The Impact of Incentive Compensation on the Salesperson's Work Habits: An Economic Model

Abstract

This paper provides a theoretical framework for assessing the likely impact of variations in the remuneration level on a salesperson's income and sales. It is shown how salespeople who display various behavioral responses to financial incentives should have different sets of values for two observable and measurable elasticities e_i and es (elasticities of income and sales with respect to remuneration). The behavioral responses to financial incentives under consideration are: Salespersons are (1) money sensitive, (2) unresponsive to financial incentives, (3) leisure sensitive, (4) income satisfiers, and (5) “irrational”. The theory can be applied by observing and measuring the two elasticities e_i and e_s, and then inferring salespeople's work habits. The theory is consistent with some empirical data. Practical and normative implications for sales force motivation, compensation plan design, and recruiting are discussed.     

Incentive Salience and Improved Performance

Using data from 441 call center employees at a large North American financial services firm, we studied how the frequency of thinking about an incentive available for performance led to increased output on an important performance metric. We find that people think more frequently about noncash tangible incentives (merchandise and travel) than cash incentives and that as the frequency of thought increases, performance increases. This leads to a larger performance boost for tangible incentives compared to a cash incentive of equal purchasing power. These results show an additional benefit from the use of tangible incentives and help answer the question regarding the psychological processes which make incentives motivating.     

The Performance Effects of Outcome-Based Incentive Pay Plans on Sales Organizations: A Contextual Analysis

The contextual role of sales volatility, the complexity of customers’ purchase decisions, and the level of monitoring on the performance impact of incentives are examined. Results reveal that the use of an incentive plan is positively related to all three dimensions of organizational performance. This relationship is moderated positively by the customers’ purchase decisions and negatively by sales volatility and monitoring. In addition, the contextual role of sales volatility, the complexity of customers’ purchase decisions, and the level of monitoring differ according to the performance measure used. Implications of the findings are presented, followed by limitations and future research directions.     

Sales Managers' Perceptions of Gray Markets: The Role of Incentives,Channel Dependence,and Type of Gray Market

The objective of this paper is to develop an empirical understanding of sales managers' perceptions of gray markets, that is, exclusive territory violations. We examine a number of factors that can affect these perceptions and then make recommendations about how senior management can align actions on gray markets by changing aspects of the contexts in which sales managers operate. Specifically, we develop a typology of gray markets and use the typology in conjunction with the constructs of distributor dependence and managerial incentives to make predictions regarding sales managers' positive or negative perceptions of gray markets. We test these predictions with a within-subjects, full-factorial experiment that incorporates role-playing by experienced managers. Most of the predictions are supported by the analysis and we develop recommendations based on these results involving compensation design and distributor dependence by which top management can achieve consensus within firms about managing gray markets.     

How does commuting behavior change due to incentives? An empirical study of the Beijing Subway System

This study examines the impact of incentives on commuters’ travel behavior based upon a questionnaire survey conducted with respect to the Beijing Subway System. Overall, we find that offering incentives to commuters, particularly fast food restaurant-related services and reduced ticket fares, has a positive influence on avoiding the morning rush hour. Furthermore, by using an interaction analysis, we discover that a flexible work schedule has an impact on commuters’ behavior and the efficiency of the subway system. Finally, we recommend two possible policies to maximize the utility of the subway system and to reduce congestion at the peak of morning service: (1) a set of incentives that includes free wireless internet service with a coupon for breakfast and a discount on ticket fares before the morning peak and (2) the introduction of a flexible work schedule.     

Compensation and Control Systems: A New Application of Vertical Dyad Linkage Theory

Compensation and control systems offer much for study. In this paper, we provide directions for future research by considering the system of influences that operate to shape salesperson behavior in the presence of formal and informal systems attempting to influence behaviors and outcomes. By applying vertical dyad linkage theory to the issue of control, we illustrate how the field remains fertile for continued study to improve the understanding of how incentives influence sales managers, salespeople, and customers. Of particular interest is the interplay between superiors and subordinates across sales force management layers and in the context of compensation/control. Further, the chain of linkages extends to customers, also providing fruitful opportunities for research.     

Coupon or my privacy: How consumers choose to disclose their personal information and accept mobile location-based advertising (LBA) through privacy calculus

With their capacity to track geo-specific location information rapidly expanding, the practice of location-based advertising (LBA) is becoming increasingly prevalent. While LBA can provide relevant and financial benefits, concerns about data collection and privacy are also on the rise. In the following two experiments, based on the privacy calculus theory and parallel mediation analyses, an explanatory framework is presented to lay out how consumers choose to disclose their personal information and accept LBA depending on location congruent levels of a mobile ad message by assessing the benefits as well as costs of disclosing personal information. In Study 1 (N = 186), it was found that both perceived benefits and costs fully mediated the experimental effects of location congruence (congruent vs. incongruent) on intentions to disclose personal information as well as accept LBA practice. In Study 2 (N = 230), a 2 (location congruence: congruent vs. incongruent) × 2 (sales promotion: yes vs. no) factorial experiment was conducted. The results from moderated mediation analysis showed that privacy concerns due to location tracking disappeared when sales promotion was offered. These results indicate that consumers' information disclosure and LBA acceptance can be understood as a trade-off between incentives and privacy issues in which privacy concerns can be alleviated when financial benefits are offered.     

Hybrid sales structures in the age of e-commerce

Sales organizations continue to exhibit meaningful changes in their structures during the e-commerce era. This article examines the impact of Internet technology on the evolution of sales organizations and identifies key components underpinning a successful hybrid sales structure. A comprehensive review of sales organization studies leads to the derivation of a hybrid sales structure model, as well as a series of key recommendations pertaining to the organization and sales performance. These findings establish a platform for further research into the hybrid sales structure. The transition from a reliance on traditional, outside sales forces to a concomitant use of inside sales personnel produces hybrid sales structures that can accommodate online buyer–seller interactions and also leverage technological advances in sales automation and business intelligence to boost sales performance.     

Sales manager cost control engagement: antecedents and performance implications

Many organizations face competing agendas by which they are expected to simultaneously grow sales output while controlling associated costs. At the interface of this organizational pressure and the sales force’s implementation of such initiatives is the sales manager. However, questions with significant implications remain regarding how a sales manager’s requisite engagement with cost control affects sales performance. To address this issue, the authors conceptualize and operationalize the notion of sales manager cost control engagement. Results from a survey of 178 business-to-business sales managers show the antecedent and consequence effects of sales manager cost control engagement. A variety of organizational factors are shown to effectively direct the sales manager’s attention to cost control, which in turn has a positive impact on cost-related sales performance. These findings add to an emergent body of research aimed at understanding key skills required of sales managers for driving sales performance as well as provide a novel perspective for sales managers to consider when balancing pressures between cost inputs and sales outputs. Several theoretical and managerial implications are offered, as are future research directions.     

Drug Abuse in the Sales Force

Drug abuse in the workplace is a national problem of frightening proportions and there is no reason to suspect that the nations's sales forces should be immune. This study examines the problem of sales force drug abuse and reports the findings of a nationwide survey of field sales managers concerning the extent of drug abuse in the nation's sales forces, the methods of dealing with the problem, and factors related to drug abuse problems in the sales force. Implications for sales managers, sales management educators and trainers, and researchers in the field of sales and sales management are also discussed.     

A qualitative study of leader behaviors perceived to enable salesperson performance

Abstract

This study builds on and extends previous sales leadership research by exploring sales professionals’ perceptions of effective leadership behaviors. Semistructured interviews with both sales leaders and salespeople working in a global enterprise software company were examined through a qualitative analysis. Results indicated that participants believed sales leadership played an important role in influencing sales performance. When asked to describe specific sales leader behaviors that best enable salesperson performance, sales professionals – both sales leaders and salespeople – overwhelmingly referenced coaching, followed by collaborating, championing, and customer engaging. We define and describe these four key sales leader behaviors and identify four potential mediating variables (trust, confidence, optimism, and resilience), from which emerges a conceptual framework of sales leader behaviors perceived to enable salesperson performance. We examine these four key sales leader behaviors and mediators in the broader context of leadership theory, particularly transformational, servant, authentic, and adaptive leadership theories. The key contribution of this study is the identification of a set of leader behaviors that are likely to be especially effective in modern sales organizations given that they originated from the perceptions of sales professionals themselves.     

Personal Selling and Sales Management in the Marketing Curriculum: A Status Report

This article reviews the offering of sales and sales management courses over the last few decades. More schools currently offer the sales management course than the sales course, but sales is more frequently required as a part of the marketing major. Larger, public, AACSB accredited schools tend to offer both courses more than smaller, private, nonaccredited schools. Many schools were reportedly dropping these courses in the 1960s and early 1970s, and this study found that the trend has continued overall when considering only the separate courses. An important growing trend is a combined sales/sales management course, and when it is also considered a slight overall increase in courses in the sales and sales management area seems to be the pattern emerging in the 1980s.     

Sales Management’s Influence on Employment and Training in Developing an Ethical Sales Force

Because it is believed sales performance can be enhanced through ethical behaviors, increasingly, emphasis is being placed on understanding unethical behaviors among key customer-contact employees and the environment in which these sales professionals engage clients. In this context, understanding how the direct supervision of the sales force (sales managers) can shape the ethical behavior of salespeople may be a critical controllable key to understanding unethical sales behaviors that offers upper management strategic opportunities to enrich customer relationships. In this framework of understanding unethical sales behaviors, 240 sales managers were surveyed to determine their impact on unethical sales behaviors. The results indicate that although the overall ethical climate influences ethical attitudes of sales managers, importantly, these managerial attitudes impact ethical training and hiring evaluations of the sales force. Further, the positive relationship found between the ethical attitudes of sales managers and their hiring evaluation criteria affects unethical sales force behaviors. Detailed implications of the results are presented in the study.     

Gravity biases in a non-human primate?

Pre-school children expect falling objects to travel in a straight line even when there are clear physical mechanisms that deviate the object's path (Hood, 1995). The current study set out to determine whether this expectancy is limited to humans. Cotton-top tamarins (Saguinus oedipus oedipus), a New World monkey species, were tested on Hood's (1995) experimental task where objects are dropped down a chimney connected by an opaque tube to one of three containers. Like human children, there was a significant tendency to search in the container underneath the chimney where the food was dropped on the first trial, even though aligned chimneys and containers were never connected. These search errors suggest that there may be a gravity bias that operates when both primate species fail to understand the constraints operating on object trajectories. Unlike human children however, tamarins were generally more likely to perseverate in making errors even though repeated testing and cost incentives were used.     

Predicting Sales Performance Criteria With Personality Measures: The Use of the General Factor of Personality,the Big Five and Narrow Traits

The present study investigated the predictive validities of different hierarchical levels of personality for sales performance. The General Factor of Personality was expected to be most effective at predicting general sales performance, whereas the Big Five factors and its underlying narrow traits were expected to be most effective at predicting the specific sales performance criteria to which they are conceptually aligned. Six different sales performance measures were used in an international study involving 405 sales employees. The results suggest that General Factor of Personality is a valid predictor of general job performance but that some of the aligned narrow personality traits predict specific sales performance above and beyond the Big Five factors. The narrow trait Social Boldness has a negative relation with rated sales performance and sales results.     

Selling and Sales Management in Action: Attitudes and Applications of Quotas by Sales Executives and Sales Managers

A survey of 186 sales managers and executives revealed that in setting sales quotas, factors such as the sales territory and the support provided by the manager were considered more important than the past performance of the sales representative. As would be expected, in an inspection of general opinions about sales quotas, the managers demonstrated a preference for linking the sales quota to the compensation of the salesperson.     

Macro sales force research

The call for more macro sales force research where the sales force as a whole is the unit of analysis, which was raised in “The Strategic Role of the Sales Force,” is revisited in this article. Technology, consolidation, government policies, the evolution of organizational strategy are dramatically changing the role of the sales force and the daily lives of salespeople. Yet, it is estimated that no more than 5%, and probably less, of sales and sales management research examines these developments. To shine a light on this, a case study of a health-care company that has changed its strategic focus from a product to a solutions provider is presented. Changes in the role of the sales force are examined within the five sales force capabilities identified in the “The Strategic Role” article. Research questions are raised about sales force capabilities.     

AN OBJECTIVE EVALUATION OF A BEHAVIOR MODELING TRAINING PROGRAM

Past research on the effects of behavior modeling training has rarely focussed on actual changes in job performance. This paper describes a study in which results of a behavior modeling training program for sales representatives were evaluated in relation to effects on the sales performance of the participants. Sales associates selling large appliances, radios, and television sets for a large chain retailer in seven stores in one metropolitan area participated in a behavior modeling training program designed to improve their sales effectiveness. Before and after comparisons were made in their sales records with similar sales associates in seven matched stores who participated in other kinds of sales training during the same period. Sales representatives who received the behavior modeling training increased their sales by an average of 7% during the ensuing six-month period, while their counterparts in the control group stores showed a 3% decrease in average sales. The extra effort entailed in obtaining the needed sales records seemed to be worthwhile in providing convincing evidence of the value of the training.     

A taxonomy for financial services selling

The financial services industry accounts for almost half of the country’s nonfarm, commercial profit, making the industry a major driver of the economy. Prior to this study, limited information was available to evaluate financial services sales activities, and a taxonomy of sales activities for individuals in the financial services industry had not previously been conducted. Prior empirically developed sales taxonomies did not include service firms and specifically financial services, while focusing on manufacturing and other product sales. Given that taxonomies are a critical step in scientific inquiry, this is a major limitation in the literature hindering the development of a better understanding of this important industry. Using an established methodology and a seminal sales taxonomy, a financial services sales taxonomy was conducted. Results reflect that financial services sales positions differ from those in other industries. Six sets of sales activities (factors) along with six job positions (clusters) were identified.