In this paper, we investigate an important marketing issue, which is whether salespeople should be given pricing authority. Whether or not the delegation of pricing authority to salespeople improves the company`s performance has been a highly controve...
In this paper, we investigate an important marketing issue, which is whether salespeople should be given pricing authority. Whether or not the delegation of pricing authority to salespeople improves the company`s performance has been a highly controversial issue in marketing. Despite the repeated calls in the marketing literature for empirical researches of the relationship between delegating the pricing authority and its effects on the performance, few empirical research has been done on the effect of delegating pricing authority to the sales force. One of the main purposes of this article, therefore, is to analyze differences among firms that delegates pricing authority to their salespeople in varying degrees. And we focused on the empirical analysis of the relationship between the extent of pricing authority and its impact on the performance. A survey was conducted using a questionnaire administered to the sales managers of 125 listed companies in Korean stock market. We found out that most firms grant medium to high degree of pricing authority to their sales force regardless of the presence or absence of the critical condition like a commission system called for in the existing literature. Although marketing managers have an affirmative expectation of its impact on the profit maximization and moral of the sales force, we found the actual performance was somewhat inconsistent with their subjective expectation. The empirical results suggest that the optimal level of pricing authority delegation is medium rather than high or non. This result could provide the managers with highly relevant managerial issues.