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Fusion for ProfitHow Marketing and Finance Can Work Together to Create Value$
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Sharan Jagpal and Shireen Jagpal

Print publication date: 2008

Print ISBN-13: 9780195371055

Published to Oxford Scholarship Online: September 2008

DOI: 10.1093/acprof:oso/9780195371055.001.0001

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How Should the Firm Compensate Its Sales Force? The Basic Model

How Should the Firm Compensate Its Sales Force? The Basic Model

(p.333) 16 How Should the Firm Compensate Its Sales Force? The Basic Model
Fusion for Profit

Sharan Jagpal (Contributor Webpage)

Oxford University Press

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).

Keywords:   certainty-equivalent profits, consumer satisfaction, cost of capital, draw system, internet marketing, learning curve, multiperiod contracts, price delegation, sales force compensation plans, unobservable effort

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