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Motivation by Commission Based Pay

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Motivation by Commission Based Pay

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  • October 9, 2012
  • 4490 Words
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Introduction:

In today’s competitive environment, companies are constantly striving to survive and grow by pushing their sales department to grow sales and in turn their bottom line. As a great motivational tool, most companies that rely stronly on their sales force will use incentives contracting such as commission based pay.

According to Washington (2009) , commisions are “a form of variable pay by which staff earn a cut of the income they create for their employer”. As a result, the company directly links its perfomance to those of its sales staff so that their income is dependent on the company’s sucess.

According to Interest and Octaviani (2009), a selling agent has two direct tasks: (1) prospecting for customers and (2) advising on the product’s suitability for the specific needs of the customers. Consumers usually rely on information and advice provided by representatives of a seller when purchasing unfamiliar products. Therefore, having a knowledgable and ethical sales force is key to having a high customer service company that will lead to customers being satisfied.

Yet comanies fail to realize that having their sales staff on commission based pay will only increase sales and higher profits in the short-term. Long-term it will have a negative effect on the company’s reputation and growth. This paper will argue that having a company’s sales force on commission-based pay will lead to lower customer satisfaction and in turn hurt the company’s bottom line. As customers become aware of fradulent selling techniques, customers will loose trust with the company, decreasing customer satisfcaion. This will, in turn, lower custoer service brand image and therefore, loss of those customer. As a result, the company’s sales and profits will decrease.

This paper will start by first discussing the benefits of commission based pay such as having a transparent reward structure, having access to resulr oriented employees and having the ablity to share...