This paper is the first essay of the first author’s doctoral dissertation at Yale University. Do ... more This paper is the first essay of the first author’s doctoral dissertation at Yale University. Do Bonuses Enhance Sales Productivity?
∗ This paper is based on a session (with the same title and participants) that was part of the Si... more ∗ This paper is based on a session (with the same title and participants) that was part of the Sixth Invitational
This paper establishes the following: Random Utility Models (RUMs) that assume consistent prefere... more This paper establishes the following: Random Utility Models (RUMs) that assume consistent preferences result in inconsistent and therefore irrational choice behavior. Paradoxically, it is possible to create RUMs that result in consistent choice behavior, but these models assume inconsistent preferences.
This paper is the first essay of the first author’s doctoral dissertation at Yale University. Do ... more This paper is the first essay of the first author’s doctoral dissertation at Yale University. Do Bonuses Enhance Sales Productivity?
We estimate a dynamic structural model of sales force response to a bonus based compensation plan... more We estimate a dynamic structural model of sales force response to a bonus based compensation plan. The paper has two main methodological innovations: First, we implement empirically the method proposed by Arcidiacono and Miller (2011) to accommodate unobserved latent class heterogeneity with a computationally light two-step estimator. Second, we estimate discount factors in a dynamic structural model using field data. The key to identification of discount factors is that bonuses affect only future payoff in non-bonus periods providing exclusion restrictions on current payoffs. Further, we exploit differences in predicted effort (and thus sales) over time from the exponential and hyperbolic discounting models to identify present bias in a hyperbolic discounting model. Substantively, the paper sheds insights on how different elements of the compensation plan enhance productivity. We find evidence that: (1) bonuses enhance productivity across all segments; (2) overachievement commissio...
Companies spend billions of dollars every year on marketing because it is essential to organic gr... more Companies spend billions of dollars every year on marketing because it is essential to organic growth. Given these large investments, marketing managers have the responsibility to optimally allocate resources and to demonstrate that their investments generate appropriate returns for the firm. In this chapter, we highlight a two-stage process for marketing resource allocation. In stage one, a model of demand is estimated. This model empirically assesses the impact of marketing actions on consumer demand for a company's product. In stage two, estimates from the demand model are used as input in an optimization model that attempts to maximize profits. This stage takes into account costs as well as firm's objectives and constraints (e.g., minimum market share requirement). Over the last several decades, marketing researchers and practitioners have adopted various methods and approaches that explicitly or implicitly follow these two stages. We have categorized these approaches in...
This article identifies a property of several standard discrete-choice models that amounts to an ... more This article identifies a property of several standard discrete-choice models that amounts to an implicit assumption about individual choice behavior. This property, which I call the Invariant Proportion of Substitution (IPS), implies that the proportion of growth in expected own-good choice that an individual consumer draws from a given competing alternative is the same no matter which own-good attribute is improved. The IPS and Independence from Irrelevant Alternatives (IIA) properties are similar. But models that relax IIA, such as generalized extreme value (GEV) and covariance probit models, do not necessarily also relax IPS. Some models that do relax IPS are discussed.
In order to manage and motivate salespeople, companies regularly use both carrots (e.g., commissi... more In order to manage and motivate salespeople, companies regularly use both carrots (e.g., commission) and sticks (e.g., punishment). Although sticks are commonly found in practice, astonishingly little academic research has been devoted to studying their effects. In this project, we study a novel program called the “man-on-the-bench” program in a field experiment setting. It was developed to manage low-performing salespeople and is similar to a forced-ranking system, wherein low performers are let go. In treatment districts, inactive “bench” salespeople were hired, and at the end of the program these salespeople took the place of the lowest performing salesperson in their districts if that salesperson did not make quota. In control districts, the company operated business as usual. We find the man-on-the-bench program to have an immediate and sustained impact on low-performing salespeople. Furthermore, the program had a greater impact in cohesive sales districts. This finding suggest...
Different instruments are relevant for different marketing objectives (category demand expansion ... more Different instruments are relevant for different marketing objectives (category demand expansion or market share stealing). To help brand managers make informed marketing mix decisions, it is essential that marketing mix models appropriately measure the different effects of marketing instruments. Discrete choice models that have been applied to this problem might not be adequate because they possess the Invariant Proportion of Substitution (IPS) property, which imposes counter-intuitive restrictions on individual ...
ABSTRACT Should SparkPlace target small business owners or marketing managers at mid-size compani... more ABSTRACT Should SparkPlace target small business owners or marketing managers at mid-size companies? The B2B marketing software company is debating which target market to pursue and has to consider market size, customer lifetime value, marketing return on investment, and other metrics to help it make its decision.
This paper is the first essay of the first author’s doctoral dissertation at Yale University. Do ... more This paper is the first essay of the first author’s doctoral dissertation at Yale University. Do Bonuses Enhance Sales Productivity?
∗ This paper is based on a session (with the same title and participants) that was part of the Si... more ∗ This paper is based on a session (with the same title and participants) that was part of the Sixth Invitational
This paper establishes the following: Random Utility Models (RUMs) that assume consistent prefere... more This paper establishes the following: Random Utility Models (RUMs) that assume consistent preferences result in inconsistent and therefore irrational choice behavior. Paradoxically, it is possible to create RUMs that result in consistent choice behavior, but these models assume inconsistent preferences.
This paper is the first essay of the first author’s doctoral dissertation at Yale University. Do ... more This paper is the first essay of the first author’s doctoral dissertation at Yale University. Do Bonuses Enhance Sales Productivity?
We estimate a dynamic structural model of sales force response to a bonus based compensation plan... more We estimate a dynamic structural model of sales force response to a bonus based compensation plan. The paper has two main methodological innovations: First, we implement empirically the method proposed by Arcidiacono and Miller (2011) to accommodate unobserved latent class heterogeneity with a computationally light two-step estimator. Second, we estimate discount factors in a dynamic structural model using field data. The key to identification of discount factors is that bonuses affect only future payoff in non-bonus periods providing exclusion restrictions on current payoffs. Further, we exploit differences in predicted effort (and thus sales) over time from the exponential and hyperbolic discounting models to identify present bias in a hyperbolic discounting model. Substantively, the paper sheds insights on how different elements of the compensation plan enhance productivity. We find evidence that: (1) bonuses enhance productivity across all segments; (2) overachievement commissio...
Companies spend billions of dollars every year on marketing because it is essential to organic gr... more Companies spend billions of dollars every year on marketing because it is essential to organic growth. Given these large investments, marketing managers have the responsibility to optimally allocate resources and to demonstrate that their investments generate appropriate returns for the firm. In this chapter, we highlight a two-stage process for marketing resource allocation. In stage one, a model of demand is estimated. This model empirically assesses the impact of marketing actions on consumer demand for a company's product. In stage two, estimates from the demand model are used as input in an optimization model that attempts to maximize profits. This stage takes into account costs as well as firm's objectives and constraints (e.g., minimum market share requirement). Over the last several decades, marketing researchers and practitioners have adopted various methods and approaches that explicitly or implicitly follow these two stages. We have categorized these approaches in...
This article identifies a property of several standard discrete-choice models that amounts to an ... more This article identifies a property of several standard discrete-choice models that amounts to an implicit assumption about individual choice behavior. This property, which I call the Invariant Proportion of Substitution (IPS), implies that the proportion of growth in expected own-good choice that an individual consumer draws from a given competing alternative is the same no matter which own-good attribute is improved. The IPS and Independence from Irrelevant Alternatives (IIA) properties are similar. But models that relax IIA, such as generalized extreme value (GEV) and covariance probit models, do not necessarily also relax IPS. Some models that do relax IPS are discussed.
In order to manage and motivate salespeople, companies regularly use both carrots (e.g., commissi... more In order to manage and motivate salespeople, companies regularly use both carrots (e.g., commission) and sticks (e.g., punishment). Although sticks are commonly found in practice, astonishingly little academic research has been devoted to studying their effects. In this project, we study a novel program called the “man-on-the-bench” program in a field experiment setting. It was developed to manage low-performing salespeople and is similar to a forced-ranking system, wherein low performers are let go. In treatment districts, inactive “bench” salespeople were hired, and at the end of the program these salespeople took the place of the lowest performing salesperson in their districts if that salesperson did not make quota. In control districts, the company operated business as usual. We find the man-on-the-bench program to have an immediate and sustained impact on low-performing salespeople. Furthermore, the program had a greater impact in cohesive sales districts. This finding suggest...
Different instruments are relevant for different marketing objectives (category demand expansion ... more Different instruments are relevant for different marketing objectives (category demand expansion or market share stealing). To help brand managers make informed marketing mix decisions, it is essential that marketing mix models appropriately measure the different effects of marketing instruments. Discrete choice models that have been applied to this problem might not be adequate because they possess the Invariant Proportion of Substitution (IPS) property, which imposes counter-intuitive restrictions on individual ...
ABSTRACT Should SparkPlace target small business owners or marketing managers at mid-size compani... more ABSTRACT Should SparkPlace target small business owners or marketing managers at mid-size companies? The B2B marketing software company is debating which target market to pursue and has to consider market size, customer lifetime value, marketing return on investment, and other metrics to help it make its decision.
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Papers by Thomas Steenburgh