An Empirical Analysis of Sales-Force Compensation Plans

Abstract

Among the array of direct and indirect methods of motivation and control available to the sales manager is sales-force compensation. In this article, the authors summarize theoretical predictions from the economics, marketing, finance, and accounting literatures on the structure of optimal sales-force compensation plans. Guided by these insights, they then construct empirical models to quantify the effect of various sales-force factors, firm and product factors, and market factors on compensation. Using data from 286 firms in 39 industries, the authors examine determinants of incentive components and total pay and the optimal horizon for incentive pay. Copyright 1992 by University of Chicago Press.