Questions: A producer wants to increase the amount of time its sales reps spend on supporting activities. It also wishes to keep its sales reps motivated and aggressive, without completely removing income security. Which payment plan should the firm use?

The answer is combination plan.

A straight commission plan pays sales reps solely based on the sales they generate. While this can motivate reps to be aggressive in pursuing sales, it does not provide income security, which is a concern for the producer.

A straight salary plan provides income security by paying a fixed salary regardless of sales performance. However, it may not sufficiently motivate sales reps to be aggressive in their sales efforts, as there is no direct financial incentive tied to sales performance.

A bonus plan offers additional financial incentives based on achieving certain targets or performance metrics. While it can motivate sales reps, it may not address the need for income security as effectively as other options.

A stock plan involves offering company stock as part of the compensation package. While this can align the interests of sales reps with the long-term success of the company, it may not provide immediate income security or directly motivate aggressive sales behavior.

A combination plan typically includes a base salary (providing income security) along with commissions or bonuses (motivating aggressive sales behavior). This plan effectively balances the need for income security with the desire to keep sales reps motivated and aggressive, making it the most suitable choice for the producer's goals.