Deck 9: Sales Force Compensation

Question 1

In sales compensation,the level of earnings is the total amount of money paid to a rep for a given period of time;the method of compensation is the plan by which the workers reach the intended level.

Answer 1

True

Question 2

A sales compensation plan is closely related to a company's strategic marketing planning,but has no direct bearing on the implementation of a marketing plan.

Answer 2

False

Question 3

Frequently companies so not change their compensation to match changes in their strategies.

Answer 3

True

Question 4

An ideal sales compensation plan will provide a maximum of incentive and security for the sales force,but these goals are mutually incompatible.

Question 5

If a company is a new high risk venture,then its compensation should have a very low percentage of at-risk income to compensate for the company's level of risk.

Question 6

Experts recommend that the incentive reward for outstanding performance should be twice the average incentive payout.

Question 7

The best signal that your compensation plan isn't working is that several of your best salespeople quit.

Question 8

Many companies do not differentiate top performance from average performance in terms of salary.

Question 9

Some companies individualized their sales objectives.

Question 10

Compensation is the second most widely used method of motivating the sales force.

Question 11

Although designing an effective sales compensation plan is a difficult task,most companies generally are satisfied with their sales compensation plans.

Question 12

One of the most difficult of all goals in a sales compensation plan is to correlate efforts,results,and rewards.

Question 13

Companies only develop one standardized compensation plan for their salespeople.

Question 14

Management cannot design a sales compensation plan that has both stability and flexibility.

Question 15

The objectives of a good compensation plan should be viewed only from the company's perspective.

Question 16

Enjoyment of the job is a type of non-financial incentive.

Question 17

Many companies offer salespeople some choice in how they are compensated.

Question 18

Most sales compensation plans are based only on factors controllable by the salespeople and objectively measurable.

Question 19

Customer satisfaction measures are commonly used as a factor in compensation determination.

Question 20

There should be only one sales compensation plan in a company at any one time.

Question 21

With regard to compensation,which of the following is true?

A)Companies change their compensation plans more frequently than they change their strategies.
B)Compensation plans should be reviewed frequently to make sure that they are consistent with strategies.
C)Most firms change their compensations plans at least once in two years.
D)Firms should only change their compensation program when the salespeople are dissatisfied.
E)All of these are true

Question 22

A progressive commission rate might well lead to high pressure selling tactics by a sales force.

Question 23

A straight salary is a good plan for compensating sales reps if management wants these people to give proper consideration to customers' interests.

Question 24

By using a combination of salary and commission for the sales compensation plan,management can avoid the administrative problems connected with split commissions.

Question 25

A straight salary plan is the most widely used method for compensating a sales force.

Question 26

In a sales force compensation plan,an example of indirect financial compensation is:

A)Salary payment.
B)Paid vacation.
C)Field supervision.
D)Christmas cash bonus.
E)Air-conditioned office.

Question 27

Companies rarely place limits on the earnings of their salespeople.

Question 28

It is a good idea to pretest a compensation plan and introduce it to the sales force before the plan is installed on a permanent basis.

Question 29

Role-reward congruence means that every sales team member should be paid using the same method.

Question 30

If the sales reps are satisfied with the method and level of direct monetary payments,they usually are not concerned about indirect monetary rewards.

Question 31

A company is likely to use a salary plan for paying sales recruits during a training program.

Question 32

A straight commission plan is a good one for encouraging the reps to perform a fully balanced sales job.

Question 33

In designing compensation plans in recent years,there has been a shift in emphasis away from sales volume alone toward profitable sales volume.

Question 34

Reimbursement for travel and other sales expenses incurred by salespeople should be built into a combination pay plan.

Question 35

A straight commission plan based on sales volume is payment for performing a unit of work,and the plan constitutes a direct (variable)expense for management.

Question 36

According to the text,medical insurance is one of the most widely used company paid fringe benefit for salespeople.

Question 37

Ordinarily management can control and guide the activities of its salespeople better under a salary plan than under a commission compensation plan.

Question 38

In sales force compensation,a bonus is a payment for a unit of time rather than for a unit of accomplishment.

Question 39

Management is likely to use a straight salary plan for its sales force when the company wants to provide considerable incentive for the reps.

Question 40

Salespeople paid by straight commission usually have a lower turnover rate for personnel than those do paid by straight salary.

Question 41

The most common choice that companies give salespeople with regard to their compensation is:

A)What their commission rate should be .
B)What their salary will be.
C)How frequently they will be paid.
D)What percentage of their compensation will be salary versus commission.
E)Whether or not they will receive a bonus.

Question 42

From the company's perspective,a good compensation plan should:

A)Motivate the salesperson.
B)Control the activities of the salesperson.
C)Insure proper treatment of customers.
D)All of these.
E)None of these.

Question 43

When designing a sales compensation plan,which of the following management tools is likely to be most helpful?

A)A carefully designed territorial structure.
B)Patterned interviews.
C)Job description.
D)Company sales forecast.
E)Centralized sales training program.

Question 44

Which of the following is a characteristic of a good pay plan for salespeople?

A)Plan provides a compromise between security and incentive pay.
B)Plan is flexible enough to meet the needs of individual territories and product groups.
C)Plan is simple to understand,yet economical to administer.
D)All of these.
E)Only two of A-B-C are found in good pay plans.

Question 45

From the salesperson's perspective,the compensation plan should:

A)Be fair.
B)Insure proper treatment of customers.
C)Attract and keep competent people.
D)Control salespeople's activities.
E)Be economical.

Question 46

A compensation plan:

A)Will not incorporate customer satisfaction as a measure of performance because it is too hard to measure.
B)Will not use customer satisfaction as a measure of performance because customers are not comfortable with providing this information.
C)Will use customer satisfaction as a measure in the evaluation of overall performance,but will not reward salespeople for high performance on this dimension.
D)Will increasingly use customer satisfaction as a measure of performance in compensation determination.
E)Always includes some measure of customer satisfaction.

Question 47

Which of the following is an example of the level of earnings,in contrast to the method of compensation?

A)The reps are paid a straight salary.
B)The pay plan includes generous insurance profits.
C)Ten percent of the reps earn more than $50,000 a year.
D)People on straight commission do not get a paid vacation.
E)None of these.

Question 48

Experts recommend that the incentive potential for outstanding performance compared to average performance should be:

A)Slightly above that of average performance.
B)No more than a $10,000 bonus for outstanding performance.
C)Three times that of average performance.
D)Twenty percent more than that of average performance.
E)No more than a $5000 bonus for outstanding performance.

Question 49

Regarding the relationship between sales force compensation plans and strategic planning:

A)The pay plan has a direct bearing on the implementation of the strategic marketing plan.
B)The strategic planning depends upon whether the sales force is paid a salary or a commission.
C)The level of pay should guide the planning.
D)Compensation is tied directly to the evaluation stage of the planning process.
E)None of these is correct.

Question 50

As one of its goals,a good plan for paying salespeople should:

A)Equate efforts and rewards.
B)Result in a sales rep selling the same dollar volume in each product line.
C)Help management to direct the activities of the sales force.
D)Equate level and method of compensation.
E)Discourage a salesperson from spending time on non-selling activities.

Question 51

In four of the following pairs of concepts regarding compensation plans,the ideas are mutually incompatible or diametrically opposite.In which pair is there no conflict?

A)Plan should maximize salespeople's income and minimize company outlay.
B)Plan should provide greatest degree of security and incentive.
C)Plan should be extremely flexible yet simple and easy to administer.
D)Plan should provide both a competitive level and a competitive method of compensation.
E)Plan should encourage maximum effort in selling and non-selling activities by salespeople.

Question 52

All of the following are steps in designing a sales compensation plan except:

A)Identify the plan's objectives.
B)Develop the method of compensation.
C)Pretest and Install the plan.
D)Review job description.
E)All the above are part of designing a sales compensation plan.

Question 53

In which of the following situations is the tactical implementation most consistent with the strategic planning?

A)The strategy of introducing a new product to increase market share is implemented by paying the salespeople a straight commission.
B)When the strategy calls for aggressive selling to liquidate excess inventories,management offers the reps a larger commission.
C)To provide extra service to hold existing accounts,management increases its emphasis on commission payments.
D)The strategy of attracting the top level of graduating college students is implemented by paying lower starting salaries with prospects for future increases.
E)There really is no relationship between compensation tactics and marketing strategies.

Question 54

In an individualzed compensation plan:

A)Each salesperson receives a different salary depending upon his/her sales results.
B)Each salesperson receives a different bonus depending upon her/his reaching their sales quotas.
C)Each salesperson receives a bonus depending upon his/her reaching an individualized sales target.
D)Each salesperson decides what percentage of their compensation should be salary and incentive based.
E)Each salesperson decides on which activities his/her bonus should be based.

Question 55

An illustration of the method of compensation,as contrasted with the level of pay,is:

A)Sales reps are paid a salary plus 5 percent commission on sales.
B)The top half of our sales reps average $1,500 a month in total earnings.
C)The average pay of our sales reps is 10 percent above the average received by our unionized production workers.
D)Our top sales rep earned $70,000 last year.
E)None of these is an example of method of pay.

Question 56

A good plan for compensating a sales force should:

A)Strive to correlate a sales representative's rewards with his or her results and efforts.
B)Provide a regular (steady)income or an incentive income,but not try to do both.
C)Equate the level and the method of compensation.
D)Discourage a sales representative from spending time on non-selling activities.
E)Not be used to control sales force activities.

Question 57

Which of the following features is least likely to be found in a good sales compensation plan?

A)The plan provides a regular income plus some incentive pay.
B)The plan is fair to both management and the sales force.
C)The plan provides a competitive level of pay.
D)The basic plan is changed frequently in order to provide flexibility.
E)The plan is economical to administer.

Question 58

_________ is an example of a non-financial element in a sales force compensation plan:

A)A market share based bonus.
B)An honor citation from the president of the firm.
C)A paid vacation of three weeks a year.
D)A commission based business from new customers.
E)A company-paid retirement program.

Question 59

Successful companies in the 21^st century:

A)Will reward selling as much as possible.
B)Will primarily reward maintaining market share.
C)Will reward immediate results.
D)Will reward gaining customers with fewer calls.
E)Will reward building customer share over the long term.

Question 60

Which of the following is an example of conflicting goals in a sales force compensation plan?

A)Provide security of income to sales representatives,but open new markets.
B)Develop a plan that is both flexible and fair to the sales representatives.
C)Design an extremely flexible plan,yet one which also is simple to understand and easy to administer.
D)Provide a competitive level and a competitive method of compensation.
E)None of these involves a conflict of goals.

Question 61

Sales personnel are paid in a variety of ways.Under which of the following situations would a straight salary plan be the most advisable?

A)A high level of incentive is needed to get the sales.
B)Very little non-selling missionary work is required.
C)The company is opening a new sales territory.
D)The company is unable to supervise the sales force.
E)Straight salary is not appropriate in any of the above situations.

Question 62

Which of the following is a trend in sales force compensation today?

A)A greater use of salary only plans.
B)Incentive pay for performance is a bigger component of compensation.
C)A greater use of incentive pay for organizational citizenship behaviors.
D)A greater use of bonuses for meeting volume targets.
E)A greater use of commission only plans.

Question 63

An advantage of the straight salary plan for compensating salespeople is that it:

A)Has no administrative problems.
B)Is good for providing stability of income to a salesperson during the developmental stage of a territory or product.
C)Enables management to reduce the amount of field supervision.
D)Provides a direct relationship between sales volume and salary expense.
E)Offers a sales rep much freedom of operation.

Question 64

Which of the following factors is least likely to influence the level of sales force compensation?

A)The firm's financial position.
B)The method of compensation.
C)The age of the salespeople.
D)The level of pay of factory and office workers in the firm.
E)The size of the company.

Question 65

With regard to designing sales team compensation:

A)Peer evaluations can be used to identify individual performance.
B)There should be role-reward congruence.
C)There should be some shared reward.
D)Input from team members should be sought during the design.
E)All of these.

Question 66

The most widely used pay plan for sales forces today is:

A)Straight commission.
B)Variable-percentage commission.
C)Salary plus some incentive feature.
D)Salary plus fringe benefits (vacation,pension,etc. ).
E)None of these.

Question 67

Which of the following is the best reason for having no ceilings on a sales rep's potential earnings?

A)A rep should receive full financial benefit from all windfall sales.
B)It will encourage sales managers to get out in the field and do more selling.
C)It is good for executives' morale.
D)Good sales reps should always earn more than their boss.
E)The more a rep earns,the more the company makes,especially when the company is paying with some type of commission plan.

Question 68

All of the following normally are considered to be elements (building blocks)in a sales compensation plan,except:

A)Commission.
B)Bonus.
C)Sales contest with cash prizes.
D)Salary.
E)Insurance and pension plans.

Question 69

Which of the following are trends in sales force compensation today?

A)A greater use of the commission only plan.
B)Compensation incentives related to profitable sales.
C)Compensation based on customer satisfaction.
D)A greater use of salary only compensation plans.
E)Both B and C are trends.

Question 70

Regarding the level of sales force compensation:

A)A sales force with some incentive in its compensation plan is likely to have a higher average pay than a sales force on straight salary.
B)Compensation levels vary considerable among different industries
C)Sales reps' pay levels generally have no relation to the reps' age.
D)All of these are true.
E)Only two of the A-B-C are correct.

Question 71

A competitive limitation to the straight salary plan for compensating a sales force is that:

A)It offers little direct incentive for the salespeople.
B)Management has more difficulty controlling the activities of the sales force.
C)It is the highest cost plan of all the major types.
D)Usually it is not simple to understand or economical to administer.
E)It usually is not workable when the job entails only missionary activities.

Question 72

Which of the following is a major trend today in sales force compensation?

A)Straight commission plans are increasing as a percentage of total plans.
B)Companies are designing plans which stress customer satisfaction rather than straight sales volume.
C)The average level of pay is decreasing.
D)Fringe benefits are not being used as much as in the past.
E)Combination plans are declining in popularity.

Question 73

Which of the following job elements is hardest to measure objectively in a sales force compensation plan?

A)The value of the salespeople's efforts spent in training their customers' sales force.
B)The reps' entertainment expenses.
C)The gross margin by product line that a rep contributes.
D)The volume of sales received over the phone or by mail.
E)The number of calls made on new accounts.

Question 74

An advantage of the straight salary plan for compensating salespeople is that it:

A)Offers considerable incentive for the salespeople.
B)Provides a direct relationship between sales and expenses.
C)Is good for a financially weak company.
D)Helps management to control salespeople's activities.
E)Does not provide security,so the reps will work harder.

Question 75

In the design of a compensation plan,a factor over which a sales rep has some control,but which cannot be measured objectively is:

A)Orders from new accounts.
B)Gross margin by product line.
C)Number of product demonstrations made.
D)Number of shelf and window displays obtained.
E)Customer goodwill developed toward company.

Question 76

In many companies,incentive pay for developing long term customer relationships is often set as high as:

A)10 percent
B)15 percent
C)20 percent
D)25 percent
E)30 percent

Question 77

The sales compensation plan that typically provides maximum security and stability of earnings for most sales reps is:

A)Straight commission.
B)Straight salary.
C)Salary plus commission.
D)Salary plus bonus.
E)Commission plus fringe benefits.

Question 78

A salesperson is least likely to earn more than the sales executives when the sales force pay plan is:

A)A straight commission.
B)A commission with a guaranteed drawing account.
C)A salary plus commission on net sales.
D)A straight salary.
E)A salary plus commission on gross margin.

Question 79

Which of the following is the best argument in favor of placing a limit on a salesperson's earnings?

A)Salespeople should not receive financial benefit from "windfall" sales over which they had no influence.
B)It is good for executives' morale.
C)A sales representative should not be able to earn an outrageous sum of money.
D)It encourages a sales representative to work harder.
E)It helps the company control sales costs.

Question 80

An example of a specific objective for a sales compensation plan is to:

A)Obtain 25 new accounts over the next six months.
B)Increase sales of Product A by 15 percent over last year's total.
C)Stimulate missionary selling activities - especially conduct ten training clinics for leader sales reps and make 25 product demonstrations.
D)All of these are specific goals.
E)Only two of A-B-C are correct.