Empathy in salesperson-customer interactions

A search model based on Burdett and Judd (1983) is developed where consumers encounter salespeople who have the option of making an active selling effort. This effort is good for consumers if it increases the benefits of buying whereas it is bad for them if it increases the cost of not buying. For a broad range of parameters, equilibria feature a strictly positive fraction of salespeople who make this effort while the rest do not. Price and quantity observations are insufficient to distinguish between outcomes where the effort of salespeople is good for consumers and outcomes where it is bad. Under some circumstances, the correlation between the empathy of salespeople for their customers and their volume of sales can help distinguish between these two outcomes. JEL: M31, D64, D83 ∗Harvard Business School, Soldiers Field, Boston, MA 02163, jrotemberg@hbs.edu. Books giving advice to would-be salespeople offer a number of recommendations that do not involve the transmission of information about the product or service being sold. Insofar as these techniques are successful, they must affect the value that potential customers ascribe to either buying or not buying. This paper studies the extent to which such persuasive techniques are used in a model where potential customers come into contact with a relatively small number of salespeople, so that price competition is muted. I distinguish between sales techniques that increase the value of products to their purchasers and techniques that increase the cost of not buying the good. The former tend to increase welfare while the latter tend to reduce it. I show that, nonetheless, the two are observationally indistinguishable using only data on quantities and prices. A second focus of the paper is on the role of the empathy of salespeople in increasing the level of their sales. One reason to study this empathy is that the influential papers of Mayer and Greenberg (1964) and Morlan (1986) have suggested that empathy towards customers is crucial for being successful in sales. At the same time, the empirical literature studying cross-sectional correlations between salesperson empathy and salesperson effectiveness has produced mixed results. The early study of Tobolski and Kerr (1952) found a positive relationship between a measure of dispositional empathy and the effectiveness of new car salesmen at two dealers. By contrast, negative correlations with various measures of effectiveness are reported by Lamont and Lundstrom (1977) for a sample of building supply salesmen. Lastly, Dawson et al. (1992) reports a very weak relationship between empathy and sales. Following the suggestion of Weitz (1981), the model I present implies that the connection See Dawson et al (1992) for additional references. More recent regression studies seeking to explain the performance of salespeople have tended to focus on “customer orientation,” (CO) measured as in Saxe and Weitz (1982) rather than on empathy per se. The two variables are strongly correlated with one another (see Widmier (2002) and Stock and Hoyer (2005)) and closely related conceptually. The CO scale gives considerable weight to agreement with the statements “I try to achieve my goals by satisfying customers,” and “A good salesperson has to have the customer’s best interest in mind. ” Both of these fit well with the way I model empathy, which is by supposing that the salesperson’s objective includes the utility of his customers. The meta-analysis of Franke and Park (2006) shows that the correlation between salespeople’s self-reported customer orientation and the level of performance as evaluated by their managers is quite weak.