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MGT607: SALES MANAGEMENT Tutorial

1.      Define motivation and tell how and explain sales managers concern with motivation.

  • If the product is right, sales force selection, organization & training is right, and then motivation becomes the critical determinant of success.
    • M is critical because SP operate in very demanding environment.
    • 2nd reason is that most SP is not under direct supervision.
    • Motivation is an individual’s willingness to exert effort to achieve the organization’s goals while satisfying individual needs.

To boost up the employees work and increasem in the employees work.

2.      Describe the basic model of the motivation process?

Studies show that the amount of effort a person puts into an activity depends on the interplay of 3 factors:

  1. The relationship between effort & performance
  2. The relationship between performance & rewards
  3. The importance of receiving more of a certain reward.

3.      Distinguish between Hierarchy of needs and ERG theory of motivation?

Maslow’s hierarchy categorizes human needs into physiological, safety, social, esteem, and self-actualization needs. ERG theory is a modification of Maslow’s hierarchy, where the five needs are collapsed into three categories (existence, relatedness, and growth).

  • Explain the different types of quotas and the administrative issues involved?

Administering Quotas

  • Quotas are usually based on: past, forecasted, potential sales & individual & SP’s territory.
  • Basing quotas strictly on sales potential may not always be workable.
  • Must consider environmental factors as competition, size of customers & organizational factors as advertising support, & SP factors as experience, ability.
  • Administration issues – incentive programs can be very powerful motivators, they must be properly planned & executed. Need a theme for the contest. Should encourage an average SP to put in extra effort. Should be highly promoted.

5.      Describe how to design an incentive and recognition programs?

Incentive Programs

  • Are short term promotional events intended to inspire SP to a greater than usual performance level & provide them rewards.
  • Goals & timings – obj may include more than just producing overall increases in sales volume. Goals as finding new customers, boosting sales of special items, counteracting seasonal slumps. Can enhance team building by basing rewards on dept, or teams.

Recognition Programs

  • Recognition & prizes push people closer to their potential than envelopes stuffed with money. This is why all sales mgrs have some sort of recognition program.
  • Differ from incentive programs, they are longer, annually & focus on overall performance rather than sales target.
  • To be successful, recognition programs must become part of company culture.

Tutorial 12

✓       What are the three major objectives of compensation?

  • Describe straight salary and straight commission compensation method?

✓       Briefly describe the various combination compensation plans?

  • Briefly explain each of the following:

•         customer satisfaction and sale force compensation

  • IBM places significant resources toward monitoring customer satisfaction.
    • All customers are surveyed annually on:
  • Overall customer satisfaction
  • The rep’s knowledge of the customer
  • The transaction or solution itself
  • How satisfied the customer is with the solution
  • The installation process (smooth or disruptive), including how long it took
  • The extent and clarity of the education provided
  • The time needed to get the application(s) up and running
  • The capability and speed of technical support
    • Results are benchmarked against prior IBM performance, as well as the competition
    • Results are used for compensating sales reps and managers.

•         team – selling plans

  • profit – based commission

✓       Explain how you would go about setting pay levels?

  • Explain the three types of expense reimbursement programs?

✓       How you would assemble a compensation plan?

Additional Study

Maslow’s Hierarchy of Needs

Abraham Maslow is among the most prominent psychologists of the 20th century and the hierarchy of needs, accompanied by the pyramid representing how human needs are ranked, is an image familiar to most business students and managers. Maslow’s theory is based on a simple premise: Human beings have needs that are hierarchically ranked (Maslow, 1943; Maslow, 1954). There are some needs that are basic to all human beings, and in their absence, nothing else matters. As we satisfy these basic needs, we start looking to satisfy higher-order needs. Once a lower-level need is satisfied, it no longer serves as a motivator.

The most basic of Maslow’s needs are physiological needs. Physiological needs refer to the need for air, food, and water. Imagine being very hungry. At that point, all your behavior may be directed at finding food. Once you eat, though, the search for food ceases and the promise of food no longer serves as a motivator. Once physiological needs are satisfied, people tend to become concerned about safety. Are they safe from danger, pain, or an uncertain future? One level up, social needs refer to the need to bond with other human beings, to be loved, and to form lasting attachments. In fact, having no attachments can negatively affect health and well-being (Baumeister & Leary, 1995). The satisfaction of social needs makes esteem needs more salient. Esteem needs refer to the desire to be respected by one’s peers, feeling important, and being appreciated. Finally, at the highest level of the hierarchy, the need for self-actualization refers to “becoming all you are capable of becoming.” This need manifests itself by acquiring new skills, taking on new challenges, and behaving in a way that will lead to the satisfaction of one’s life goals.

ERG Theory

ERG theory of Clayton Alderfer is a modification of Maslow’s hierarchy of needs (Alderfer, 1969). Instead of the five needs that are hierarchically organized, Alderfer proposed that basic human needs may be grouped under three categories, namely, ExistenceRelatedness, and Growth (see the following figure). Existence need corresponds to Maslow’s physiological and safety needs, relatedness corresponds to social needs, and growth need refers to Maslow’s esteem and self actualization.

ERG theory’s main contribution to the literature is its relaxation of Maslow’s assumptions. For example, ERG theory does not rank needs in any particular order and explicitly recognizes that more than one need may operate at a given time. Moreover, the theory has a “frustration-regression” hypothesis, suggesting that individuals who are frustrated in their attempts to satisfy one need may regress to another one. For example, someone who is frustrated by the lack of growth opportunities in his job and slow progress toward career goals may regress to relatedness needs and start spending more time socializing with one’s coworkers. The implication of this theory is that we need to recognize the multiple needs that may be driving an individual at a given point to understand his behavior and to motivate him.

Two-Factor Theory

Frederick Herzberg approached the question of motivation in a different way. By asking individuals what satisfies them on the job and what dissatisfies them, Herzberg came to the conclusion that aspects of the work environment that satisfy employees are very different from aspects that dissatisfy them (Herzberg, et. al., 1959; Herzberg, 1965). Herzberg labeled factors causing dissatisfaction of workers as “hygiene” factors because these factors were part of the context in which the job was performed, as opposed to the job itself. Hygiene factors included company policies, supervision, working conditions, salary, safety, and security on the job. To illustrate, imagine that you are working in an unpleasant work environment. Your office is too hot in the summer and too cold in the winter. You are being harassed and mistreated. You would certainly be miserable in such a work environment. However, if these problems were solved (your office temperature is just right and you are not harassed at all), would you be motivated? Most likely, you would take the situation for granted. In fact, many factors in our work environment are things that we miss when they are absent, but take for granted if they are present.

In contrast, motivators are factors that are intrinsic to the job, such as achievement, recognition, interesting work, increased responsibilities, advancement, and growth opportunities. According to Herzberg’s research, motivators are the conditions that truly encourage employees to try harder.

Acquired Needs Theory

Among the need-based approaches to motivation, Douglas McClelland’s acquired needs theory is the one that has received the greatest amount of support. According to this theory, individuals acquire three types of needs as a result of their life experiences. These needs are need for achievement, need for affiliation, and need for power. All individuals possess a combination of these needs.

Those who have high need for achievement have a strong need to be successful. A worker who derives great satisfaction from meeting deadlines, coming up with brilliant ideas, and planning his or her next career move may be high in need for achievement. Individuals high on need for achievement are well suited to positions such as sales where there are explicit goals, feedback is immediately available, and their effort often leads to success (Harrell & Stahl, 1981; Trevis & Certo, 2005; Turban & Keon, 1993). Because of their success in lower-level jobs, those in high need for achievement are often promoted to higher-level positions (McClelland & Boyatzis, 1982). However, a high need for achievement has important disadvantages in management. Management involves getting work done by motivating others. When a salesperson is promoted to be a sales manager, the job description changes from actively selling to recruiting, motivating, and training salespeople. Those who are high in need for achievement may view managerial activities such as coaching, communicating, and meeting with subordinates as a waste of time. Moreover, they enjoy doing things themselves and may find it difficult to delegate authority. They may become overbearing or micromanaging bosses, expecting everyone to be as dedicated to work as they are, and expecting subordinates to do things exactly the way they are used to doing (McClelland & Burnham, 1976).

Individuals who have a high need for affiliation want to be liked and accepted by others. When given a choice, they prefer to interact with others and be with friends (Wong & Csikszentmihalyi, 1991). Their emphasis on harmonious interpersonal relationships may be an advantage in jobs and occupations requiring frequent interpersonal interaction, such as social worker or teacher. In managerial positions, a high need for affiliation may again serve as a disadvantage because these individuals tend to be overly concerned about how they are perceived by others. Thus, they may find it difficult to perform some aspects of a manager’s job such as giving employees critical feedback or disciplining poor performers.

Finally, those with high need for power want to influence others and control their environment. Need for power may be destructive of one’s relationships if it takes the form of seeking and using power for one’s own good and prestige. However, when it manifests itself in more altruistic forms, such as changing the way things are done so that the work environment is more positive or negotiating more resources for one’s department, it tends to lead to positive outcomes. In fact, need for power is viewed as important for effectiveness in managerial and leadership positions (Mcclelland & Burnham, 1976; Spangler & House, 1991; Spreier, 2006).

McClelland’s theory of acquired needs has important implications for motivating employees. While someone who has high need for achievement may respond to goals, those with high need for affiliation may be motivated to gain the approval of their peers and supervisors, whereas those who have high need for power may value gaining influence over the supervisor or acquiring a position that has decision-making authority. And, when it comes to succeeding in managerial positions, individuals who are aware of the drawbacks of their need orientation can take steps to overcome these drawbacks.

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