Salesforce Motivation: Using the Stick and the Carrot

Interviene: Michael Ahearne, University of Houston

Organizzato da: Dipartimento di Marketing, registrazione obbligatoria stefania.gandolfi@unibocconi.it

Abstract: When it comes to the question of salesforce motivation, most of the marketing literature has primarily focused on the design and effectiveness of sales incentive contracts. However, in practice, most sales organizations use both an incentive (“carrot”) and a punishment (“stick”) approach to managing salespeople. The first part of this presentation focuses on a study that investigates the effects of the “stick” approach to salesforce motivation. Using data from a field experiment conducted with a Fortune 500 company and a series of lab experiments we find several interesting results. The “stick” approach is found to have a significant positive effect on sales. Much of the productivity improvement comes from the lower performers, who are most threatened by the punishment. Further, our results show evidence of helping behavior among the members of most socially cohesive groups under the threat of a punishment. While group cohesion does not affect sales performance under the standard incentive program, it significantly increases performance under the “punishment” program. The second part of this presentation focuses on a study that investigates the effects of some commonly used “carrot” approaches to salesforce motivation, i.e. short-term incentive programs in the form of target-bonus programs and sales contests. Using data from two field experiments conducted with a large US national insurance company, we find differential effects for these types of short term incentive programs. For single-product incentives, both target-bonus programs and sales contests can be effective at increasing sales. However, for multiple-product incentives, target-bonus programs may be considerably less effective than contests due to an “effort–switching” effect. Further, in some cases, sales contests might be a more effective type of short-term incentive program than target-bonus programs, as contests motivate a larger proportion of the sales force.