An Empirical Analysis of Sales-Force Compensation Plans

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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, we summarize theoretical predictions from the economics, marketing, finance, and accounting literatures on the structure of optimal sales-force compensation plans. Guided by these insights, we 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, we examine determinants of incentive components and total pay and the optimal horizon for incentive pay.

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