The influences of the external factors on the optimal compensation for heterogeneous salesforce

Salesforce's performance contributes to the profits of a firm, and their abilities affect their performance. Their abilities vary, and so do their needs. Therefore, fulfilling salespeople's needs without sacrificing a firm's profits challenges the decision maker of a firm. In this paper, we set up a mathematical model to deal with such a challenge – designing the optimal compensation plan. From the optimal compensation plan, we derive the following properties. First, salesforce's effort increases in inverse proportion to the growing mean of salesforce distribution. Secondly, when the variance of salesforce distribution increases, the lower 15.87–50% of the salesforce of the ability structure become assiduous in promoting their product, while the top 50–84.13% of the ability structure become reluctant to sell their product.