Sales Force Behavior, Pricing Information, and Pricing Decisions

Abstract

This paper focuses on salespeople behavior in business-to-business transactions. The paper investigates how salespeople use the information provided to them to set prices; of particular interest is how salespeople use price recommendations from a decision support tool. The investigation builds reduced-form models and tests them on a data set obtained by a grocery products distributor. The analysis shows that salespeople’s decisions are explained well by a two-stage decision model whereby salespeople make an initial decision on whether or not to change the price (a binary decision) and then decide on the magnitude of change (a continuous response). We find that salespeople in our data set do not blindly adopt the recommended price change generated by the pricing tool. Rather, our two-stage model allows for us to uncover a nuanced association between the recommended price and the actual price change by identifying customer-specific and salesperson-specific market factors that moderate the influence of price recommendations.