Issue link: http://digital.copcomm.com/i/16726
salespeople can have a dramat- ic impact on profits. Consider a PC manufacturer like Dell that sells to two segments: the trans- action segment where cus- tomers buy once and the rela- tionship segment where cus- tomers make multiple purchas- es over time. What types of compensation plans should the PC manufacturer use for peo- ple who sell to these segments? To address this question, “Odd as it may seem, the PC manufacturer must employ different sales force compensation plans for its salespeople who says Jagpal, the PC manufactur- er should view the effort of a salesperson who sells to the relationship segment as an investment. Decision makers must keep in mind that the profits generated by that salesperson are uncertain. Consequently, it is best for the manufacturer to share both current and future profits with her. In other words, it should pay the salesperson targeting the rela- tionship segment a lower base salary and a higher com- mission rate than a salesperson targeting the transac- tion segment. Interestingly, the salesperson targeting the relationship segment will, on average, make more money than the “transaction” salesperson. However, her income will fluctuate more. “Odd as it may seem, the PC manu- target different market segments, even though they are selling the same products,” pany is different. If you want solid, long-term performance, you need a marketing strategy that’s organic, that’s understood and agreed-upon by marketing and finance leaders, and that’s backed by state-of-the-art empirical methods. “Fusing marketing and finance may sound daunting, but the hardest part is making the psychological leap,” adds Jagpal. “Once you’ve bought into the idea, you’ll get excited about the possibilities. There’s great opportunity out there — yes, even in an econom- ic downturn — and when key players work together, your company can seize it.” About the Author: Dr. Sharan Jagpal is an internationally recognized facturer must employ different sales force compensation plans for its sales- people who target different market segments, even though they are selling the same products,” says Jagpal. “And in order to choose the optimal pay plan, the company must coordinate the decision across its marketing and finance departments. Why? Because each plan has a different effect on the firm’s net risk and return after paying the salesperson.” Of course, these tips barely scratch the surface of the valuable information in Fusion for Profit. But they do illuminate the overarching truth that inspired the book: The best marketing strategies, those that yield long- term value, are based not on trends, anecdotal evi- dence, or past “success stories” but on rigorous new scientific methods explicitly developed for analyzing data that are often imprecise. Indeed, says Jagpal, the methods laid out in his book can save many failing business models world- wide — regardless of whether the business in question is publicly owned by shareholders, pri- vately held by lofty hedge funds, or privately held by mom-and-pop stores. “What worked yesterday won’t necessarily work tomorrow,” he points out. “And what works for a large publicly held corporation won’t necessarily work for a privately owned small business. Every com- Black Meetings & Tourism July/August 2010: www.blackmeetingsandtourism.com 29 “What worked yesterday won’t necessarily work tomorrow,” expert in marketing and in other fields. He was educated at Columbia Business School and at the London School of Economics, and regularly publishes articles in top journals in marketing (e.g., Marketing Science) and in other disciplines including economics and statistics (e.g., International Economic Review and Journal of Classification). His first book, Marketing Strategy and Uncertainty (Oxford University Press), laid the foun- dation for the fusion of marketing and finance—an area he has pioneered. About the Book: Fusion for Profit: How Marketing & Finance Can Work Together to Create Value (Oxford University Press, 2008, ISBN: 978-0-19-537105-5, $59.95). Available from major retailers, online booksellers, and oup.com/us. For further information, please visit fusionforprof-it.com.