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Optimal Sales Force Compensation Plans: An Operational Procedure

Author

Listed:
  • Dominique Rouzies

    (GREGH - Groupement de Recherche et d'Etudes en Gestion à HEC - HEC Paris - Ecole des Hautes Etudes Commerciales - CNRS - Centre National de la Recherche Scientifique)

  • René Y. Darmon

    (ESSEC Business School)

Abstract

This paper describes an operational procedure for identifying optimal sales force compensation plans featuring salary, commissions and/or quota/bonus. Utility-maximising salespeople's behaviours and reactions to given compensation plans are simulated, and the resulting sales, costs and long-term expected profits are assessed. Then, a search technique attempts to identify the long-term profit-maximising compensation plan structure. Operationally, the simulation model parameters are calibrated so as to reflect those of an actual sales force, and consequently the optimal compensation scheme for this specific sales force can be identified. The concept is illustrated in an actual case study.

Suggested Citation

  • Dominique Rouzies & René Y. Darmon, 2002. "Optimal Sales Force Compensation Plans: An Operational Procedure," Post-Print hal-00538235, HAL.
    • Handle: RePEc:hal:journl:hal-00538235
    DOI: 10.1057/palgrave.jors.2601292
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    Cited by:

    1. 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.

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