Social and Behavioral Sciences Commons^™

When Salespeople Manage Customer Relationships: Multidimensional Incentives And Private Information, Minkyung Kim, K. Sudhir, Kosuke Uetake, Rodrigo Canales

Cowles Foundation Discussion Papers

At many firms, incentivized salespeople with private information about customers are responsible for CRM. While incentives motivate sales performance, private information can induce moral hazard by salespeople to gain compensation at the expense of the firm. We investigate the sales performance–moral hazard tradeoff in response to multidimensional performance (acquisition and maintenance) incentives in the presence of private information. Using unique panel data on customer loan acquisition and repayments linked to salespeople from a microfinance bank, we detect evidence of salesperson private information. Acquisition incentives induce salesperson moral hazard leading to adverse customer selection, but maintenance incentives moderate it as salespeople …