Part 3 · FMCG trade practice · Chapter 3.16
Salesman incentives
Draft: the wording may change.
The idea
A salesman does what the incentive pays for. Pay only on sales value and he will push the easiest product into the biggest shops on credit. A good incentive pays for four things together — value, the focus product, collection and coverage — so that the easy way to earn it is also the right way to run the beat.
The four parts
| Part | What it rewards | What goes wrong without it |
|---|---|---|
| Value (by brand) | Total sales of the brand against a target | — |
| Focus SKU | Sales of one product the company or you want to grow | Only fast movers get sold; new packs die |
| Collection | Bills paid within the credit days | Sales on credit that never come back |
| Coverage | Number of shops billed, new shops opened | Big shops get all the visits; small ones drop away |
An SKU (stock keeping unit) is one exact product and pack — cream biscuit 75g is one SKU, cream biscuit 150g is another.
At the counter
Kumar sells the biscuit company's range. His November incentive sheet:
| Part | Target | Achieved | Rule | Earned |
|---|---|---|---|---|
| Value | ₹6,00,000 | ₹5,58,000 (93%) | Below 90%: nil · 90–99%: ₹2,000 · 100% and above: ₹3,500 | ₹2,000 |
| Focus SKU: cookies 100g | 60 cases | 72 cases | ₹15 per case sold | ₹1,080 |
| Collection within credit days | 90% | 94% | ₹1,000 if 90% or more | ₹1,000 |
| Outlets billed | 208 of 260 (80%) | 210 (81%) | ₹800 if target met | ₹800 |
| New outlets | — | 6 | ₹50 each, after their second bill | ₹300 |
| Total | ₹5,180 |
Two rules sit on top of the sheet:
- The collection gate. If collection is below 85%, the whole incentive is halved. Sales that don't come back are not sales.
- The second-bill rule. A new outlet counts only after it orders a second time. Otherwise a salesman can "open" a shop with one small bill and never return.
Write the rules down and give a copy to every salesman before the month starts. A rule announced on the 30th is not an incentive; it is a surprise.
Who pays
Some companies pay their own incentive to salesmen who work only on their brand, based on the company's targets. The stockist often pays a second incentive on top, on the stockist's own rules. If both exist, make sure they don't pull in opposite directions — for example, the company paying on primary loading while you pay on collection. Incentive is part of the salesman's pay, so it goes through payroll with the rest of his salary (chapter 2.7).
Common mistake
Paying on billing value alone. On the 27th, Kumar is ₹42,000 short of his target. He bills ₹45,000 of glucose biscuit into four friendly shops on 15 days' credit. He earns the slab. In December, two shops return half the stock, one pays late, and you have paid ₹1,500 of extra incentive for sales that came back. The collection gate and a "net of returns" rule close this door.
Where you'll use this
In Part 4, the incentive sheet is calculated from the bills, receipts and returns already in the system, so Kumar can see his position every day instead of arguing about it at month-end (chapter 4.7).
Check yourself
- Why does a value-only incentive lead to bad credit?
- What is a focus SKU, and why pay extra for it?
- Why should a new outlet count only after its second bill?
Answers
- The salesman is paid when he bills, not when the money comes in, so he pushes stock on credit to reach his target.
- One product and pack chosen to grow — usually a new or slow product — paid extra so it doesn't get ignored in favour of fast movers.
- So a salesman can't earn by opening a shop with one small bill and never going back; the second bill shows it is a real customer.