Compensating Sales Professionals
Using the background information below, in 400 words and 2 scholarly references, take a look at the unintended consequences that occur with a new product roll out.
From a compensation perspective:
1. Identify the factors that must be considered in this situation
2. Identify how the factors oppose one another from the information provided
3. Make 2 recommendation on how to overcome the issues
Compensating sales professionals is challenging. There are many factors to consider, and some naturally oppose each other. The classic example of this opposition is sales volume versus customer service. You can readily see how these might conflict if sales professionals are rewarded only on volume of sales and not at all on customer satisfaction.
CybrTech Inc. is a mid-sized provider of computer hardware and software that focuses on handheld solutions for service and maintenance organizations. Their maintenance business is primarily in the United States, although they have begun to license sales in several foreign countries. In the U.S., CybrTech uses an in-house sales staff that includes seven professionals in the field and three professionals at the headquarters who connect with customers via phone and website.
The pay structure for the outside sales staff includes both base salary and commission.
Base salary – $28,000
Commission – 5% of gross sales, for both hardware and software. It is typical for a sales professional to produce $800,000 annually.
The pay structure for inside sales staff is a straight salary – $48,000 per year.
All employees receive a competitive benefits package.
CybrTech’s primary product is a handheld device, the M1. The M1 stores information about heating, ventilating and air conditioning (HVAC) systems, parts inventories, safety concerns, and other information pertinent to completing maintenance and repairs on large and complex mechanical systems. The product has been on the market for about eight years and enjoys a good reputation.
About a year ago, CybrTech launched a new product, the M2, which has many more features than the M1. The M2 has a web-based application that allows for real-time interface with technical support, and a work order program that fully captures costs of all maintenance and repairs.
The company’s business plan for the M2 planned to replace about 15% of the existing M1s and also sell an additional 500 units to new customers in the first year. The results are not even close to expectations.
To further complicate the problem, customer feedback on the M2s in use is not good, with the primary complaint being ‘the M2 is too complicated’.
The sales of the M1 have remained steady.
The executive team has met to try to get to the bottom of the slow M2 sales. To prepare, they asked for input from the sales staff.
Input from outside sales:
The M2 does work and provides additional features, but the customers don’t seem to think it is worth the cost to upgrade.
We seldom can get time to walk them through all the features. And if a customer gives us the time, it means we only see one customer that day.
Input from inside sales:
We are really here to help customers, and to sell additional features, we cannot sell the M2 over the phone because its features are difficult to explain.
We are spending most of our time trying to help those who have purchased a unit. The outside sales team is not giving these customers enough training.
Prior to the rollout, the M2 was demonstrated to focus groups comprised of current customers and potential customers. The M2 received excellent evaluations.