Essays on the management and compensation of the salesforce

Abstract

This dissertation focuses on topics within the salesforce area and is written in the form of three essays. Essay one examines the optimal allocation of resources in the firm-salesperson system and considers two applications. In the first, we address the problem of determining the optimal level of resource allocation when its productivity is private information. We demonstrate that it is feasible to design a menu of contracts such that the salesperson will utilize his superior information to self-select into the contract desired by the firm. In the second application, the focus of our research is to provide insights and prescriptions regarding the amount of advertising resources and sales incentives that should be employed over the different stages of the product life cycle of an industrial product. The second essay empirically examines the factors which affect salesforce retention. We examine if the existence of a bonus component in the sales compensation structure can enhance salesforce retention. We also study the impact of total sales compensation on salesforce turnover. We find that bonus payments do enhance salesforce retention among firms whose total compensation is above industry average but not among firms whose total compensation is below industry average. Further, we examine the role of training, non-financial motivational tools, age, education, and length of the selling cycle on salesforce turnover. In the third essay, we report findings from tests of hypotheses pertaining to the selection and structure of salesforce control systems. We find that uncertainty in the selling process, length of the selling cycle, the need for prospecting activities, the amount of sales support expenses, and knowledge of the effort-sales relationship all positively influence a firm towards the use of behavior-based control systems. We conclude this essay with a few managerial implications and directions for future research