Q.Explain the three basic methods of remunerating salesmen, with their merits and demerits.

There are three basic methods of paying salesmen — straight salary, straight commission, and the combination of salary plus commission.

There are three basic methods of remunerating salesmen.

1. Straight salary method — the salesman is paid a fixed sum at regular intervals regardless of sales.

• Merits: a secure, steady income; simple to calculate; suits cases where sales cannot be traced to one salesman or where he does non-selling duties (opening territories, servicing customers); and the firm controls how his time is used.
• Demerits: no direct incentive to sell more, so an inefficient salesman is paid like an efficient one; hard workers may feel it unfair; selling cost stays fixed even when sales fall.

2. Straight commission method — the salesman is paid only a commission, a percentage of the sales (or profit) he makes, with no fixed salary.

• Merits: a strong incentive, since earnings rise with sales; selling cost varies with sales, so the firm pays only for results; it rewards the efficient salesman.
• Demerits: income is uncertain and may be very low in a slack period, creating insecurity; salesmen may neglect non-selling duties and push for quick sales over long-term goodwill; unsuitable for new salesmen.

3. Combination method (salary plus commission) — a fixed salary plus a commission on sales above a certain level. It is the most widely used because it combines the advantages of the other two. …

Give both merits and demerits for each method as asked; a common error is to describe only the methods without their advantages and disadvantages. Bonus a …