Value Added by Customer- and Operations-Focused Sales Reps in Business Markets
47 Pages Posted: 14 Nov 2023 Last revised: 13 Oct 2024
Date Written: October 1, 2023
Abstract
In business markets, customers are typically assisted by customer-focused outside (OS) reps and operations-focused inside (IS) reps, who work together to ensure smooth buying experiences. Because these reps work jointly, selling firms evaluate reps’ performance according to overall output, without assessing or quantifying their respective individual contributions to customer buying decisions. The authors propose using value-added metrics that pertain to three drivers of value: (1) OS reps, (2) IS reps, and (3) the interface between OS and IS reps. This approach leverages variations in OS–IS combinations and produces value-added metrics for individual reps as well as dyadic synergies. To address the empirical challenges (i.e., limited variations in OS–IS combinations), they use empirical Bayes estimation, which produces BLUP (Best Linear Unbiased Prediction) estimates for the metrics. An application, using data from a Fortune 500 firm operating in business markets, reveals that all three value-added drivers have large and differential effects on customer sales. Specifically, an increase of one standard deviation in the effect of OS, IS, or interface synergy improves customer sales by 17.8%, 11.6%, or 14.3%, respectively. The authors evaluate the estimation biases of the proposed method against baseline fixed effects estimation with a series of simulations, demonstrating the practical superiority of empirical Bayes. They further demonstrate the validity of the value-added metrics based on their predictive power related to future customer sales. This research provides initial estimates of the value added by customer- and operations-focused roles, and their interfaces. Potential applications of the proposed approach include evaluating the impact of sales programs and enabling more informed resource allocation.
Keywords: Business markets, empirical Bayes, human capital, marketing and operations interface, sales operations, sales reps, unobserved effects
JEL Classification: M54, M31
Suggested Citation: Suggested Citation