Salesperson profitability in relationship marketing

Abstract

Purpose

This paper aims to answer a prominent question that arises for the manager who wishes to recruit a salesperson to maintain and develop a portfolio–customer relationship: Under which condition is this decision profitable for the firm? Though several authors have underscored the importance of the salesperson's role in the creation of purchaser–salesperson relationships, in the author's knowledge, no study has focused on the salesperson's profitability in the relationship approach. This issue is significant for sales managers because the investment in sales force is greater, and the relationship profitability with customers is not guaranteed.

Design/methodology/approach

Econometric model based on transaction cost economics theory and dynamic exchange between firm, salesperson and a customer. Specifically, this model links between customer life value, firm financial value, salesperson cost and relationship time.

Findings

Three zones are identified that can characterize the dynamic salesperson profitability. It was shown that only one zone can be profitable to the firm.

Research limitations/implications

This result is important because it can solve the equivocal posit between scholars with regard to the success or the failure of relationship marketing. This study also specifies the critical retention rate, the critical duration time in which a salesperson begins to be profitable.

Originality/value

In the author's knowledge, this study is the first to use an exchange model to show in which conditions the salesperson will be profitable in relationship marketing.

Citation

Echchakoui, S. (2014), "Salesperson profitability in relationship marketing", Journal of Modelling in Management, Vol. 9 No. 3, pp. 306-323. https://doi.org/10.1108/JM2-02-2014-0014