Doug J. Chung - Faculty & Research - Harvard Business School
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Doug J. Chung

MBA Class of 1962 Associate Professor of Business Administration


Doug J. Chung is the MBA Class of 1962 Associate Professor of Business Administration in the Marketing unit at Harvard Business School. He teaches Sales & Sales Force Management and Business-to-Business Marketing in the second year MBA Elective Curriculum. He also teaches Marketing Models in the DBA Curriculum and in various Executive Education programs at the Harvard Business School and Harvard Law School. He has previously taught the core Marketing course in the first year MBA Required Curriculum.

Professor Chung focuses his research primarily on sales force management and incentive compensation. He has worked with firms worldwide to develop effective employee incentive compensation systems and his work has been published in Marketing ScienceManagement Science, Journal of Marketing Research, Harvard Business Review, and the European Financial Review. His current work examines how different elements 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 M.A. 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, and he was the finalist for the 2014 John D. C. Little Award and the 2015 Frank M. Bass Award. He is also a member of the Edward A. Bouchet Graduate Honor Society. He was selected as a 2017 MSI Young Scholar by the Marketing Science Institute. 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 Warfare Command. He also held a variety of industry positions with several multinational companies.

Journal Articles
  1. How Do Sales Efforts Pay Off? Dynamic Panel Data Analysis in the Nerlove-Arrow Framework

    Doug J. Chung, Byungyeon Kim and Byoung G. Park

    This paper evaluates the short- and long-term value of sales representatives’ detailing visits to different types of physicians. By understanding the dynamic effect of sales calls across heterogeneous physicians, we provide guidance on the design of optimal call patterns for route sales. The findings reveal that the long-term persistence effect of detailing is more pronounced for specialist physicians, whereas the contemporaneous marginal effect is higher for generalists. The paper also provides a key methodological insight to the marketing and economics literature. In the Nerlove-Arrow framework, moment conditions that are typically used in conventional dynamic panel data methods become vulnerable to serial correlation in the error structure. We discuss the associated biases and present a robust set of moment conditions for both lagged dependent and predetermined explanatory variables. Furthermore, we show that conventional tests to detect serial correlation have weak power, resulting in the misuse of moment conditions that leads to incorrect inference. Theoretical illustrations and Monte Carlo simulations are provided for validation.

    Keywords: Nerlove-Arrow framework; stock-of-goodwill; dynamic panel data; serial correlation; instrumental variables; sales effectiveness; detailing; pharmaceutical industry; Data and Data Sets; Sales; Analysis; Performance Effectiveness; Pharmaceutical Industry;

    Citation:

    Chung, Doug J., Byungyeon Kim, and Byoung G. Park. "How Do Sales Efforts Pay Off? Dynamic Panel Data Analysis in the Nerlove-Arrow Framework." Management Science (forthcoming).  View Details
  2. Incentives versus Reciprocity: Insights from a Field Experiment

    Doug J. Chung and Das Narayandas

    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 sales force 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; however, it may lead to lower future performance. We find little evidence that effectiveness differs between a quota-bonus plan and a 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 of which the effectiveness decreases with repeated exposure. We also find heterogeneity in the impact of compensation on performance across salespeople; unconditional compensation is more effective for salespeople with high base performance, whereas conditional compensation is equally effective across all types of salespeople.

    Keywords: Sales force compensation; field experiment; heterogeneity; Loss aversion; reciprocity; Salesforce Management; Compensation and Benefits;

    Citation:

    Chung, Doug J., and Das Narayandas. "Incentives versus Reciprocity: Insights from a Field Experiment." Journal of Marketing Research (JMR) 54, no. 4 (August 2017): 511–524. (Lead article.)  View Details
  3. How Much Is a Win Worth? An Application to Intercollegiate Athletics

    Doug J. Chung

    Intercollegiate athletics in the United States have become a multibillion-dollar industry over the past several decades. In this study, we investigate the short- and long-term direct monetary effects of operating a winning athletics program for an academic institution of higher education. We construct a unique panel dataset from multiple sources and utilize the latest dynamic panel data estimation methods to account for heterogeneity while also addressing endogeneity concerns. We find that success in men's football and basketball has a significant impact on a school's respective football and basketball revenues; however, the effect is different based on the type of school. We find that regular season wins in football account for most of the increase in revenue for established schools whereas invitations to prestigious postseason bowl games play a big part for less-established schools. Furthermore, we find that student population and education quality dissipate the effect of athletic success on monetary payoffs. We find that success in basketball carries over more from the past than in football with additional contemporaneous marginal effects for established schools. We do find, however, that past athletic success carries over significantly to the present in both football and basketball, suggesting the significance of the long-term monetary effect of athletic success to many academic institutions in the United States.

    Keywords: dynamic panel data; heterogeneity; instrumental variables; intercollegiate athletics; educational finance; entertainment marketing; Higher Education; Marketing; Sports; Revenue; Education Industry; United States;

    Citation:

    Chung, Doug J. "How Much Is a Win Worth? An Application to Intercollegiate Athletics." Management Science 63, no. 2 (February 2017): 548–565.  View Details
  4. How to Really Motivate Salespeople

    Doug J. Chung

    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.

    Keywords: Sales; compensation; motivating people; Motivation and Incentives; Compensation and Benefits; Sales;

    Citation:

    Chung, Doug J. "How to Really Motivate Salespeople." Harvard Business Review 93, no. 4 (April 2015): 54–61.  View Details
  5. Do Bonuses Enhance Sales Productivity? A Dynamic Structural Analysis of Bonus-Based Compensation Plans

    Doug J. Chung, Thomas Steenburgh and K. Sudhir

    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; Salesforce Management; Compensation and Benefits;

    Citation:

    Chung, Doug J., Thomas Steenburgh, and K. Sudhir. "Do Bonuses Enhance Sales Productivity? A Dynamic Structural Analysis of Bonus-Based Compensation Plans." Marketing Science 33, no. 2 (March–April 2014): 165–187. (Lead article. Featured in HBS Working Knowledge.)  View Details
  6. The Dynamic Advertising Effect of Collegiate Athletics

    Doug J. Chung

    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.

    Keywords: advertising; choice modeling; entertainment marketing; heterogeneity; panel data; structural modeling; Rights; Data and Data Sets; Higher Education; Ethics; Consumer Behavior; Advertising; Sports; Advertising Industry; Education Industry;

    Citation:

    Chung, Doug J. "The Dynamic Advertising Effect of Collegiate Athletics." Marketing Science 32, no. 5 (September–October 2013): 679–698. (Lead article. Featured in HBS Working Knowledge.)  View Details
Online Articles
  1. What's the Right Kind of Bonus to Motivate Your Sales Force?

    Doug J. Chung and Das Narayandas

    Companies typically compensate their sales force by using some combination of salary, commission, and bonuses, but executives are often unsure which incentives provide the best motivation. Should bonuses be tied to quotas or should they be given unconditionally? Is it better to use bonuses as a reward or as punishment? A randomized field experiment at a large Indian company investigated these questions, finding that conditional bonuses were more than twice as effective as unconditional bonuses. The results have implications for companies trying to use bonuses to more effectively manage their salespeople.

    Keywords: Compensation and Benefits; Motivation and Incentives; Salesforce Management;

    Citation:

    Chung, Doug J., and Das Narayandas. "What's the Right Kind of Bonus to Motivate Your Sales Force?" Harvard Business Review (website) (September 12, 2017).  View Details
Working Papers
  1. A Bayesian Analysis of Post-Entry Outcomes: An Application to Shopping Mall Sales

    Doug J. Chung, Kyoungwon Seo and Reo Song

    We propose a Bayesian model of post-entry outcomes. Endogenous firm entries are modeled as a discrete game of complete information. The model encompasses many realistic elements, such as common aggregate shocks and within-/cross-category spillovers. Multiple equilibria are addressed by estimating a selection function from the observed data. The Bayesian approach that combines decision-making with parameter inference, as well as multiple equilibria in complete information games, require demanding computational power for model estimation. We overcome computational burden by utilizing an improved simulator for likelihood evaluation and the general-purpose computing on graphics processing units (GPGPU) technology that takes advantage of multiple processing cores in a GPU to increase computational speed. We apply our model to shopping mall configuration and sales. We find that competition effects dominate within retail store categories, but that agglomeration effects exist across store categories. We find positive causal brand effects for midscale and upscale stores, above and beyond market effects, but find negative causal brand effects for discount stores on mall sales. We find that a developer is better off creating a mall in an affluent versus a populated market.

    Keywords: firm entry; discrete game; complete information; multiple equilibria; endogeneity; GPGPU technology; Bayesian Estimation; shopping mall; spillover; Sales; Marketing; Geographic Location; Retail Industry;

    Citation:

    Chung, Doug J., Kyoungwon Seo, and Reo Song. "A Bayesian Analysis of Post-Entry Outcomes: An Application to Shopping Mall Sales." Harvard Business School Working Paper, No. 17-071, February 2017. (Revised April 2018.)  View Details
  2. The Effects of Quota Frequency: Sales Performance and Product Focus

    Doug J. Chung, Das Narayandas and Dongkyu Chang

    This study investigates the comprehensive and multidimensional effects of quota frequency on sales force performance. We develop a theory of salespeople’s behavior with regard to the effect of sales quota frequency on aggregate effort and the product type focus. The theory includes many realistic elements such as salespeople’s multi-dimensional effort, heterogeneity in ability, product focus, and forward-looking behavior. We test our theory through a field experiment in which we vary the sales force compensation scheme of a major retail chain in Sweden. We find that shifting to a temporally more frequent quota plan leads to an increase in sales performance for low-performing salespeople by preventing them from giving up in the later periods within a quota evaluation cycle. However, we find little evidence of improvement in productivity for high-performing salespeople. In addition, we find no effects in product returns with regard to a change in quota frequency. With quotas set over shorter time horizons, the high-performing salespeople focus mainly on low-ticket products, resulting in a decrease in both sales volume and the sale of high-ticket products, thus reducing the firm’s profits.

    Keywords: Sales force compensation; field experiment; quotas; quota frequency; Commissions; bonuses; goals; Goals and Objectives; Salesforce Management; Performance; Compensation and Benefits; Retail Industry; Sweden;

    Citation:

    Chung, Doug J., Das Narayandas, and Dongkyu Chang. "The Effects of Quota Frequency: Sales Performance and Product Focus." Harvard Business School Working Paper, No. 17-059, January 2017. (Revised August 2018.)  View Details
  3. Price Bargaining and Channel Selection in Online Platforms: An Empirical Analysis of the Daily Deal Market

    Lingling Zhang and Doug J. Chung

    The prevalence of online platforms opens new doors to traditional businesses for customer reach and revenue growth. This research investigates platform choice in a setting where prices are determined by negotiations between platforms and businesses. We compile a unique and comprehensive dataset from the U.S. daily deal market, where merchants offer deals to generate revenues and attract new customers. We specify and estimate a two-stage supply-side model in which platforms and merchants bargain on the wholesale price of deals. Based on Nash bargaining solutions, our model generates insights into how bargaining and competition jointly determine the price and firm profits. Our results show that there is systematic variation in bargaining power between platforms and merchants with different characteristics. By working with a bigger platform, merchants enjoy a larger customer base, but they are subject to lower margins due to less bargaining power during negotiations. Our counterfactual results quantify the value of platforms for merchants and show that merchants with lower bargaining power benefit more by working with a smaller platform. Regarding the impact of price negotiations on platform competition, we estimate that roughly 11% of the deals on a smaller platform are attributable to the platform’s lower level of revenue sharing.

    Keywords: business-to-business marketing; platform competition; Two-Sided Markets; price bargaining; daily deals; structural model; Two-Sided Platforms; Marketing Channels; Price; Negotiation;

    Citation:

    Zhang, Lingling, and Doug J. Chung. "Price Bargaining and Channel Selection in Online Platforms: An Empirical Analysis of the Daily Deal Market." Harvard Business School Working Paper, No. 16-107, March 2016. (Revised March 2018.)  View Details
  4. Selling to a Moving Target: Dynamic Marketing Effects in US Presidential Elections

    Doug J. Chung and Lingling Zhang

    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 campaign advertising works more favorably towards Republican candidates. In contrast, field operations are more effective for Democratic candidates, primarily through the 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; Personal selling; advertising; political campaigns; dynamic panel data; instrumental variables; Marketing Communications; Political Elections; Advertising Campaigns; United States;

    Citation:

    Chung, Doug J., and Lingling Zhang. "Selling to a Moving Target: Dynamic Marketing Effects in US Presidential Elections." Harvard Business School Working Paper, No. 15-095, June 2015. (Revised December 2015.)  View Details
  5. The Air War versus The Ground Game: An Analysis of Multi-Channel Marketing in U.S. Presidential Elections

    Lingling Zhang and Doug J. Chung

    We jointly examine the effects of television advertising and field operations in U.S. presidential elections, where the former is referred to as the “air war” and the latter as the “ground game.” Specifically, we look at how different campaign effects vary by voter segments and how types of advertising—candidate and party advertising versus outside advertising—affect voter preference. We compile a comprehensive dataset that includes voting outcomes and detailed campaign activities for the 2004–2012 elections. Individuals' voting preference is modeled via a random-coefficient aggregate discrete-choice model, in which we incorporate individual heterogeneity and use instrumental variables to address the endogeneity concern underlying campaign allocations. We find that different campaign activities have heterogeneous effects depending on voters’ party affiliation; field operations are more effective among partisans and candidate and party advertising is more effective among non-partisans, whereas outside advertising is more effective among partisan voters. Our findings can help strategists efficiently allocate resources across and within channels to design an effective political marketing campaign.

    Keywords: multi-channel; ground campaigning; advertising; political campaigns; discrete-choice model; instrumental variables; Political Elections; Marketing Channels; Advertising; United States;

    Citation:

    Zhang, Lingling, and Doug J. Chung. "The Air War versus The Ground Game: An Analysis of Multi-Channel Marketing in U.S. Presidential Elections." Harvard Business School Working Paper, No. 15-033, October 2014. (Revised March 2018.)  View Details
Cases and Teaching Materials
  1. Medicetra Medtech Company, Inc.

    Doug J. Chung

    Medicetra MedTech Company is a dental equipment distributor and senior management is deciding whether to implement a new incentive compensation program for the sales force. For many years, Medicetra had paid salespeople only a fixed salary. Although the current plan of a straight salary seemed to be working favorably towards sales force retention salespeople had limited monetary incentives to sell more, as increased sales did not directly relate to increased pay. Management is leaning towards a change to a variable compensation plan that links performance with pay and is considering three options: 1) commission; 2) quota-bonus; and 3) commission plus quota-bonus plans. Which compensation plan would induce behavioral changes that would lead to better sales force performance but, at the same time, would appear fair to other employees?

    Keywords: Sales compensation; sales force retention; employee fairness; Salesforce Management; Motivation and Incentives; Retention; Fairness; Performance Improvement;

    Citation:

    Chung, Doug J. "Medicetra Medtech Company, Inc." Harvard Business School Case 518-049, October 2017.  View Details
  2. Luminopia: Improving Treatment for Visual Disorders

    Doug J. Chung and Sarah Mehta

    Luminopia—a start-up founded in January 2016 by three Harvard College freshmen—uses virtual reality technology to treat amblyopia (more commonly called “lazy eye”), the single biggest cause of visual disorders among children. By February 2017, the three founders had raised $950,000 in angel funding and developed a prototype of their virtual reality product, which was in use in clinical trials at Boston Children’s Hospital. As the founders prepare to bring their new medical device to market, they struggle with two key decisions: Should Luminopia create its own salesforce to sell its product or should it outsource? And how should the company price its device to maximize returns yet remain attractive to doctors, insurance providers, and individual patients?

    Keywords: pricing; Virtual reality; Startup; Marketing; Marketing Channels; Product Marketing; Product Launch; Product Positioning; Business Startups; Price; Medical Devices and Supplies Industry; Cambridge; Massachusetts; United States;

    Citation:

    Chung, Doug J., and Sarah Mehta. "Luminopia: Improving Treatment for Visual Disorders." Harvard Business School Case 517-065, April 2017.  View Details
  3. Cyberdyne: A Leap to the Future

    Doug J. Chung and Mayuka Yamazaki

    Cyberdyne Inc. was a Japanese technology venture founded in 2004 by scientist Yoshiyuki Sankai to commercialize a hybrid assistive limb (HAL). HAL was a robotic exoskeleton system for people who had difficulty walking due to nervous system disabilities resulting from stroke, spinal cord injury (SCI), and intractable neuromuscular diseases. In a person with neuromuscular disorders, signals transmitted from the brain to steer muscle movement are weakened, causing ambulatory difficulty. HAL could noninvasively read faint signals that leaked to the skin surface and amplify them, which drove actuators to assist limb movement. In other words, when a person wearing HAL tried to move his or her limb, HAL assisted the person in moving the limb. As a result, HAL enabled the person’s brain to relearn how to walk, as HAL could reinforce the neurological system’s transmission. In order to sell and promote HAL in the U.S., the world’s largest medical device market, Cyberdyne submitted an application to the Food Drug and Administration (FDA) in November 2014 and eagerly awaited approval.
    The case concentrates on the marketing decisions that Cyberdyne has to make to bring HAL to the U.S. market once Cyberdyne obtains FDA approval. The students can consider target-market selection and accompanying marketing-mix elements—distribution, promotion, and price. The case provides students the opportunity to understand and utilize marketing-mix elements when bringing a technologically innovative product to market in a business-to-business context.

    Keywords: Technological Innovation; Marketing Strategy; Decisions; Product Launch; Medical Devices and Supplies Industry;

    Citation:

    Chung, Doug J., and Mayuka Yamazaki. "Cyberdyne: A Leap to the Future." Harvard Business School Teaching Note 516-114, May 2016.  View Details
  4. Cyberdyne: A Leap to the Future

    Doug J. Chung and Mayuka Yamazaki

    Cyberdyne Inc. was a Japanese technology venture founded in 2004 by scientist Yoshiyuki Sankai to commercialize a hybrid assistive limb (HAL). HAL was a robotic exoskeleton system for people who had difficulty walking due to nervous system disabilities resulting from stroke, spinal cord injury (SCI), and intractable neuromuscular diseases. In a person with neuromuscular disorders, signals transmitted from the brain to steer muscle movement are weakened, causing ambulatory difficulty. HAL could noninvasively read faint signals that leaked to the skin surface and amplify them, which drove actuators to assist limb movement. In other words, when a person wearing HAL tried to move his or her limb, HAL assisted the person in moving the limb. As a result, HAL enabled the person’s brain to relearn how to walk, as HAL could reinforce the neurological system’s transmission. In order to sell and promote HAL in the U.S., the world’s largest medical device market, Cyberdyne submitted an application to the Food Drug and Administration (FDA) in November 2014 and eagerly awaited approval.
    The case concentrates on the marketing decisions that Cyberdyne has to make to bring HAL to the U.S. market once Cyberdyne obtains FDA approval. The students can consider target-market selection and accompanying marketing-mix elements—distribution, promotion, and price. The case provides students the opportunity to understand and utilize marketing-mix elements when bringing a technologically innovative product to market in a business-to-business context.

    Keywords: marketing; sales distribution; go to market strategy; Marketing; Distribution; Strategy; Medical Devices and Supplies Industry;

    Citation:

    Chung, Doug J., and Mayuka Yamazaki. "Cyberdyne: A Leap to the Future." Harvard Business School Case 516-072, January 2016. (Revised July 2018.)  View Details
  5. Marketing Reading: Sales Force Design and Management

    Doug J. Chung and Das Narayandas

    This Core Curriculum Reading introduces students to (1) the importance of sales force design in implementing organizational strategy, and (2) the role of sales force management in linking structures and processes to behaviors. The material combines theoretical perspectives with real-world examples, drawn from the business-to-business (B2B), business-to-consumer (B2C) and nonprofit sectors, to illustrate the range of challenges and opportunities in this field.
    The Reading includes an interactive illustration enabling students to test varying levels and combinations of fixed and variable compensation components. Three videos address the topics of (1) aligning strategy and sales, (2) engaging employees, and (3) using customer-feedback metrics in evaluation systems.

    Keywords: Sales budget; Sales compensation; Sales cycle; sales force management; Sales forces; sales management; Sales operations; Sales organization; Sales planning; Sales strategy;

    Citation:

    Chung, Doug J., and Das Narayandas. "Marketing Reading: Sales Force Design and Management." Core Curriculum Readings Series. Boston: Harvard Business Publishing 8213, 2014.  View Details
  6. Outotec (A): Project Capture

    Robert J. Dolan and Doug J. Chung

    Outotec was a market leader in providing mining solutions to large mining companies. The company's specialization and proprietary technology created value for its customers and helped the firm differentiate from its competitors. Yet, Outotec was not pricing or marketing its solutions in a way that took advantage of its distinct capabilities and value-add. Outotec used a cost-based (inside/out) pricing policy, which was the industry norm. As a result, operating profit was only 8% of sales and the CEO had promised the investment community improvements above 10%. The company and particularly the newly hired VP of Market Operations want to move from a cost-based (inside/out) to a value-based (outside/in) pricing and selling model to capture more profitable revenues and meet profitability targets the CEO announced to investors. But there are several challenges to this, which the case study highlights for students to discuss and debate.

    Citation:

    Dolan, Robert J., and Doug J. Chung. "Outotec (A): Project Capture." Harvard Business School Case 514-064, October 2013. (Revised August 2015.)  View Details
  7. Outotec (B): Action Plan

    Robert J. Dolan and Doug J. Chung

    Outotec was a market leader in providing mining solutions to large mining companies. The company's specialization and proprietary technology created value for its customers and helped the firm differentiate from its competitors. Yet, Outotec was not pricing or marketing its solutions in a way that took advantage of its distinct capabilities and value-add. Outotec used a cost-based (inside/out) pricing policy, which was the industry norm. As a result, operating profit was only 8% of sales and the CEO had promised the investment community improvements above 10%. The company and particularly the newly hired VP of Market Operations want to move from a cost-based (inside/out) to a value-based (outside/in) pricing and selling model to capture more profitable revenues and meet profitability targets the CEO announced to investors. But there are several challenges to this, which the case study highlights for students to discuss and debate.

    Citation:

    Dolan, Robert J., and Doug J. Chung. "Outotec (B): Action Plan." Harvard Business School Supplement 514-065, October 2013. (Revised August 2015.)  View Details