Evaluating compensation system effectiveness at Collegiate Promotions

Compensation Benefits

Evaluate whether or not the compensation system at Collegiate Promotions is effective.

If a company wants to introduce a new product to market in a quick way, but has rigid funds they have the option of utilizing an independent sales representative model. This allows a company to use representatives in their business to cut expenses and increase sales over the phone or enter into new markets or territories. Companies use representatives as direct sellers in order to show and eventually sell products in high amounts. Not only is direct selling an economical way to market and spread a good, but it can also help in the recruiting endeavor as well (How to Work With Independent Sales Reps, 2011).

The compensation system at Collegiate Promotions is effective for them since it keeps their cost low and yet allows for them to sell a lot of their products. They don't have to expense out a lot of money for training and/or brick and mortar sales office. Each representative pays for their own materials in order to get started and then is responsible for selling the products by way of whatever channel they chose. The compensation that each rep gets is completely dependent on how many sales they make. So the more product that they sell the more money they make and thus the more money that Collegiate Promotions makes in the end.

2. Discuss why a sales representative would try to sell at the top of the price range? Why at the bottom of the price range?

A sales representative would try to sell products at the top of the price range because the more that they sell the product for the more commission that they make. This is because of the Wholesale plus pricing strategy that the company uses. This strategy allows for the sales representative to sell products at thirty to fifty percent higher than wholesale and then receive a commission of half the amount charged over the wholesale price.

Sales representative may choose to sell at the bottom of the price range so that they can sell more quantity. The more products that they sell the more commission they stand to make. Products that are priced cheaper are more likely to sell than higher prices items. Thus a lower price will lead to more sales.

3. Do you predict that most sales are made at the top or bottom of the range of possible prices? Explain.

My prediction is that the majority of sales are made at the bottom of the possible prices. Consumers are always looking for ways to save money, so the cheaper the price that they can find for a product the more likely they are to buy it. In today's economy people often find themselves with less disposable income to spend after they have paid their bills. Items that bear a college logo would be considered luxury items and not something that would be necessary to buy. Because of this, the cheaper that a product is the more likely that one would be to buy it with the disposable income that they have left. Thus products priced at the lesser end of the price range would be higher sellers.

4. Discuss how the lack of geographically protected sales areas affects salesperson's behavior.

Geographic sales territories reduce account conflict. Salespeople can't argue over accounts because an account is either located in the geographic territory or it's not. Since all opportunities are protected, a hungry sales rep is locked out of them. Also, networking leads and account referrals may have to be turned over to the salesperson that controls the geographic territory.

Open sales territories on the other hand are effective because they benefit aggressive sales representatives. Everyone is working in a snooze and lose environment. There are many benefits to Open Sales Territories. High sales activity gets rewarded. However, one needs firm and consistent rules concerning when and how a salesperson can claim involvement in and ownership of an opportunity. There are some downsides to Open Sales Territories. Open Sales Territories generate a lot of I was there first arguments. In addition, time management decreases because sales reps start driving up and down the entire area in order to locate sales (The Best and Most Effective Sales Territory Designs, 2011).

5. How committed do you think the independent contractor are to Collegiate Promotions?

Independent sales representatives are going to be as committed to Collegiate Promotions as their paycheck warrants. In order to become a sales representative for Collegiate Promotions they have to pay $300 in order to receive their initial materials. This is not a lot of money to invest but could be a lot for some people. If a person finds that they can easily sell the product and they are making a lot of money they will continue to sell and thus be more committed to the company than maybe someone else would be.