Research Insight | Sales Contests Are Broken—Here's How to Make Them Effective
In a typical sales contest, salespeople compete against one another on a pre-set metric. Proponents argue that these contests satisfy the innate human need to compete, serve as tools to foster agile behaviors within the sales force, and enable firms to offer flexible and responsive steering strategies. But critics argue that such contests motivate only the top salespeople since middle and bottom performers may not have a fair chance to win.
This study investigates the efficacy of two types of sales contests: single-segment and multi-segment. In a single-segment sales contest, a salesperson competes against all other salespeople in the organization. In a multi-segment sales contest, salespeople are segmented into homogenous segments (e.g., similar past performance) and a salesperson competes only against salespeople from their segment.
The findings reveal that, on average, single-segment contests do not outperform a no-contest situation, whereas multi-segment contests enhance not only the average performance but also the performance across the segments. This performance improvement is due to a higher perceived chance of winning in the multi-segment contest.
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What You Need to Know
- Single-segment sales contests, where all salespeople compete in one segment, do not boost performance.
- Multi-segment contests, where salespeople are segmented based on past performance and compete only within their segment, enhance not only the total performance but also the performance within each segment.
- The performance improvement in multi-segment contests is due to a higher perceived chance of winning.
Abstract
Sales contests are vital motivational tools, yet their effectiveness remains unclear. This research provides valuable insights by examining two contest types: (1) single-segment contests, where a salesperson competes against all other salespeople, and (2) multi-segment contests, where salespeople are divided into homogeneous segments and compete only within their respective segments. The authors compare both contests using different theoretical lenses and integrate managerial insights. For the empirical assessment, the authors carried out a field experiment with two treatment groups, each participating in a different contest type, and a control group that did not participate in any contest. To strengthen the internal and external validity of the findings, they conducted four supplementary studies, which comprised two additional field studies and two experimental studies. Findings reveal that, on average, single-segment contests do not outperform a no-contest situation, whereas multi-segment contests enhance not only the average performance but also the performance across the segments. This performance improvement is mediated by a higher perceived chance of winning and motivation. Additionally, the authors compare multi-segment contests with “duel-style” contests, where a salesperson competes in one-on-one duels within the same segment. Results indicate that the former yields superior results.
Raghu Bommaraju, S. Arunachalam, and Sebastian Hohenberg, “Multi-Segment and Single-Segment Sales Contests: Evidence of Their Effectiveness and the Underlying Mechanisms,” Journal of Marketing Research, 62 (3), 447–65. doi:10.1177/00222437241307577.