The Effect of Sales Incentives on Business Seasonality

Paul Oyer ()

No 733, Working Papers from Princeton University, Department of Economics, Industrial Relations Section.

Abstract: This paper shows that, in addition to varying with the calendar business cycle, manufacturing firms' sales are significantly higher at the end of the fiscal year, and lower at the beginning, than they are in the middle. The causes of these fiscal-year effects are investigated, emphasizing the role of salespeople and their motivation to meet quotas and earn a bonus. In many industries firms have substantially lower average prices toward the end of fiscal years, but price changes cannot explain all the effect of fiscal years on revenue seasonality. It is shown that the industry variation in the fiscal year revenue and price effects are correlated with type of product, distribution method, and the industry average salesperson turnover rate. The results are consistent with a sales quota model of fiscal seasonality, where all salespeople can vary their effort throughout the fiscal year but only some salespeople can influence the timing of their customers' purchases.

Keywords: compensation; incentive contracts; seasonality; fiscal year; salespeople (search for similar items in EconPapers)
JEL-codes: B40 (search for similar items in EconPapers)
Date: 1995-11
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Citations: View citations in EconPapers (2)

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