Collegiate promotions distribute products, such as branded mugs and T-shirts to students and alumni member of major universities. The company has hired independent free lancer sales representatives to sell the products in colleges and universities. These agents do not get any basic salary. They are working on commission based system. Higher the sales, higher will b their commission. Moreover, they are not restricted by any means. They can sell into any region, through any channel or marketing strategy. They are also authorized to sell the product within the price range of 30 to 50 percent above the whole sale price.
Evaluate whether or not the compensation system at Collegiate Promotions is effective.
The compensation system at Collegiate promotions is on the basis of sales done by the agent. This type of system has numerous advantages for the representative as well as the company. In the current economy and state of recession and unemployment, this method is highly effective. The company may save the cost of hiring permanent employees and their other expenses, including medical insurance and utilities expense. On the other side, this also motivates the agent to work better as his income will base on the amount of sales he brings for the company.
However, this system also has some limitations and disadvantages associated with it. The agent may take the job for granted. He will never feel himself as part of the organization; therefore, his commitment will be less than those of permanent employees (Osborn, 2005). Since, the agent is working as an independent representative; there is a high possibility that he may leave the job as soon as he gets another opportunity or an office job.
Discuss reasons a sales representative would try to sell at both the top and the bottom of the price range.
Sales representative may set the price of the product as his discretion. He may sell the product above 30 to 50 percent of the price range. It depends upon the skills and strategy of the agent, as to whether he sells at a lower margin or at a higher price. The main motivation behind selling the product at maximum possible price would be the commission that will be generated against it. The more the price, the more will be the commission. For instance, the coffee mug that is sold at USD 15 per piece would ...