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An Empirical Analysis of Sales-Force Compensation Plans


  • Coughlan, Anne T
  • Narasimhan, Chakravarthi


Among the array of direct and indirect methods of motivation and control available to the sales manager is sales-force compensation. In this article, the authors summarize theoretical predictions from the economics, marketing, finance, and accounting literatures on the structure of optimal sales-force compensation plans. Guided by these insights, they then construct empirical models to quantify the effect of various sales-force factors, firm and product factors, and market factors on compensation. Using data from 286 firms in 39 industries, the authors examine determinants of incentive components and total pay and the optimal horizon for incentive pay. Copyright 1992 by University of Chicago Press.

Suggested Citation

  • Coughlan, Anne T & Narasimhan, Chakravarthi, 1992. "An Empirical Analysis of Sales-Force Compensation Plans," The Journal of Business, University of Chicago Press, vol. 65(1), pages 93-121, January.
  • Handle: RePEc:ucp:jnlbus:v:65:y:1992:i:1:p:93-121

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    References listed on IDEAS

    1. Marco Pagano, 1989. "Endogenous Market Thinness and Stock Price Volatility," Review of Economic Studies, Oxford University Press, vol. 56(2), pages 269-287.
    2. Robert J. Shiller, 1984. "Stock Prices and Social Dynamics," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 15(2), pages 457-510.
    3. De Long, J Bradford & Andrei Shleifer & Lawrence H. Summers & Robert J. Waldmann, 1990. "Noise Trader Risk in Financial Markets," Journal of Political Economy, University of Chicago Press, vol. 98(4), pages 703-738, August.
    4. John Y. Campbell & Albert S. Kyle, 1993. "Smart Money, Noise Trading and Stock Price Behaviour," Review of Economic Studies, Oxford University Press, vol. 60(1), pages 1-34.
    5. Kyle, Albert S, 1985. "Continuous Auctions and Insider Trading," Econometrica, Econometric Society, vol. 53(6), pages 1315-1335, November.
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    Cited by:

    1. Thomas Steenburgh, 2008. "Effort or timing: The effect of lump-sum bonuses," Quantitative Marketing and Economics (QME), Springer, vol. 6(3), pages 235-256, September.
    2. David B. Balkin & Jérôme Côté & Michel Tremblay, 1998. "Explaining Sales Pay Strategy Using Agency, Transaction Cost and Resource Dependence Theories," CIRANO Working Papers 98s-28, CIRANO.
    3. Mrinal Ghosh & George John, 2000. "Experimental Evidence for Agency Models of Salesforce Compensation," Marketing Science, INFORMS, pages 348-365.
    4. Todd R. Zenger & Sergio G. Lazzarini, 2004. "Compensating for innovation: Do small firms offer high-powered incentives that lure talent and motivate effort?," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 25(6-7), pages 329-345.
    5. Fabio Caldieraro & Anne T. Coughlan, 2009. "Optimal Sales Force Diversification and Group Incentive Payments," Marketing Science, INFORMS, vol. 28(6), pages 1009-1026, 11-12.
    6. Julia Heidemann & Marcus Kaiser & Mathias Klier & Florian Probst, 2012. "Customer lifetime value-based sales force control in the financial services industry— an incentive-compatible remuneration model," Metrika: International Journal for Theoretical and Applied Statistics, Springer, vol. 23(1), pages 27-51, September.
    7. Foss, Nicolai J. & Laursen, Keld, 2005. "Performance pay, delegation and multitasking under uncertainty and innovativeness: An empirical investigation," Journal of Economic Behavior & Organization, Elsevier, vol. 58(2), pages 246-276, October.
    8. Krafft, Manfred, 1997. "An empirical investigation of the antecedents of salesforce control systems," Manuskripte aus den Instituten für Betriebswirtschaftslehre der Universität Kiel 454, Christian-Albrechts-Universität zu Kiel, Institut für Betriebswirtschaftslehre.
    9. Murali Mantrala & Sönke Albers & Fabio Caldieraro & Ove Jensen & Kissan Joseph & Manfred Krafft & Chakravarthi Narasimhan & Srinath Gopalakrishna & Andris Zoltners & Rajiv Lal & Leonard Lodish, 2010. "Sales force modeling: State of the field and research agenda," Marketing Letters, Springer, vol. 21(3), pages 255-272, September.
    10. Jozée Lapierre & Bernard Sinclair-Desgagné, 2004. "An Empirical Investigation of Perceptual Incongruence Between Sales Managers and Salespeople as to Sales Force Control System Application," CIRANO Working Papers 2004s-10, CIRANO.
    11. repec:kap:sbusec:v:50:y:2018:i:1:d:10.1007_s11187-017-9885-3 is not listed on IDEAS
    12. Wan-Ju Franz, 2014. "Why are Some Salespeople More Aggressive than Others?," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 42(4), pages 383-397, December.
    13. Canice Prendergast, 1996. "What Happens Within Firms? A Survey of Empirical Evidence on Compensation Policies," NBER Working Papers 5802, National Bureau of Economic Research, Inc.
    14. Albers, Sonke, 1996. "Optimization models for salesforce compensation," European Journal of Operational Research, Elsevier, vol. 89(1), pages 1-17, February.
    15. Albers, Sönke & Krafft, Manfred, 1995. "Zur relativen Aussagekraft und Eignung von Ansätzen der neuen Institutionenlehre für die Absatzformwahl sowie die Entlohnung von Verkaufsaußendienstmitarbeitern," Manuskripte aus den Instituten für Betriebswirtschaftslehre der Universität Kiel 375, Christian-Albrechts-Universität zu Kiel, Institut für Betriebswirtschaftslehre.
    16. Joaquim Vergés, 2010. "Incentive schemes for executive officers when forecasts matter," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 31(5), pages 339-352.
    17. John Rust & Richard Staelin, 2011. "Rust’s and Staelin’s Comments on: “A structural model of sales force compensation dynamics: estimation and field implementation” by Sanjog Misra and Harikesh Nair," Quantitative Marketing and Economics (QME), Springer, vol. 9(3), pages 259-265, September.
    18. Banker, Rajiv D. & Lee, Seok-Young & Potter, Gordon, 1996. "A field study of the impact of a performance-based incentive plan," Journal of Accounting and Economics, Elsevier, vol. 21(2), pages 195-226, April.

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