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Why Do Sales People Spend So Much Time Lobbying for Low Prices?

Marketing Science, 2014, 33(6), pages 796-808.

62 Pages Posted: 13 Dec 2011 Last revised: 8 Jan 2015

Duncan Simester

Massachusetts Institute of Technology (MIT) - Sloan School of Management

Juanjuan Zhang

Massachusetts Institute of Technology (MIT) - Sloan School of Management

Date Written: June 26, 2013

Abstract

In business-to-business settings a company’s sales force often spends considerable time lobbying internally for authorization to charge lower prices. These internal lobbying activities are time consuming, and divert attention from other tasks, such as interacting with customers. We explain why the sales force’s internal lobbying activities serve an important role. They help the firm elicit truthful reporting of demand information from the sales force. As a result, it may be profitable for the firm to require lobbying (and make the requirement onerous), even though lobbying is a nonproductive activity that creates an additional administrative burden and imposes a deadweight loss.

Keywords: lobbying, influence activities, sales force management, pricing, agency theory, incentives, information elicitation, marketing-sales interface

JEL Classification: D82, D83, L14, L23, M12, M52

Suggested Citation

Simester, Duncan and Zhang, Juanjuan, Why Do Sales People Spend So Much Time Lobbying for Low Prices? (June 26, 2013). Marketing Science, 2014, 33(6), pages 796-808. . Available at SSRN: https://ssrn.com/abstract=1971347 or http://dx.doi.org/10.2139/ssrn.1971347

Duncan Simester (Contact Author)

Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )

Management Science
Cambridge, MA 02142
United States
617-258-0679 (Phone)
617-258-7597 (Fax)

Juanjuan Zhang

Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )

Cambridge, MA 02142
United States

HOME PAGE: http://jjzhang.scripts.mit.edu

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