The ambivalent role of monetary sales incentives in service innovation selling

Abstract

Abstract Complex service innovations constitute a cornerstone in the strategy of numerous industrial companies. The industrial sales force assumes an important role in the selling of these complex service innovations. For firms a key challenge in this respect resides in ensuring the sales force's motivation for the selling of such innovations and effectively solving customers’ business problems. Past research frequently discussed monetary sales incentives as an effective tool to reinforce desired employee behaviors, but, to date, the discussion has failed to produce conclusive guidance for practitioners as to whether monetary sales incentives in fact can facilitate selling of complex service innovations. To clarify the effects of monetary sales incentives in this respect, we draw on self‐focus theory to disentangle how complex service innovation selling is shaped by the interplay of salesperson service incentives (i.e., the extent to which variable compensation depends on service turnover) and salesperson share of variable compensation (i.e., the percentage of compensation that depends on performance). To test these interactive effects, we use a multiple‐source data set including 294 salespeople, and match objective firm data. The results reveal that when service incentives are high, the share of variable compensation exhibits an inverse u‐shaped effect on a salesperson's problem‐solving behavior, which is an important predictor of innovative service selling success. In addition, the share of variable compensation increases work effort, which in turn drives innovative service selling success. These findings shed light on the intricate “human”, employee‐related side of service innovation management and provide actionable implications for managers how to increase their firms’ innovative service selling success.

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