Answer to Question 1
The three major types of sales compensation methods are straight salary compensation plan, straight commission compensation plan, and combination compensation plan.
The straight salary compensation plan:
There are many advantages of the straight salary compensation plan. It gives salespeople security and sales managers control over salespeople. It is easy to administer and yields more predictable selling expenses.
There are also a few disadvantages of the straight salary compensation plan. It provides no incentive, necessitates closer supervision of salespeople, and during sales declines, selling expenses remain constant.
The straight commission compensation plan:
One of the advantages of the straight commission compensation plan is that it provides maximum amount of incentive. By increasing commission rate, sales managers can encourage salespeople to sell certain items. Another advantage is that selling expenses relate directly to sales resources.
There are also a few disadvantages to the straight commission compensation plan. Salespeople have little financial security. Sales managers have minimum control over sales force. It may cause salespeople to give inadequate service to smaller accounts, and selling costs are less predictable.
The combination compensation plan:
Some of the advantages of combination compensation plan are provision of certain level of financial security, some incentive, and movement of sales force efforts in profitable direction.
The disadvantages of combination compensation plan are less predictability of selling expenses and chances of difficulty in administering.
Answer to Question 2
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