have a significant impact on the customer satisfaction, loyalty, and retention.
However, motivating the sales force is not a simple or straightforward task, as it involves
various factors that can influence their behavior, attitude, and motivation. Some of the key
factors that can affect the sales force motivation are:
- Compensation: The compensation system is the primary way of rewarding the sales force
for their efforts and results. It should be designed to align the sales force's goals with the
company's objectives, and to provide incentives for achieving or exceeding the targets. A well-
designed compensation system can also foster a sense of fairness, equity, and recognition
among the sales force. For example, a company can use a combination of fixed salary,
commission, bonuses, and non-monetary rewards to motivate the sales force based on their
performance, skills, and experience.
- Training: The training program is the main way of developing the sales force's knowledge,
skills, and abilities. It should be tailored to the specific needs and challenges of the sales force,
and to the characteristics and expectations of the customers. A well-designed training
program can also enhance the sales force's confidence, competence, and professionalism. For
example, a company can use a variety of methods such as online courses, workshops,
coaching, and mentoring to train the sales force on the product features, benefits, and value
proposition, as well as on the sales techniques, strategies, and ethics.
- Leadership: The leadership style is the key way of influencing the sales force's behavior,
attitude, and motivation. It should be adapted to the situation and the individual, and to
the culture and values of the company. A well-adapted leadership style can also foster a sense
of trust, respect, and support among the sales force. For example, a company can use a mix
of directive, supportive, participative, and achievement-oriented leadership styles to motivate
the sales force based on their level of maturity, autonomy, and motivation.
- Culture: The culture is the underlying way of shaping the sales force's norms, beliefs, and
values. It should be consistent with the vision and mission of the company, and with the needs
and preferences of the customers. A well-consistent culture can also create a sense of identity,
belonging, and pride among the sales force. For example, a company can use a combination
of symbols, stories, rituals, and ceremonies to communicate and reinforce the culture to the
sales force, such as the company logo, motto, history, awards, and events.

What is sales compensation?

Sales compensation is the mix of pay and rewards that sellers receive based on their job
performance. It includes their regular salary — typically calculated as annual pay — and other
financial incentives, like commissions for sales and bonuses for reaching targets. These aim to
motivate and reward effective sales efforts.

What are sales compensation plans?

Sales compensation plans are detailed guides that break down how sellers earn their pay.
These plans usually specify base salary, commission rates for sales made, and bonuses for
hitting or exceeding sales targets. They can also include other incentives like profit sharing or
stock options.
Sales compensation plans are commonly based on specific goals like the number of deals
closed, revenue targets hit, or customer retention rates achieved. Essentially, these plans map
out how a sales team’s performance is rewarded and how it serves the broader goals of the
company.

Why are sales compensation plans important?

Would you be willing to take a job without knowing what to expect for earnings? If you don’t
have a clear compensation plan, that’s exactly what you’re asking sales reps to do. If you want
to attract and retain talented salespeople, it’s crucial to be fair and transparent about their
pay.
Our State of Sales report found the top reason sales reps want to leave their job is unrealistic
sales targets. The number two reason is uncompetitive pay/benefits. A Pew Research
Center report points to inadequate pay as the main reason for leaving a job, according to 56%
of employees. This shows how crucial it is for your company to get your sales compensation
plan right.

What is the purpose of a sales compensation plan?

A well-designed sales compensation plan does more than just outline potential earnings. It
sets clear expectations, inspires your team, and drives them toward individual and
organizational goals. This clarity in compensation fosters a stable and focused team, ensuring
everyone is working toward the same objectives. It’s not just about paying salaries; it’s about
creating an environment where salespeople feel valued, which in turn helps drive business
success.
Common sales compensation plan terms
As you begin to develop your organization’s sales compensation plan, you’ll run across various
terms and concepts. Here are some that are helpful to know:
Sales quota: A sales quota is a specific sales target that a salesperson needs to achieve within
a set period, such as a month or quarter. For example, if a sales rep has a quota of Rs 100,000
in sales for a quarter, they need to sell enough products or services to meet or exceed that
amount.
Sales accelerators: Sales accelerators are incentives that increase a salesperson’s commission
rate once they surpass their sales quota. For instance, a rep might earn a 5% commission on
sales, but if they exceed their quota by 20%, their commission might increase to 7% on all
sales beyond that quota.
Sales decelerators: Sales decelerators decrease the commission rate when a salesperson fails
to meet their minimum quota. If a salesperson only achieves 75% of their quota, their
commission rate might be reduced from 5% to 3% on those sales.
Clawbacks: Clawbacks occur when a salesperson must return a portion of their commission
due to specific events. For example, if a rep earns a commission for a sale but the customer
cancels the order within a month, the rep might have to return the commission they received
for that sale.

On-target earnings (OTE): OTE refers to the total compensation a salesperson can expect to
earn if they meet their sales targets. It includes both their base salary and expected
commissions. For instance, if a sales role has an OTE of Rs 70,000 per year, it means the rep
can expect to earn this amount in total, provided they hit their sales goals.
Sales performance incentive fund (SPIF) or sales contests: These are additional incentives
designed to motivate salespeople over a short period. A company might offer a bonus (SPIF)
for the first three salespeople who reach a certain sales target within a month, like a Rs500
bonus for selling a new product line.
Commission vs. bonus: Commission is a payment based on the number of sales a person
makes, often noted as a percentage. For example, a 5% commission on a Rs 1,000 sale would
be Rs 50. A bonus, on the other hand, is a fixed reward for achieving specific goals, unrelated
to the number of sales. For instance, a salesperson might receive a Rs 200 bonus for signing
up 10 new customers, regardless of the total sales value.

Types of sales compensation plans

Sales compensation plans can look pretty different from one company to another, depending
on the sales team’s structure, their resources, and the company’s goals. Some companies
might give their salespeople a bigger regular salary, while others might put more emphasis on
earning commissions. Here are the common formulas:
Salary + commission: Salary plus commission is one of the most common ways to pay sales
reps. It combines a base salary with extra earnings from commissions. This mix offers
salespeople a reliable income, plus the chance to earn more based on how much they sell. It’s
a win-win for businesses, too, as it attracts driven salespeople. The commission rate usually
depends on the job’s complexity and the salesperson’s role. For example, roles with less
customer influence or overall complexity typically have lower commission rates. In most cases,
the total earnings for a rep split salary and commission 60/40 (60% base salary and 40%
commission), but it can vary. For example, it might be 70/30 for more complex sales roles
where the rep needs to educate the customer about the product.
Fixed percentage-based commission: This plan pays sales reps a set percentage of each sale
they make. It’s straightforward: Sell more, earn more. For instance, if the commission is 5%,
and a rep sells Rs1,000 worth of products, they earn Rs 50. It’s simple and predictable.
Tiered commission: In a tiered commission structure, the commission rate increases as
salespeople hit higher sales levels. It’s kind of like a game where each level up brings greater
rewards. For example, a rep might earn 5% on initial sales, but this could jump to 7% once
they surpass a certain sales amount. It’s great for motivating reps to push their limits.
Bonus plan: A bonus plan offers additional pay for meeting specific targets or completing
certain tasks. Unlike commission, bonuses are fixed amounts given for specific achievements,
like closing a certain number of deals or hitting a sales milestone. It’s a direct way to incentivize
particular goals.

Territory volume: In this plan, commissions are based on the total sales within a rep’s
assigned territory. It encourages reps to maximize sales across their entire area, not just
individual clients. For example, a rep might earn a percentage of the total sales in their region,
promoting a sales strategy that reaches a broader clientele.
Set rate commission: Sales reps earn a fixed amount for each item sold or deal closed in a set
rate commission plan. It’s very straightforward — sell a product, earn a set amount. This works
well for products or services with consistent pricing, encouraging volume selling.
Relative commission: This plan bases a rep’s commission on their performance relative to
their peers. It’s competitive, as reps earn more by outperforming others. For instance, the top
performers in a sales team might earn higher commissions than those with lower sales,
fostering a competitive environment.

5 steps to build an effective sales compensation plan

Sales compensation isn’t a one-size-fits-all deal. Every sales team member deserves a
compensation plan that’s tailored just for them, taking into account their specific role,
experience, how long their sales cycle usually is, and the type of deals they handle. As Justin
Lane, VP of professional services at Forma.ai, put it: “A strong compensation plan should be
aligned with company goals, simple to understand and communicate, and give sales reps and
managers target objectives to work toward.”
1. Understand and prioritize the goals for your business
Before designing a compensation plan, identify what you want to achieve. Whether it’s
increasing overall sales, keeping more customers (reducing churn), getting more business from
current customers, launching new products, or changing existing customer contracts, your
plan should encourage these outcomes. For instance, if expanding revenue from current
customers is a goal, the plan could include bonuses for upselling.

2. Build a sales compensation plan team

When building comp plans, the more departments you involve, the more people trust the
plan. Involving people from different departments, like finance, sales, and operations, makes
your plan more balanced and trusted. Different perspectives help create a plan that’s realistic
and aligns with company goals. Involving sales reps in the process ensures they understand
and buy into the plan, too.
3. Choose your type of sales compensation plan
A balanced compensation plan includes both a stable base salary and performance-based
incentives. Refer to the list of sales compensation plan types to see common examples.
Whichever one you choose, your sales compensation plan should be sustainable, meaning the
goals set for reps should be achievable and in line with industry standards. Of course, you
should avoid setting targets that are too low or too high, as this can lead to high turnover or
unsustainable business practices. Regularly review your plan to ensure it aligns with industry
standards and is fair for all reps.

4. Balance plan components and weights

Your plan should be easy to understand and focus on achievable targets. Tailor incentives to
each sales role, ensuring that reps are rewarded for their individual performance and
contributions. Incorporating team goals can also motivate collective effort, but the primary
focus should be on individual achievements.

5. Communicate and monitor your plan

Transparency in compensation is crucial. Without a doubt, you need to make sure your sales
team understands how and why they’re paid in a certain way. Regular communication and
adjustments are necessary to keep the plan effective and relevant. Involve your team in
discussions about the compensation plan to ensure it meets their needs and aligns with
business goals.