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  • 2015
  • Working Paper
  • HBS Working Paper Series

Incentives versus Reciprocity: Insights from a Field Experiment

By: Doug J. Chung and Das Narayandas
  • Format:Print
  • | Language:English
  • | Pages:45
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Abstract

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. 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. Lastly, we find seasonality to influence sales volumes for salespeople with low base sales, but not so much for those with high base sales.

Keywords

Sales Force Compensation; Field Experiment; Heterogeneity; Loss Aversion; Reciprocity; Motivation and Incentives; Salesforce Management; Compensation and Benefits

Citation

Chung, Doug J., and Das Narayandas. "Incentives versus Reciprocity: Insights from a Field Experiment." Harvard Business School Working Paper, No. 15-084, April 2015. (Revised November 2015.)
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About The Author

Das Narayandas

Marketing
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Related Work

    • 2015
    • Faculty Research

    Incentives versus Reciprocity: Insights from a Field Experiment

    By: Doug J. Chung and Das Narayandas
    • August 2017
    • Journal of Marketing Research (JMR)

    Incentives versus Reciprocity: Insights from a Field Experiment

    By: Doug J. Chung and Das Narayandas
Related Work
  • Incentives versus Reciprocity: Insights from a Field Experiment By: Doug J. Chung and Das Narayandas
  • Incentives versus Reciprocity: Insights from a Field Experiment By: Doug J. Chung and Das Narayandas
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