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Do most sales managers try to maximize sales volume to the detriment of profits? The authors do not think so. Methods are proposed For shifting incentives from sales volume to profits through better utilization of data available from electronic data processing systems. [ABSTRACT FROM AUTHOR]

A sales compensation plan paying equal commission rants on the gross margins of the products in a salesman's line is shown to be optimal. Under such a plan, a salesman trying to maximize his commissions simultaneously maximizes his contribution to company profits. The plan can also handle problems such as loss leaders and capacity constraints with minor modifications. The plan appears operational and may help simplify formal quota and control systems now needed under other compensation programs. [ABSTRACT FROM AUTHOR]

We study a channel relationship in which manufacturer(s) use independent sales representatives (rep firms), which employ salespeople to do the actual selling. We show that commission-only payments by manufacturers to rep firms lead to suboptimal outcomes for the manufacturer relative to those obtained under a vertically integrated channel. From the manufacturer's standpoint, these inefficiencies can be ameliorated through the use of sales incentives given to the rep firm's salespeople directly by the manufacturer (called "spiffs"). In a monopolistic environment, spiffs are shown to improve the manufacturer's profits in the face of contractual restrictions on the channel members' ability to set separate commission rates by product. For certain types of restrictions, spiffs may generate manufacturer outcomes close to the fully coordinated ones achieved under vertical integration even when compensating the rep firm through commission-only contracts. In a competitive environment, spiffs are shown to be used by a powerful manufacturer that shares a rep firm's sales efforts with the product of a weaker manufacturer (i.e., in the case of "common agency"). In this case, spiffs are used as a strategy to deter the weaker manufacturer from challenging the stronger manufacturer for the salesforce's valuable selling effort. [ABSTRACT FROM AUTHOR]

Dantzig, Fulkerson, and Johnson (1954) introduced the cutting-plane method as a means of attacking the traveling salesman problem; this method has been applied to broad classes of problems in combinatorial optimization and integer programming. In this paper we discuss an implementation of Dantzig et al.'s method that is suitable for TSP instances having 1,000,000 or more cities. Our aim is to use the study of the TSP as a step towards understanding the applicability and limits of the general cutting-plane method in large-scale applications. [ABSTRACT FROM AUTHOR]

For the symmetric traveling salesman problem, we identify a set of (undirected) edges that can be eliminated while still retaining at least one optimal solution of the problem. The simple identification rules are based on the fact that a solution can be optimal only if it is 2-optimal. The rules are less stringent than those formulated for nonoptimal arcs (directed), applied to the symmetric case. So, in general, they identify more nonoptimal edges. Application of the theory in a 1tree based traveling salesman algorithm roughly halves the average computation time for Euclidean problems. We indicate to what extent the theorems presented here can be adapted for variants of the traveling salesman problem. [ABSTRACT FROM AUTHOR]

For a multi-product sales force, the policy of paying commissions as an equal percentage of realized gross margins is shown to be, in general, nonoptimal from the firm's profit maximization point of view. For a homogeneous salesforce, the nonoptimality results from the fact that earlier research while taking into account the effect of commission rates on a salesperson's allocations of total time to the multiple products, has not incorporated the effect of commission rates on salesperson's total selling time (resulting from his/her trading off income vs. total time to maximize utility). The equal commission rate policy is, however, optimal for the cases of (i) salesperson with a fixed total selling time and a minimum income requirement and (ii) "fair-income" salesperson whose total selling time is merely a function of income (and not based on rate of change of income as in the utility maximization case). If the salesforce is heterogeneous (e.g., different salespersons have differing sales responses to selling time) this makes the equal commission rate policy to be, in general, nonoptimal even for the restrictive cases (i) and (ii). It is suggested that the commission rates be set higher for products with greater elasticities (relating quantities sold to selling times). The common practice of paying commissions as a percentage of total dollar sales (rather than gross margins) is shown to be optimal under certain assumptions. [ABSTRACT FROM AUTHOR]

Quotas, commissions and mixtures of the two are widely used to control salesmen's activities both in terms of overall motivation and as decentralized means to direct allocation of effort over various products in the firm's line. Sales commission plans as allocation devices for a commission-maximizing sales force and a profit-maximizing central management generally turn out to be inadequate decentralized allocation devices in themselves, regardless of whether commissions are based on sales or on profit margins. A plan based on sales fails to reconcile the interests of salesmen and management, while a plan based on profit margins generally makes each salesman's income depend not only on his performance but on the performance of all other members of the sales force simultaneously. Further, information requirements about individual salesmen and markets appear so great that setting optimal quotas centrally is impossible for practical purposes. However, an iterative quota generating procedure may be used to reconcile interests of salesmen and management, and yet maintain the desirable features of decentralized allocation consistent with the independent operation of the individual salesman. [ABSTRACT FROM AUTHOR]