scholarly journals Incomplete and imperfect information for sales compensation

2010 ◽  
Author(s):  
Raluca Valeanu
Keyword(s):  
Moral Hazard ◽  
Imperfect Information ◽  
Sales Force ◽  
Agent Behavior ◽  
Conflicting Objectives ◽  
Compensation Plan ◽  
Sales Compensation ◽  
Commission Agent ◽  
Force Compensation

Sales force compensation represents the fix and / or variable payment by the company. To compensate agents based on the results, the company set a goal which is brought to their attention through the compensation plan. Applying the model of moral hazard, where the agent behavior cannot be verified, it cannot be specified in the contract what is the expected behavior of the agent. In order to make an offer to contract principal should know the effort that the agent will submit it to define the payment and the contract is determined optimally in trade between the two conflicting objectives of the two participants in the contract. Although agent behavior cannot be verified, the result of this behavior should be measurable at the end of the contract so that the employer may make the contract contingent on effort commission agent for sale of which is measured by the amount of earnings to the company.

Sales Force Compensation Design for Two-Sided Market Platforms

2019 ◽  
Vol 56 (4) ◽  
pp. 666-678 ◽  
Author(s):  
Hemant K. Bhargava ◽  
Olivier Rubel
Keyword(s):  
Network Effects ◽  
Sales Force ◽  
Compensation Plans ◽  
Agency Relationship ◽  
Indirect Network Effects ◽  
Compensation Plan ◽  
Sales Agent ◽  
Sales Compensation ◽  
Sales Agents ◽  
Compensation Design

The authors study the use of sales agents for network mobilization in a two-sided market platform that connects buyers and sellers, and they examine how the presence of direct and indirect network effects influences the design of the sales compensation plan. They employ a principal–agent model in which the firm tasks sales agents to mobilize the side of the platform that it monetizes (i.e., sellers). Specifically, the presence of network effects alters the agency relationship between the firm and the sales agent, requiring the platform firm to alter the compensation design, and the nature of the alteration depends on whether the network effects are direct or indirect and positive or negative. The authors first show how the agent’s compensation plan should account for different types of network effects. They then establish that when the platform firm compensates the agent solely on the basis of network mobilization on the side cultivated by the agent (sellers), as intuition would suggest, it will not fully capitalize on the advantage of positive network effects; that is, profit can be lower under stronger network effects. To overcome this limitation, the platform should link the agent’s pay to a second metric, specifically, network mobilization on the buyer side, even though the agent is not assigned to that side. This design induces a positive relation between the strength of network effects and profit. This research underlines the complexity and richness of network effects and provides managers with new insights regarding the design of sales agents’ compensation plans for platforms.

An Empirical Analysis of Sales-Force Compensation Plans

1992 ◽  
Vol 65 (1) ◽  
pp. 93 ◽  
Author(s):  
Anne T. Coughlan ◽  
Chakravarthi Narasimhan
Keyword(s):  
Empirical Analysis ◽  
Sales Force ◽  
Compensation Plans ◽  
Force Compensation

Managing Sales Force Compensation

2012 ◽  
Vol 44 (2) ◽  
pp. 86-99 ◽  
Author(s):  
Pankaj M. Madhani
Keyword(s):  
Sales Force ◽  
Force Compensation

The Effect of Product Sales Quotas on Sales Force Productivity

1973 ◽  
Vol 10 (2) ◽  
pp. 180-183 ◽  
Author(s):  
Leon Winer
Keyword(s):  
Sales Force ◽  
Controlled Experiment ◽  
Implicit Assumption ◽  
Compensation Model ◽  
Product Sales ◽  
Sales Quotas ◽  
Sales Compensation

This article describes an actual controlled experiment to test the validity of the Davis-Farley sales compensation model. Results indicate that the implicit assumption of the model that salesmen seek to maximize income needs additional study.

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