Marketing Seminar（2014-10）

Title:Upselling versus Upsetting Customers? A Model of Intrinsic and Extrinsic Incentives

Speaker: Qiaowei Shen

Affiliation:University of Pennsylvania

Time: : Wednesday 26 November. 10:30-12:00am

Location: Room216, Guanghua Building 2

Abstract

Upselling is a common practice in business that is associated with high profit margin. Yet we find empirical evidence that upselling is negatively correlated with customer satisfaction. In this paper, we study the relationship between upselling and customer satisfaction in the framework of sales agents incentive. On the one hand, sales representatives are motivated to upsell by the monetary incentive in the form of commission. On the other hand, sales representatives have the intrinsic motivation to achieve customer satisfaction, which is not tied to monetary reward. As exerting effort is costly, an agent optimally allocates effort in the upselling practice and in serving customers to maximize personal utility. Using a comprehensive data set from a national car rental company that practices upselling, we estimate a model of customers' decision to purchase add-on products at the counter and customer satisfaction together with counter representatives' effort allocation deci-sion. We conduct counterfactual analysis to evaluate the implications of different incentive schemes on upselling, customer satisfaction and future business.

Your participation is warmly welcomed!