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Are Sales Incentives Really Worth the Profits to the Company?

Sales teams have always received bonuses and incentives depending on the customers they bring in. But Yale SOM researchers studied the correlation between the kinds of sales incentives and profits to reveal some unsettling results.

They studied the data from a microfinance bank in Mexico to find out exactly what kind of sales incentives lead to profits for the company. They reviewed the data collected over 14 months from 461 loan officers who worked on approximately 130,000 loans. They also set out to understand if the long-term relationships salespeople build with certain customers is truly profitable.

K. Sudhir, a professor of marketing at the Yale School of Management, explained that what is good for the salesperson, might not be good for the company as a whole. The incentives and bonuses the salespeople receive might not be worth the value they are bringing to the company with the customers they are getting the bonuses for. The long-term relationships with customers also revealed negative consequences for the company.

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