Models for Sales Management Decisions

Albers, Sönke; Mantrala, Murali K.

doi:10.1007/978-0-387-78213-3_6

Cited by 27 publications

(16 citation statements)

References 108 publications

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“…Under the new plan, revenues to the …rm increased by about $12 million incremental per year (a 9% improvement overall), indicating the success of the …eld implementation. 1 Agent behavior and the distribution of output is also found to change as predicted by the model. We interpret these results as reinforcing the practical value of structural agency-theoretic models for compensation design in real-world settings.…”

Section: Introductionmentioning

confidence: 83%

“…Figure (11) presents results from regressions in which we project the quota in quarter on ‡exible functions of agent's sales and quotas in quarter ( 1). Due to the fact that quotas vary only at the quarter-level, we estimate a pooled speci…cation with agent …xed-e¤ects.…”

Section: Ratcheting Policymentioning

confidence: 99%

“…In the US, nearly 12% of the total workforce is employed in full-time sales occupations (Zoltners et al 2001). In a review of sales-force practice, Albers and Mantrala (2008) note,"Dartnell's 30 th Sales-force Compensation Survey: 1998-1999 reports the average company spends 10% and some industries spend as much as 40% of their total sales revenues on sales-force costs. In total, the US economy is estimated to spend $800 billion on sales-forces, almost three times the amount spent on advertising in 2006 (Zoltners et al 2008)".…”

Section: Introductionmentioning

confidence: 99%

“…For instance, in a "salary + commission" scheme such as ours, sales-agents who achieve the quota required for earning the commission in the current compensation cycle may have a perverse in- 1 These numbers should be viewed conservatively as a lower bound on the e¤ect of the new plan due to the recession in 2009-2010. centive to postpone additional e¤ort to the future. Essentially, the marginal e¤ort expended has higher marginal bene…t when postponed, as it contributes to attaining the quota in the next compensation cycle.…”

Section: Introductionmentioning

confidence: 99%

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A structural model of sales-force compensation dynamics: Estimation and field implementation

2011

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We present an empirical framework to analyze real-world sales-force compensation schemes, and report on a multi-million dollar, multi-year project involving a large contact lens manufacturer at the US, where the model was used to improve sales-force contracts. The model is built on agency theory, and solved using numerical dynamic programming techniques. The model is ‡exi-ble enough to handle quotas and bonuses, output-based commission schemes, as well as "ratcheting" of compensation based on past performance, all of which are ubiquitous in actual contracts. The model explicitly incorporates the dynamics induced by these aspects in agent behavior. We apply the model to a rich dataset that comprises the complete details of sales and compensation plans for the …rm's US sales-force. We use the model to evaluate pro…t-improving, theoretically-preferred changes to the extant compensation scheme. These recommendations were then implemented at the focal …rm. Agent behavior and output under the new compensation plan is found to change as predicted. The new plan resulted in a 9% improvement in overall revenues, which translates to about $12 million incremental revenues annually, indicating the success of the …eld-implementation. The results bear out the face validity of dynamic agency theory for real-world compensation design. More generally, our results …t into a growing literature that illustrates that dynamic programming-based solutions, when combined with structural empirical speci…cations of behavior, can help signi…cantly improve marketing decision-making, and …rms'pro…tability.

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Section: Introductionmentioning

confidence: 83%

Section: Ratcheting Policymentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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A structural model of sales-force compensation dynamics: Estimation and field implementation

2011

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“…According to Zoltners et al (2001), nearly twelve percent of the total workforce in the US is employed in full-time sales occupations. Furthermore, firms' average expenditure on salesforce typically ranges between ten percent to forty percent of their sales revenues (Albers and Mantrala 2008). In addition, enhanced salesforce management often can increase sales revenue by more than ten percent (Zoltners et al…”

Section: Introductionmentioning

confidence: 99%

The Impact of the Manufacturer-Hired Sales Agent on a Supply Chain with Information Asymmetry

Khanjari

Iravani

Shin

2014

M&SOM

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This paper studies the impact of a manufacturer-hired sales agent on a supply chain comprising a manufacturer and a retailer. The sales agent is working mainly at the retailer's location in order to boost the demand. We focus on a wholesale price contract, under which the retailer decides how much to order from the manufacturer. The information structure within the supply chain and the efficiency of the sales agent affect the supply chain members' expected profits. We show that, due to the agency issue between the sales agent and the manufacturer, when the retailer's demand forecast accuracy is similar to the manufacturer's and the wholesale price is fixed, the retailer's profit is decreasing in his demand forecast accuracy. We also illustrate that when the retailer's forecast accuracy is much better than the manufacturer's and the wholesale price is endogenous, his expected profit is decreasing in his forecast accuracy. Moreover, we demonstrate that having a more efficient sales agent is beneficial for the retailer when the wholesale price is fixed, whereas it is not always the case when the wholesale price is determined depending on the efficiency of the sales agent. * The authors thank Steve Graves, the anonymous Associate Editor and the three anonymous referees for their detailed and extremely helpful comments and suggestions. They also thank Mark Daskin and Terry August for valuable comments and discussions.

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Sales Optimization Models—Sales Force Territory Planning

Albers

Mantrala

2011

Wiley Encyclopedia of Operations Research and Management Science

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There have been a number of important developments and applications of operations research‐based models in the domain of sales management that have contributed significantly to enhancing sales force productivity. In this article, the authors provide an overview of the key sales resource allocation and deployment decision problems faced by firms and extant model‐based solution approaches. Understanding and estimating relationships between selling efforts and sales outputs, that is “sales response functions,” lies at the heart of models for planning the sales force size, territories, and allocating selling efforts within territories. The authors briefly review the main challenges and proposed methods for such estimations, and a well‐known example of an optimization model (CALLPLAN) that utilizes such measurements for allocating selling efforts between customers and prospects in a salesperson's territory. This is followed by a description of models that have been proposed for the design of sales territories; that is, the assignment of sets of customers to salespeople, and sales force sizing, as well as integrated sizing, territory design, and allocation models. Throughout, the article notes outstanding issues for further investigation and closes with directions for future research.

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Models for Sales Management Decisions

Cited by 27 publications

References 108 publications

A structural model of sales-force compensation dynamics: Estimation and field implementation

A structural model of sales-force compensation dynamics: Estimation and field implementation

The Impact of the Manufacturer-Hired Sales Agent on a Supply Chain with Information Asymmetry

Sales Optimization Models—Sales Force Territory Planning

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