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Designing salesforce compensation programs to improve pricing execution

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  • Stephan M. Liozu

    (Case Western Reserve University, Weatherhead School of Management)

Abstract

Despite progress over the past few years, the pricing function has far to go to reach the maturity of other business disciplines. In the area of pricing execution, also known as price getting, many firms do not fully realize the potential of their pricing strategies and are instead stuck in a zone of good intentions. Often, this lack of strategy-execution results is due to issues with salesforce compensation plans and how they might be encouraging the wrong behaviors. As the pricing and sales literature remains silent on the connection between pricing execution and salesforce compensation, we conducted qualitative interviews with 12 pricing executives to inform the relationship between the two constructs and to identify best practices in the design of salesforce compensation plans to improve pricing execution. Our results highlight the sensitivity of the topic of changing salesforce compensation and the need to add pricing as part of a basket of variables, to consider a 2- to 3-year transition period, and to embrace critical change-management considerations. Finally, the need for accurate and transparent pricing information is essential to the design of these profit-driven salesforce compensation plans.

Suggested Citation

  • Stephan M. Liozu, 2018. "Designing salesforce compensation programs to improve pricing execution," Journal of Revenue and Pricing Management, Palgrave Macmillan, vol. 17(1), pages 11-19, February.
    • Handle: RePEc:pal:jorapm:v:17:y:2018:i:1:d:10.1057_s41272-017-0131-z
    DOI: 10.1057/s41272-017-0131-z
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    References listed on IDEAS

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    1. Birendra K. Mishra & Ashutosh Prasad, 2004. "Centralized Pricing Versus Delegating Pricing to the Salesforce Under Information Asymmetry," Marketing Science, INFORMS, vol. 23(1), pages 21-27, January.
    2. Stephan M Liozu, 2016. "The evolution and future of pricing capabilities," Journal of Revenue and Pricing Management, Palgrave Macmillan, vol. 15(3), pages 306-316, July.
    3. Rajiv Lal, 1986. "Technical Note—Delegating Pricing Responsibility to the Salesforce," Marketing Science, INFORMS, vol. 5(2), pages 159-168.
    4. Frenzen, Heiko & Hansen, Ann-Kristin & Krafft, Manfred & Mantrala, Murali K. & Schmidt, Simone, 2010. "Delegation of pricing authority to the sales force: An agency-theoretic perspective of its determinants and impact on performance," International Journal of Research in Marketing, Elsevier, vol. 27(1), pages 58-68.
    5. Pradeep Bhardwaj, 2001. "Delegating Pricing Decisions," Marketing Science, INFORMS, vol. 20(2), pages 143-169, September.
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    Cited by:

    1. Stephan M. Liozu, 2021. "The adoption of pricing from an organizational perspective and its impact on relative firm performance," Journal of Revenue and Pricing Management, Palgrave Macmillan, vol. 20(4), pages 390-402, August.

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