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A Practical Approach to Sales Compensation: What Do We Know Now? What Should We Know in the Future?

Author

Listed:
  • Chung, Doug J.
  • Kim, Byungyeon
  • Syam, Niladri B.

Abstract

Personal selling represents one of the most important elements in the marketing mix, and appropriate management of the sales force is vital to achieving the organization’s objectives. Among the various instruments of sales management, compensation plays a pivotal role in motivating and incentivizing sales agents. This monograph reviews the evolution of research in sales compensation and discusses future trends and opportunities. Specifically, it examines the managerial relevance of the theoretical foundations, discussing the underlying reasons for their applicability (or lack thereof) in practice. Furthermore, the monograph surveys recent empirical methods—including field experiments and structural econometrics—that are practical for analyzing sales agents’ behavior under various compensation systems. It also discusses prominent areas of future research in the midst of a changing sales environment. In particular, this monograph sheds light on how the use of big data, machine learning, and artificial intelligence can affect sales strategy formulation and, thus, sales compensation systems to better motivate and incentivize an organization’s sales force.

Suggested Citation

  • Chung, Doug J. & Kim, Byungyeon & Syam, Niladri B., 2020. "A Practical Approach to Sales Compensation: What Do We Know Now? What Should We Know in the Future?," Foundations and Trends(R) in Marketing, now publishers, vol. 11(1), pages 1-52, June.
    • Handle: RePEc:now:fntmkt:1700000063
    DOI: 10.1561/1700000063
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    References listed on IDEAS

    as
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    2. Charles B. Weinberg, 1975. "An Optimal Commission Plan for Salesmen's Control Over Price," Management Science, INFORMS, vol. 21(8), pages 937-943, April.
    3. Viswanathan, Madhu & Li, Xiaolin & John, George & Narasimhan, Om, 2018. "Is cash king for sales compensation plans? Evidence from a large-scale field intervention," LSE Research Online Documents on Economics 87158, London School of Economics and Political Science, LSE Library.
    4. Charles B. Weinberg, 1978. "Jointly Optimal Sales Commissions for Nonincome Maximizing Sales Forces," Management Science, INFORMS, vol. 24(12), pages 1252-1258, August.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    sales compensation; sales management; sales strategy; principal-agent theory; structural econometrics; field experiments; machine learning; artificial intelligence;
    All these keywords.

    JEL classification:

    • M31 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Marketing

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