The Effect of Sales Incentives on Business Seasonality

Author
Keywords
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.

Year of Publication
1995
Number
354
Date Published
11/1995
Publication Language
eng
Citation Key
8142
URL
Working Papers