Personal Selling Elasticities: A Meta-Analysis

Abstract

This article presents a meta-analysis of prior econometric estimates of personal selling elasticity—that is, the ratio of the percentage change in an objective, ratio-scaled measure of sales output (e.g., dollar or unit purchases) to the corresponding percentage change in an objective, ratio-scaled measure of personal selling input (e.g., dollar expenditures). The authors conduct a meta-analysis of 506 personal selling elasticity estimates drawn from analyses of 88 empirical data sets across 75 previous articles. They find a mean estimate of current-period personal selling elasticity of .34. They also find that elasticity estimates are higher for early life-cycle-stage offerings, higher from studies set in Europe than from those set in the United States, and smaller in more recent years. In addition, elasticity estimates are affected significantly by analysts’ use of relative rather than absolute sales output measures, by cross-sectional rather than panel data, by omission of promotions, by lagged effects, by marketing interaction effects, and by the neglect of endogeneity in model estimation. The method bias–corrected mean personal selling elasticity is approximately .31. The authors discuss the implications of their results for sales managers and researchers.

Team Incentives and Performance: Evidence from a Retail Chain

“…First, the elasticity of our bonus scheme is 3.8 (i.e., an increase of the costs by 10 percent results in an increase of sales by 38 percent) which is orders of magnitude higher than the elasticity of many marketing practices: for example, in their meta-analysis, Albers, Mantrala, and Sridhar (2010) find that the elasticity of resources invested in "personal selling" (sales persons selling products to customers in personal meetings) is 0.34; the average sales-to-advertising elasticity is estimated as 0.1 (Tellis 2004). 4 Second, we changed only one HR management practice rather than the entire HR system (as in Ichniowski, Shaw, and Prennushi 1997).…”

Do Bonuses Enhance Sales Productivity? A Dynamic Structural Analysis of Bonus-Based Compensation Plans

“…Meta-analysis of various research studies estimate that the sales force expenditure elasticity is about 0.34 (Albers et al, 2010), relative to about 0.22 for advertising (Assmus, Farley and Lehmann 1983) and about -2.62 for price (Bijmolt et al 2005). While relative sales force expenditure elasticity is useful in determining the relative effectiveness of different instruments in the marketing mix, they give us little insight on how to design a sales force compensation plan, which is widely understood to be the primary tool by which firms can induce the sales force to exert the optimal levels of effort and thus to optimize the use of sales force expenditures.…”

Determinants of Advertising Effectiveness: The Development of an International Advertising Elasticity Database and a Meta-Analysis

“…Companies' massive investment in advertising is necessary in order to persuade the consumer to purchase the product by influencing his attitude, social norm, perceived behavior control, and subsequently his behavior intention (Armitage and Conner 2001). Next to personal selling, in which comDeterminants of Advertising Effectiveness: The Development of an International Advertising Elasticity Database and a Meta-Analysis panies in the US invest almost three times the amount spent on advertising (Albers, Mantrala, and Sridhar 2010), advertising is the second largest investment to influence consumer behavior. Source: ZenithOptimedia 2011ZenithOptimedia (estimated values for 2011ZenithOptimedia -2013 Such high advertising expenditures have to be justified by satisfactory financial outcomes, so marketing managers are greatly interested in measuring the response to advertising expenditures (Lehmann 2004;Srinivasan, Vanhuele, and Pauwels 2010).…”