Value Creation

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Topics: Sales
Identify and describe the categories of value creation on which Best Value currently relies most. Identify and describe the categories of value creation on which Best Value currently relies most

Straight commission is a “pay for performance plan” where monetary compensation is strictly tied to the results achieved by the salesperson. It is best used when maximum time is provided for the salespeople to sell while non-selling tasks are minimized. Ordinarily, commissions are in direct correlation and proportionate to the value or volume of completed sales transactions made by the salesperson. Since financial compensation plans are offered as motivational incentives to inspire and energize the sales force to achieve greater results, it is assumed that the higher commissions earned from performance will also produce higher profits for the company (Hoffman, 2007). Because straight commissions are directly paralleled with performance outcome, it is believed that salespeople are motivated to attain a higher level of selling effort (Johnston & Marshall, 2009).

The advantage of paying employees on a straight commission basis is that they provide maximum incentives for the salesperson. Straight commissions tend to reward high achievers while discouraging poor performance from salespeople with low productivity. For the company, higher commissions can be used to direct the sales team toward certain products that may produce a higher profit. In addition, it limits the amount of working capital because the business does not pay high wages for their salespeople unless they generate high sales revenues (Johnston & Marshall, 2009).

The disadvantage of paying employees on a straight commission basis is that salespeople have very little financial security because their income is unstable and difficult to predetermine. In difficult economic times, employee turnover is greater because salespeople cannot earn a living on a low income from poor sales. When compensation



References: Campbell, K., Davis, L., & Skinner, L. (2006). Rapport management during the exploration phase of the salesperson--customer relationship. Journal Of Personal Selling & Sales Management, 26(4), 359-370 Cherry, P Erffmeyer, R. C., Russ, K., & Hair Jr., J. F. (1991). Needs assessment and evaluation in sales-training programs. Journal Of Personal Selling & Sales Management, 11(1), 17-30. Hoffman, J Johnston, M. & Marshall, G. (2009). Relationship selling. Boston. McGraw Hill Johnston M Kahle, D. (February 2008). Are there best practices for salespeople? American Salesman 53, 2, February 2008, pp. 11–15 Livingston, J Paparoidamis, Nicholas G., and Paolo Guenzi (2009). An empirical investigation into the impact of relationship selling and lmx on salespeople’s behaviours and sales effectiveness. European Journal of Marketing, 43 (7–8), 1053–1075. Pigues, K., Alderman, J. (2010). Winning with customers: A playbook for b2b. Hoboken, N.J.: John Wiley & Sons, Inc. Ryan, R. M., & Deci, E. L. (2000). Intrinsic and extrinsic motivations: Classic definitions and new directions. Contemporary Educational Psychology, 25, 54-67. Retrieved from http://mmrg.pbworks.com/f/Ryan,+Deci+00.pdf Salovey, P., Mayer, J Sorce, P. (September 2002). Relationship marketing strategy. Manuscript submitted for publication, Rochester Institute of Technology, Rochester, NY. Retrieved from http://print.rit.edu/pubs/02_04_sorce.pdf Watts, D Wealth Engine. (September 2010). Best practices for prospect research in healthcare fundraising. 2010 Healthcare Report. 2nd ed. Bethesda: MD White, H Yeung, R. (2001). Anyone can sell. How To Books, Ltd.

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