Optimal Sales Force Compensation Plans: An Operational Procedure

Dominique Rouzies (1) , René Y. Darmon (2)

1 GREGH - Groupement de Recherche et d'Etudes en Gestion à HEC
2 Marketing Department

This paper describes an operational procedure for identifying optimal sales force compensation plans featuring salary, commissions and/or quota/bonus. Utility-maximising salespeople's behaviours and reactions to given compensation plans are simulated, and the resulting sales, costs and long-term expected profits are assessed. Then, a search technique attempts to identify the long-term profit-maximising compensation plan structure. Operationally, the simulation model parameters are calibrated so as to reflect those of an actual sales force, and consequently the optimal compensation scheme for this specific sales force can be identified. The concept is illustrated in an actual case study.

Keywords: Compensation; Utility function; Sales costs; Response function; Sales; Optimal operation; Profit; Specificity

Keywords: Force vente; Fonction utilité; Coût commercialisation; Fonction réponse; Vente; Fonctionnement optimal; Bénéfice; Spécificité

Domains: Humanities and Social Sciences; Business administration

Dominique Rouzies, René Y. Darmon. Optimal Sales Force Compensation Plans: An Operational Procedure. Journal of the Operational Research Society, 2002, Vol.53, N°4, pp. 447-456. ⟨10.1057/palgrave.jors.2601292⟩. ⟨hal-00538235⟩