Doug J. Chung
Assistant Professor of Business Administration
Doug J. Chung is an assistant professor of business administration in the Marketing Unit and teaches the Marketing course in the MBA required curriculum and Business Marketing in Executive Education. Professor Chung focuses his research primarily on sales force management and incentive compensation. His current work examines how different components of an incentive compensation plan affect the performance of varying types of sales agents. Professor Chung earned his Ph.D. in management at Yale University, where he also earned an MA and M. Phil in management. He is the recipient of the ISMS Doctoral Dissertation Award, ISBM Doctoral Support Award, and the Mary Kay Doctoral Dissertation Award. He is also a member of the Edward A. Bouchet Graduate Honor Society. He completed his undergraduate studies at Korea University. Prior to pursuing a career in academics, Professor Chung served as an officer and platoon commander in the South Korean Special Forces. He also held a variety of industry positions with several multinational companies.
How to Really Motivate Salespeople
Much of what we believe about the best ways to compensate and motivate the sales force is based on theory and lab experiments. But in the past decade, researchers have been moving out of the lab and into the field, analyzing companies' sales and pay data, and conducting experiments involving actual salespeople. The findings from this new wave of research support some current compensation practices but call others into question. For example, studies clearly show that caps on commissions hurt sales. If managers must retain a cap, they should set it as high as possible to avoid reducing reps' incentives. Although overly complicated compensation systems have their downsides, research has found that a system needs to include enough elements (such as quarterly performance and overachievement bonuses) to keep high performers, low performers, and average performers engaged throughout the year. Managers should be careful in setting and adjusting quotas. For instance, studies show that ratcheting (raising a salesperson's annual quota if he or she exceeded it the previous year) dampens motivation. The research also suggests that it's important to pay attention to the timing of bonuses: a reward given at the end of a period is more motivating than one given at the beginning.
Motivation and Incentives;
Compensation and Benefits;
Do Bonuses Enhance Sales Productivity? A Dynamic Structural Analysis of Bonus-Based Compensation Plans
We estimate a dynamic structural model of sales force response to a bonus based compensation plan. 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 commissions help sustain the high productivity of the best performers even after attaining quotas; and (3) quarterly bonuses help improve performance of the weak performers by serving as pacers to keep the sales force on track to achieve their annual sales quotas. The paper also introduces two main methodological innovations to the marketing literature: First, we implement empirically the method proposed by Arcidiacono and Miller (2011) to accommodate unobserved latent class heterogeneity using a computationally light two-step estimator. Second, we illustrate how discount factors can be estimated in a dynamic structural model using field data through a combination of (1) an exclusion restriction separating current and future payoff and (2) a finite horizon model in which there is no forward looking behavior in the last period.
Keywords: Performance Productivity;
Compensation and Benefits;
Motivating Diverse Salespeople Through a Common Incentive Plan
The Dynamic Advertising Effect of Collegiate Athletics
I measure the spillover effect of intercollegiate athletics on the quantity and quality of applicants to institutions of higher education in the United States, popularly known as the "Flutie Effect." I treat athletic success as a stock of goodwill that decays over time, similar to that of advertising. A major challenge is that privacy laws prevent us from observing information about the applicant pool. I overcome this challenge by using order statistic distribution to infer applicant quality from information on enrolled students. Using a flexible random coefficients aggregate discrete choice model that accommodates heterogeneity in preferences for school quality and athletic success, and an extensive set of school fixed effects to control for unobserved quality in athletics and academics, I estimate the impact of athletic success on applicant quality and quantity. Overall, athletic success has a significant long-term goodwill effect on future applications and quality. However, students with lower than average SAT scores tend to have a stronger preference for athletic success, while students with higher SAT scores have a greater preference for academic quality. Furthermore, the decay rate of athletics goodwill is significant only for students with lower SAT scores, suggesting that the goodwill created by intercollegiate athletics resides more extensively with low-ability students than with their high-ability counterparts. But, surprisingly, athletic success impacts applications even among academically stronger students.
Selling to a Moving Target: Dynamic Marketing Effects in US Presidential Elections
We examine the effects of various political campaign activities on voter preferences in the domain of US Presidential elections. We construct a comprehensive data set that covers the three most recent elections, with detailed records of voter preferences at the state-week level over an election period. We include various types of the most frequently utilized marketing instruments: two forms of advertising—candidate's own and outside advertising, and two forms of personal selling—retail campaigning and field operations. Although effectiveness varies by instrument and party, among the significant effects we find that a candidate's own advertising is more effective than outside advertising, and that advertising and retail campaigning work more favorably towards Republican candidates. In contrast, we find field operations to be more effective for Democratic candidates, primarily through get-out-the-vote efforts. We do not find any between-party differences in the effectiveness of outside advertising. Lastly, we also find a moderate but statistically significant carryover effect of campaign activities, indicating the presence of dynamics of marketing efforts over time.
Keywords: multi-channel marketing;
Incentives versus Reciprocity: Insights from a Field Experiment
We conduct a field experiment in which we vary the sales force compensation scheme at an Asian enterprise that sells consumer durable goods. With variation generated by the experimental treatments, we model salesforce performance to identify the effectiveness of various forms of conditional and unconditional compensation. We account for salesperson heterogeneity by using a hierarchical Bayesian framework to estimate our model. We find conditional compensation in the form of quota-bonus incentives to improve performance. We find no evidence that effectiveness differs between a quota-bonus plan and punitive-bonus plan framed as a penalty for not achieving quota. We find unconditional compensation in the form of reciprocity to be effective at improving sales force performance only when given as a delayed reward; when immediate, sales force performance decreases. We also find heterogeneity in the impact of compensation on performance across salespeople; unconditional compensation is more effective for salespeople with high intrinsic ability, whereas conditional compensation is equally effective across all types of salespeople. Lastly, we find seasonality to significantly influence sales volumes for low ability, but not so much for high ability, salespeople.
Keywords: Sales force compensation;
Motivation and Incentives;
Compensation and Benefits;
The Air War versus The Ground Game: An Analysis of Multi-Channel Marketing in U.S. Presidential Elections
Firms increasingly use both mass-media advertising and targeted personal selling to successfully promote products and brands in the marketplace. In this study, we jointly examine the effect of mass-media advertising and personal selling in the context of U.S. presidential elections, where the former is referred to as the "air war" and the latter the "ground game." Specifically, we look at how different types of advertising―candidates' own ads vs. outside ads―and personal selling―in the form of utilizing field offices―affect voter preferences. Further, we ask how these various campaign activities affect the outcome of elections through their diverse effects on various types of people. We find that personal selling has a stronger effect among partisan voters, while candidates' own advertising is better received by non-partisans. We also find that personal selling accounted for the Democratic victories in the 2008 and 2012 elections and that advertising was critical only in a close election, such as the one in 2004. Interestingly, had the Democrats received more outside advertising in 2004, the election would have ended up in a 269–269 tie. Our findings generate insights on how to allocate resources across and within channels.
Keywords: Personal selling;