Collegiate Promotions
Evaluate whether or not the compensation system at Collegiate Promotions is effective.
At Collegiate Promotions, independent sales representatives have a great deal of autonomy. They have freedom to work when and where they choose and the ability to structure their own pricing within guidelines provided by the company. It is a very effective compensation system for the company, since sales representatives pay an initial $300 fee for start-up materials. Sales reps are independent contractors and not employees, so they cost the employer absolutely nothing. For ambitious sales reps, this system of at-risk compensation system can be very rewarding. Individuals who already have contacts as well as individuals who are savvy Web users may have a distinct advantage in their ability to reach potential customers more quickly. As AUTHORS (p. 459) point out, "Money is not the most important consideration for many employees." For those who desire independence and want or need flexibility, working for Collegiate Promotions can be ideal. There are drawbacks, however. The most obvious is the correlation between effort and income. Because the sales reps are not employees of Collegiate, they do not receive any health benefits, nor can they participate in a company-sponsored retirement plan. It is incumbent upon the individual to budget for state and federal income taxes. For Collegiate, the current compensation system is highly cost-effective and virtually risk-free. A sales representative must weigh the pros and cons of working within Collegiate's structure. It could be the perfect job for someone...
Profit margins for Collegiate's products are small, so unlike salespeople who sell cars or real estate, the commissions will probably be insufficient to support an individual, much less a household.
2. Discuss reasons a sales representative would try to sell at both the top and the bottom of the price range.
A sales rep may enjoy higher sales if s/he gives customers volume discounts. Selling more items at the bottom price range may be more lucrative than selling fewer items at the top of the price range. Experience in the field will guide a sales representative in determining what is best for the market served.
3. Predict whether the most sales are made at the top or bottom of the range of possible prices. Explain your prediction.
With exclusive territory, each salesperson would have total freedom in setting prices. Customers who wanted Collegiate Promotions items would have to pay the going rate. They would not have an alternative other than finding comparable items from another company, if such products were available. However, since Collegiate's salespeople have unrestricted territories, they can undercut one another's prices in order to appeal to buyers. This writer predicts that most sales would be made at the bottom of the range of possible prices. Particularly in the current tough economy, shoppers are looking for the best prices they can find on the items they want. Collegiate's products are "wants," not "needs," so buyers can afford to…
