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Structuring a Multiproduct Sales Quota-Bonus Plan for a Heterogeneous Sales Force: A Practical Model-Based Approach

Author

Listed:
  • Murali K. Mantrala

    (University of Florida)

  • Prabhakant Sinha

    (ZS Associates)

  • Andris A. Zoltners

    (Northwestern University)

Abstract

This paper presents an agency theoretic model-based approach that assists sales managers in determining the profit-maximizing structure of a common multiproduct sales quota-bonus plan for a geographically specialized heterogeneous sales force operating in a repetitive buying environment. This approach involves estimating each salesperson's utility function for income and effort and using these models to predict individual sales achievements and the associated aggregate profit for the firm under a specified plan. The utility function estimation is based on the salesperson's own preference rank-ordering of alternative sales quota-bonus plans. Once these functions have been estimated, they are incorporated in a mathematical programming model that the sales manager can use to determine the best plan. The authors demonstrate the approach in the context of a case involving the design of a two-product sales quota-bonus plan for a set of salespeople at a pharmaceutical products firm.

Suggested Citation

  • Murali K. Mantrala & Prabhakant Sinha & Andris A. Zoltners, 1994. "Structuring a Multiproduct Sales Quota-Bonus Plan for a Heterogeneous Sales Force: A Practical Model-Based Approach," Marketing Science, INFORMS, vol. 13(2), pages 121-144.
    • Handle: RePEc:inm:ormksc:v:13:y:1994:i:2:p:121-144
    DOI: 10.1287/mksc.13.2.121
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    Citations

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    Cited by:

    1. Haofeng Jin & Zhentong Lu, 2021. "Measuring the Effectiveness of Salespeople: Evidence from a Cold-Drink Market," Staff Working Papers 21-40, Bank of Canada.
    2. Birendra K. Mishra & Ashutosh Prasad, 2004. "Centralized Pricing Versus Delegating Pricing to the Salesforce Under Information Asymmetry," Marketing Science, INFORMS, vol. 23(1), pages 21-27, January.
    3. Albers, Sonke, 1996. "Optimization models for salesforce compensation," European Journal of Operational Research, Elsevier, vol. 89(1), pages 1-17, February.
    4. Lee, Chung-Yee & Yang, Ruina, 2013. "Compensation plan for competing salespersons under asymmetric information," European Journal of Operational Research, Elsevier, vol. 227(3), pages 570-580.
    5. Bernd Skiera & Sönke Albers, 1998. "COSTA: Contribution Optimizing Sales Territory Alignment," Marketing Science, INFORMS, vol. 17(3), pages 196-213.
    6. Frenzen, Heiko & Hansen, Ann-Kristin & Krafft, Manfred & Mantrala, Murali K. & Schmidt, Simone, 2010. "Delegation of pricing authority to the sales force: An agency-theoretic perspective of its determinants and impact on performance," International Journal of Research in Marketing, Elsevier, vol. 27(1), pages 58-68.
    7. Mrinal Ghosh & George John, 2000. "Experimental Evidence for Agency Models of Salesforce Compensation," Marketing Science, INFORMS, vol. 19(4), pages 348-365, August.

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