IDEAS home Printed from https://ideas.repec.org/a/inm/ormksc/v22y2003i2p161-187.html
   My bibliography  Save this article

In the Eye of the Beholder: An Analysis of the Relative Value of a Top Sales Rep Across Firms and Products

Author

Listed:
  • David Godes

    (Graduate School of Business Administration, Harvard University, Morgan Hall 165, Soldiers Field, Boston, Massachusetts 02163)

Abstract

We ask the question, “when should the most highly skilled salespeople sell the best products?” Our main result is that the highly skilled reps should sell better products when the task is very complex and worse products when the task is very simple. This is shown using a general analytical model of selling in which sales are a joint function of the salesperson's skill and the complexity of the selling task. Complexity varies across products and industries. Intuitively, when the selling task is complex, few salespeople oflevel of ability will be successful with a low-quality product. Therefore, the high-skill rep's value is higher on the better product. Conversely, when the task is simple, salespeople ofability can sell the better product fairly easily so the high-skill rep's impact is more pronounced on the worse product. This general result offers insight into many key problems: Which salespeople should we hire? How should we organize our salespeople? How should we allocate training funds? We show that the insights hold for salespeople that eithervalue or simplythe customer about the product's value. Finally, we contrast this set of questions with the question ofsalespeople the firm should hire. We find that the firm that has the biggest sales force does not always have the best.

Suggested Citation

  • David Godes, 2003. "In the Eye of the Beholder: An Analysis of the Relative Value of a Top Sales Rep Across Firms and Products," Marketing Science, INFORMS, vol. 22(2), pages 161-187, May.
    • Handle: RePEc:inm:ormksc:v:22:y:2003:i:2:p:161-187
    DOI: 10.1287/mksc.22.2.161.16040
    as

    Download full text from publisher

    File URL: http://dx.doi.org/10.1287/mksc.22.2.161.16040
    Download Restriction: no
    File URL: https://libkey.io/10.1287/mksc.22.2.161.16040?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Booth, Alison L, 1984. "A Public Choice Model of Trade Union Behaviour and Membership," Economic Journal, Royal Economic Society, vol. 94(376), pages 883-898, December.
    2. Birger Wernerfelt, 1994. "On the Function of Sales Assistance," Marketing Science, INFORMS, vol. 13(1), pages 68-82.
    3. John D. C. Little, 1970. "Models and Managers: The Concept of a Decision Calculus," Management Science, INFORMS, vol. 16(8), pages 466-485, April.
    4. Ram C. Rao, 1990. "Compensating Heterogeneous Salesforces: Some Explicit Solutions," Marketing Science, INFORMS, vol. 9(4), pages 319-341.
    5. David B. Montgomery & Alvin J. Silk & Carlos E. Zaragoza, 1971. "A Multiple-Product Sales Force Allocation Model," Management Science, INFORMS, vol. 18(4-Part-II), pages 3-24, December.
    6. James W. Albrecht & Susan B. Vroman, 1992. "Non-Existence of Single-Wage Equilibria in Search Models with Adverse Selection," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 59(3), pages 617-624.
    7. Malcomson, James M, 1981. "Unemployment and the Efficiency Wage Hypothesis," Economic Journal, Royal Economic Society, vol. 91(364), pages 848-866, December.
    8. Narasimhan, Chakravarthi, 1988. "Competitive Promotional Strategies," The Journal of Business, University of Chicago Press, vol. 61(4), pages 427-449, October.
    9. Sridhar Moorthy & Kannan Srinivasan, 1995. "Signaling Quality with a Money-Back Guarantee: The Role of Transaction Costs," Marketing Science, INFORMS, vol. 14(4), pages 442-466.
    10. Leonard M. Lodish, 1971. "Callplan: An Interactive Salesman's Call Planning System," Management Science, INFORMS, vol. 18(4-Part-II), pages 25-40, December.
    11. Andris A. Zoltners & Prabhakant Sinha, 1980. "Integer Programming Models for Sales Resource Allocation," Management Science, INFORMS, vol. 26(3), pages 242-260, March.
    12. Weiss, Andrew W, 1980. "Job Queues and Layoffs in Labor Markets with Flexible Wages," Journal of Political Economy, University of Chicago Press, vol. 88(3), pages 526-538, June.
    13. George J. Mailath & Andrew Postlewaite, 1990. "Workers Versus Firms: Bargaining Over a Firm's Value," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 57(3), pages 369-380.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Dmitri Kuksov & J. Miguel Villas-Boas, 2019. "The Performance Measurement Trap," Marketing Science, INFORMS, vol. 38(1), pages 68-87, January.
    2. Duncan Simester & Juanjuan Zhang, 2014. "Why Do Salespeople Spend So Much Time Lobbying for Low Prices?," Marketing Science, INFORMS, vol. 33(6), pages 796-808, November.
    3. Sanjog Misra & Harikesh Nair, 2011. "A structural model of sales-force compensation dynamics: Estimation and field implementation," Quantitative Marketing and Economics (QME), Springer, vol. 9(3), pages 211-257, September.
    4. Ian Larkin, 2014. "The Cost of High-Powered Incentives: Employee Gaming in Enterprise Software Sales," Journal of Labor Economics, University of Chicago Press, vol. 32(2), pages 199-227.
    5. Tat Y. Chan & Jia Li & Lamar Pierce, 2014. "Learning from Peers: Knowledge Transfer and Sales Force Productivity Growth," Marketing Science, INFORMS, vol. 33(4), pages 463-484, July.
    6. Steven M. Shugan, 2005. "Marketing and Designing Transaction Games," Marketing Science, INFORMS, vol. 24(4), pages 525-530.
    7. Fabio Caldieraro & Anne T. Coughlan, 2009. "Optimal Sales Force Diversification and Group Incentive Payments," Marketing Science, INFORMS, vol. 28(6), pages 1009-1026, 11-12.
    8. Fabio Caldieraro & Anne T. Coughlan, 2007. "Spiffed-Up Channels: The Role of Spiffs in Hierarchical Selling Organizations," Marketing Science, INFORMS, vol. 26(1), pages 31-51, 01-02.
    9. Jiwoong Shin, 2007. "How Does Free Riding on Customer Service Affect Competition?," Marketing Science, INFORMS, vol. 26(4), pages 488-503, 07-08.
    10. Tat Y. Chan & Jia Li & Lamar Pierce, 2014. "Compensation and Peer Effects in Competing Sales Teams," Management Science, INFORMS, vol. 60(8), pages 1965-1984, August.
    11. Steven M. Shugan, 2003. "Editorial: Compartmentalized Reviews and Other Initiatives: Should Marketing Scientists Review Manuscripts in Consumer Behavior?," Marketing Science, INFORMS, vol. 22(2), pages 151-160.
    12. Yubo Chen & Jinhong Xie, 2008. "Online Consumer Review: Word-of-Mouth as a New Element of Marketing Communication Mix," Management Science, INFORMS, vol. 54(3), pages 477-491, March.
    13. Birendra K. Mishra & Ashutosh Prasad, 2005. "Delegating Pricing Decisions in Competitive Markets with Symmetric and Asymmetric Information," Marketing Science, INFORMS, vol. 24(3), pages 490-497, March.
    14. Steven Lu & Andre Bonfrer & Ranjit Voola, 2015. "Retaining Talented Salespeople," Customer Needs and Solutions, Springer;Institute for Sustainable Innovation and Growth (iSIG), vol. 2(2), pages 148-164, June.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Donald G. Morrison & Jagmohan S. Raju, 2004. "50th Anniversary Article: The Marketing Department in Management Science: Its History, Contributions, and the Future," Management Science, INFORMS, vol. 50(4), pages 425-428, April.
    2. Darmon, Rene Y., 2002. "Salespeople's management of customer information: Impact on optimal territory and sales force sizes," European Journal of Operational Research, Elsevier, vol. 137(1), pages 162-176, February.
    3. John D. C. Little, 2004. "Comments on ÜModels and Managers: The Concept of a Decision CalculusÝ," Management Science, INFORMS, vol. 50(12_supple), pages 1854-1860, December.
    4. Murali Mantrala & Sönke Albers & Fabio Caldieraro & Ove Jensen & Kissan Joseph & Manfred Krafft & Chakravarthi Narasimhan & Srinath Gopalakrishna & Andris Zoltners & Rajiv Lal & Leonard Lodish, 2010. "Sales force modeling: State of the field and research agenda," Marketing Letters, Springer, vol. 21(3), pages 255-272, September.
    5. Onesun Steve Yoo & Rakesh Sarin, 2018. "Consumer Choice and Market Outcomes Under Ambiguity in Product Quality," Marketing Science, INFORMS, vol. 37(3), pages 445-468, May.
    6. Pedro M. Gardete & Liang Guo, 2021. "Prepurchase Information Acquisition and Credible Advertising," Management Science, INFORMS, vol. 67(3), pages 1696-1717, March.
    7. Grossman, G.M., 1998. "Imperfect Labour Contracts and International Trade," Papers 205, Princeton, Woodrow Wilson School - Public and International Affairs.
    8. Drexl, Andreas & Haase, Knut, 1996. "Fast approximation methods for sales force deployment," Manuskripte aus den Instituten für Betriebswirtschaftslehre der Universität Kiel 411, Christian-Albrechts-Universität zu Kiel, Institut für Betriebswirtschaftslehre.
    9. Baojun Jiang & Kinshuk Jerath & Kannan Srinivasan, 2011. "Firm Strategies in the "Mid Tail" of Platform-Based Retailing," Marketing Science, INFORMS, vol. 30(5), pages 757-775, September.
    10. Albers, Sönke, 2012. "Optimizable and implementable aggregate response modeling for marketing decision support," International Journal of Research in Marketing, Elsevier, vol. 29(2), pages 111-122.
    11. AgralI, Semra & Geunes, Joseph, 2009. "Solving knapsack problems with S-curve return functions," European Journal of Operational Research, Elsevier, vol. 193(2), pages 605-615, March.
    12. Ajay Kalra & Mengze Shi & Kannan Srinivasan, 2003. "Salesforce Compensation Scheme and Consumer Inferences," Management Science, INFORMS, vol. 49(5), pages 655-672, May.
    13. Hahn, Volker, 2017. "Committee design with endogenous participation," Games and Economic Behavior, Elsevier, vol. 102(C), pages 388-408.
    14. Pradeep Bhardwaj & Yuxin Chen & David Godes, 2008. "Buyer-Initiated vs. Seller-Initiated Information Revelation," Management Science, INFORMS, vol. 54(6), pages 1104-1114, June.
    15. Fabio Caldieraro & Anne T. Coughlan, 2009. "Optimal Sales Force Diversification and Group Incentive Payments," Marketing Science, INFORMS, vol. 28(6), pages 1009-1026, 11-12.
    16. Michael R. Baye & John Morgan, 2009. "Brand and Price Advertising in Online Markets," Management Science, INFORMS, vol. 55(7), pages 1139-1151, July.
    17. Liang Guo, 2009. "Service Cancellation and Competitive Refund Policy," Marketing Science, INFORMS, vol. 28(5), pages 901-917, 09-10.
    18. Zheyin (Jane) Gu & Ying Xie, 2013. "Facilitating Fit Revelation in the Competitive Market," Management Science, INFORMS, vol. 59(5), pages 1196-1212, May.
    19. Yan Dong & Yuliang Yao & Tony Haitao Cui, 2011. "When Acquisition Spoils Retention: Direct Selling vs. Delegation Under CRM," Management Science, INFORMS, vol. 57(7), pages 1288-1299, July.
    20. Liang Guo & Ying Zhao, 2009. "Voluntary Quality Disclosure and Market Interaction," Marketing Science, INFORMS, vol. 28(3), pages 488-501, 05-06.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:inm:ormksc:v:22:y:2003:i:2:p:161-187. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Asher (email available below). General contact details of provider: https://edirc.repec.org/data/inforea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.