Erin Anderson

Perspectives on Behavior-Based versus Outcome-Based Salesforce Control Systems

Forms of control systems used in salesforce evaluation and based on the monitoring of outcomes or of behaviors are described, contrasted, and evaluated in terms of emerging theories in economics, o...

Testing a Life-Cycle Theory of Cooperative Interorganizational Relationships: Movement Across Stages and Performance

This research examines the evolution of cooperative interorganizational relationships and provides an empirical test of four propositions from the DSO (Dwyer et al. 1987) life-cycle theory, and one proposition from the RV (Ring and Van de Ven 1994) theory of relationship development. Using primary data from over 1,500 resellers in a channel of distribution, we find that the mature phase is not the pinnacle of the relationship lifecycle; relationship properties (e.g., relationship harmony, overall dependence, and the resellers trust in the manufacturer) in this stage are no different than in the build-up phase. However, relationship properties that support relationship expansion (e.g., goal congruence and information exchange norms) reach their zenith in the build-up phase and afterwards fade into the background. All of the various relationship properties hit their nadir in the decline phase. We also examine the development of relationships over a five-year period and consider whether movement across the stages in accordance with DSOs theory has the same association to overall performance evaluations as movement through regressive patterns. We find that a negative history extracts a price: Movement through regressive patterns is negatively related to performance, and these relationships do not enjoy a fresh start. Instead, these movements can last for an extended period of time and are negatively related to performance outcomes during the decline phase. Thus, the development path taken appears to be related to the results achieved. Finally, we also find evidence of the critical role that individual sales representatives play in creating successful interorganizational relationships.

Sales and Marketing Integration: A Proposed Framework

In this paper, we identify sales and marketing activities and common impediments to their integration. We then discuss the concept of sales–marketing integration and distinguish it from related concepts such as involvement and communication. Following this, we discuss approaches businesses can use to improve sales–marketing integration as well as their potential costs and drawbacks. The paper concludes with a set of propositions identifying the conditions under which sales–marketing integration has the greatest impact on firm performance.

Inconsistencies among the Constitutive Elements of a Sales Force Control System: Test of a Configuration Theory–Based Performance Prediction

This paper adopts a configuration theory perspective to investigate how inconsistencies among the perceived elements of a sales force control system influence salesperson performance. Analysis based on a sample of 1,290 salespeople suggests that these inconsistencies hurt salesperson performance. Furthermore, this relationship is moderated by professional maturity, a combined index of age, selling experience, and organizational tenure. Implications for management and future research are offered.

Firms and the Creation of New Markets

Newmarkets do not emerge, nor do they appear. They aremade by the activities of firms. New markets are created when firms correctly sense (by accident or by design) a latent need and communicate their solution to that need: markets spring into being when economic actors shift resources to that firm’s solution. The most visible way to create a new market is to offer a product/service that is novel, thereby addressing needs that were not met (and perhaps not even sensed). Much of this chapter focuses on firms’ efforts to develop and commercialize new offerings, and on how buyers respond, thereby creating new markets. However, new markets are also created when firms cultivate an underserved clientele with established products. Much of marketing is about how to bring new customers into a developed industry (as opposed to rearranging market shares among existing customers). This chapter will also highlight these market-creation activities.1 Capitalist systems exhibit an astonishing ability to create new markets (and, typically, destroy existing ones) based on developing and commercializing innovations. Schumpeter (1943) argued that large firms innovate so well that they raise a society’s general standard of living. In the same vein, Schmookler (1966) argues that long-term economic growth is primarily the result of better knowledge of what goods would be useful and how tomake them, i.e. invention. There is little argument that innovation, on the whole, increases public welfare: new markets are thought to arise because buyers recognize they will be better off. Breshnahan and Gordon (1996) document why, with a series of innovations that clearly increase buyers’ utility. It should be noted, however, that many innovations are not radical but merely incremental, and that their utility is in the eye of the beholder. Although this chapter emphasizes more radical innovation, it will address new products in general.

Should You Set Up Your Own Sales Force or Should You Outsource It ? Pitfalls in the Standard Analysis

Should you set up your own sales force or should you outsouce it? The standard analysis uses a cost basis to answer this question. It assumes that the direct sales force is largely a fixed cost and that the outsourced sales force is largely a cost that varies with sales. It then calculates the sales quantity at which the costs associated with the direct sales force are equal to the cost associated with the outsourced sales force. It suggests that for sales above that quantity, firms should have their own direct sales force. This analysis has two serious problems. First, it is too simplistic; this paper details other cost factors not considered in the standard analysis but that should be. Second, the standard analysis is based only on cost; it ignores differences in coverage efficiency and selling effectiveness between the two sales forces, two important factors that are developed in this paper.

Commitment and Its Consequences in the American Agency System of Selling Insurance

INTRODUCTION The American Agency system of selling insurance, whereby independent agents represent multiple insurers and own the rights to the expirations of the policies they sell, has been the object of much criticism and has come under competitive pressure from alternative means of distributing insurance. In response, some elements of the insurance industry have experimented with forging committed relationships with agents as a means to stay within the independent agency system while achieving better results. Commitment building is an effort by principals (here, insurers) to bind agents (here, independent insurance agents who own the rights to expirations) to them so tightly as to blur the distinction between the principal and the agent. At the limit, the relationship is so close that no party (insurer, agent, or policyholder) is entirely sure that the principal is not vertically integrated. This idea (that the principal can be technically using a market mechanism but enjoy most of the benefits of vertical integration) has attracted considerable attention. A very large literature spanning several fields (including multiple sub-disciplines of business) has developed and has collectively examined two questions: (1) do committed relationships really generate economic, as opposed to solely psychological, benefits and, if so, to whom, and (2) how can a firm create a committed relationship? This study examines both questions and does so in the context of the insurance industry in the United States. The argument made here is that one way for insurers to realize the full benefits of distribution through agents is to cultivate commitment from their independent agents. On the surface, this idea might appear impractical. This study uses a large primary data set collected from pairs of insurers and their agents, each member of the pair supplying confidential information about itself, its counterpart, and their relationship. Using this dyadic data, it is demonstrated that it is possible to build extremely high levels of commitment. However, it requires investments in the relationship that mature over relatively long periods of time and continuing attention and effort devoted to the relationship. Do committed players get anything for their commitment? This study demonstrates that both committed agents and committed insurers report more profits. Further, committed insurers are able to command a substantially higher share of the committed agents volume. It has been argued within the insurance industry that this is a path to reducing future loss ratios suffered by the insurer. If so, commitment would appear to have a significant influence on future losses. This paper is organized as follows. The following section discusses the literature on the advantages and drawbacks of the American Agency system and on close relationships as a general phenomenon. A framework is proposed delineating conditions under which agents and/or insurers will commit to each other. Effects of commitment on economic performance are also proposed. The next section details how a large primary dyadic data set was collected and presents the results of estimating a system of equations in four endogenous variables representing commitment in an insurer-independent agent dyad. Three performance models are also estimated. The final section discusses the results and their limitations, and compares them to related research in the literature of close relationships. Insurance agents are demonstrated to be driven by the same general factors that influence many other kinds of agents (e.g., industrial distributors), as well as to be strongly influenced by concern about the insurers commitment to the basic principle of selling its insurance via independent agents which own the expirations. Insurers are shown to be very attentive to financial considerations. Both parties appear to derive benefit from their arrangement, although the insurers benefit is more difficult to ascertain and is strongly tied to the vagaries of the future. …

Determinants of Pay Levels and Structures in Sales Organizations

Two key issues in business-to-business (B2B) sales force management are (1) how much a given sales job should be compensated (pay level) and (2) how much of the compensation should be fixed versus variable (pay structure). The authors examine the paychecks drawn by people in more than 14,000 selling jobs and more than 4000 sales management jobs in five B2B industry sectors in five European countries. They show that pay levels and structures reflect an apparent balancing of two conflicting pressures: the economic imperative (to reward better performers by heightening pay dispersion) and the compensation differential compression resulting from high tax regimes. In particular, B2B firms appear to use variable pay as a way to lessen the salary differential compression impact of high tax regimes on salesperson motivation. Furthermore, similar to chief executive officers, sales managers can have an important multiplier effect that justifies paying them at increasing rates as job challenge rises.

The Antecedents of Double Compensation in Concurrent Channel Systems in Business-To-Business Markets

We look at a channel compensation strategy frequently adopted by business-to-business manufacturers that use their own channels and independent entities simultaneously to sell their products in a given territory: compensating both channels (double compensation) for a sale when both channels interacted with the customer in that sale (independently of who gets the order). Using original data from prominent manufacturers operating in competitive markets worldwide, we present an exploratory investigation into the determinants of usage of double compensation. We show that manufacturers sacrifice short-term profits (by double compensation) when the expected costs associated with failing to compensate a channel that has responsibility for a sale increase. We identify such circumstances.