Abstract
Abstract This chapter shows how the firm should design sales force compensation plans to maximize its performance. It distinguishes whether or not the firm can observe the salesperson's effort. It shows how marketing-finance fusion allows the firm to design compensation plans based on such factors as the firm's cost structure, cost and demand uncertainty, consumer satisfaction, the firm's cost of capital, and whether or not the firm delegates price-setting or sales call policy to the salesperson. It shows how the sales force compensation plan should allow for multiperiod effects and the impact of Internet advertising. In particular, it distinguishes different scenarios (e.g., whether Internet advertising and conventional advertising are substitutes or complements).
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