Do Activity-Based Incentive Plans Work? Evidence from a Large-Scale Field Intervention
By Raghu Rao, Madhu Viswanathan, George John, Sunil Kishore
Journal of Marketing Research | August 2021
DOI
doi.org/10.1177/00222437211020013
Citation
Raghu Rao., Viswanathan, Madhu., George John., Sunil Kishore. (2021). Do Activity-Based Incentive Plans Work? Evidence from a Large-Scale Field Intervention Journal of Marketing Research doi.org/10.1177/00222437211020013.
Copyright
Journal of Marketing Research, 2021
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Abstract
Despite theory-based expectations, and actual usage in practice, we lack any evidence about sales productivity gains from activity-based incentive (ABI) pay. Such plans incorporate activity scores from salespersons’ call reports into incentive compensation. Securing the cooperation of a pharmaceutical firm, we undertook a three-year experiment involving an “ABI treatment-removal” design. Our first intervention added ABI pay for front-line salespeople and their supervisors across 305 sales territories. Our second intervention removed ABI pay from salespeople, and the third intervention removed them from the supervisors as well, thus returning to the status quo ante. We find a robust sales gain around 8% from each ABI intervention relative to the no-ABI baseline. These ABI sales effects are moderated by the number of salespeople in a territory with larger gains recorded in territories with more salespeople. Surprisingly, these sales gains are statistically indistinguishable regardless of whether ABI pay is provided to both supervisors and salespeople or just to the supervisors. The ABI effects on the behavioral activity measures show that supervisors exert behavior control downwards on salespeople when they (supervisors) are paid ABIs. All these results are robust to various threats to validity, including alternate specifications, attrition and accounting for the nesting of geographically adjacent territories. Managerially, our work supports tying incentive compensation to call reports despite the potential for self-serving biases in these measures, because supervisors exercise behavior control effectively.

Madhu Viswanathan is Associate Professor of Marketing at the Indian School of Business (ISB) and Executive Director of the Srini Raju Centre for IT and the Networked Economy (SRITNE). His research examines how emerging technologies reshape markets and how firms, platforms, and policymakers can design institutions that foster innovation, trust, and sustainable economic growth.

Working at the intersection of marketing, economics, strategy, and information systems, his research seeks to understand how technological change transforms consumer behaviour, organizational incentives, market design, and public policy. He studies how technologies such as artificial intelligence, digital platforms, creator ecosystems, and data-driven decision systems influence the way markets function and evolve. Across these diverse settings, his work aims to develop insights that help organizations respond to technological change with strategies that are both economically effective and socially meaningful.

His research has been published in leading journals including the Journal of Marketing Research, Marketing Science, and the Journal of Economics & Management Strategy. He serves on the Editorial Review Boards of the Journal of Marketing Research and Production and Operations Management and has been recognized with the Outstanding Reviewer Award from the Journal of Marketing Research.

As Executive Director of SRITNE, Madhu leads the Centre’s research and engagement on artificial intelligence, digital markets, and technology-enabled growth. Under his leadership, SRITNE is building a multidisciplinary research agenda around AI, digital platforms, creator economies, and emerging technologies while strengthening collaborations across academia, industry, startups, and government. His vision is to position the Centre as a leading hub for research that bridges technological innovation with business strategy and public policy.

Alongside his research, he teaches MBA, doctoral, and executive education programmes on growth strategy, digital marketing, artificial intelligence, and technology-enabled business. His teaching combines rigorous research with practical decision frameworks that help managers navigate growth, digital transformation, and strategic decision-making in rapidly evolving markets.

Beyond academia, Madhu serves as an independent director and advisor to technology ventures, working with organizations on growth strategy, platform businesses, AI adoption, digital transformation, and technology-enabled market design. His advisory work reflects his broader commitment to translating rigorous academic research into practical solutions for business leaders, entrepreneurs, and policymakers.

Prior to joining ISB, he was on the faculty at the University of Arizona. He received his PhD in Marketing from the University of Minnesota and his undergraduate degree from BITS Pilani. His work seeks to bridge rigorous academic research with business practice and public policy, helping organizations harness emerging technologies to build more innovative, efficient, and inclusive markets.

Prof Madhu Viswanathan
Madhu Viswanathan