Measuring the Effectiveness of Salespeople: Evidence from a Cold-Drink Market

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Salespeople are widely employed in many industries. Zoltners, Sinha and Lorimer (2008) conservatively estimate that US companies spend $800 billion on salespeople each year—close to three times the amount spent on advertising. However, due to lack of field data, direct empirical evidence on the effectiveness of salespeople is scarce.

We leverage a unique data set on retail sales from a leading Chinese cold-drink manufacturer and information on the firm’s salespeople assignment rule to measure the causal effect of salespeople on product revenue. Our empirical approach exploits the manufacturer’s internal allocation rules to measure the benefits of salespeople. We find that the marginal effect of the first salesperson is 16.2 percent and that of the second is 10.6 percent. We provide some evidence on the incentive issues caused by the manufacturer's compensation plan as a possible explanation for the decreasing effect of an additional salesperson.

JEL Code(s): L, L8, L81, M, M3, M5