The Effects of Quota Frequency: Sales Performance and Product Focus

This study investigates the comprehensive and multidimensional effects of quota (goal) frequency on sales force performance. The study provides a theory of salespeople’s behavior—aggregate effort and the product-type focus—in response to the temporal length of a sales quota cycle. The theory includes many realistic elements, such as salespeople’s multidimensional effort, heterogeneity in ability, product focus, and forward-looking behavior. We test the theory through a field experiment, varying the sales compensation structure of a major retail chain in Sweden. Consistent with the developed theory, shifting to a temporally frequent quota structure leads to an increase in sales performance for low-performing salespeople by preventing them from giving up in later periods within a quota-evaluation cycle, but to a decrease in sales performance for high-performing salespeople. With quotas set over short time horizons, the high-performing salespeople focus mainly on low-ticket products, resulting in a decrease in both sales volume and the sale of high-ticket products, thus reducing the firm’s profits. This paper was accepted by Eric Anderson, marketing.

How Do Specialized Personal Incentives Enhance Sales Performance? The Benefits of Steady Sales Growth

The authors study specialized personal incentives (SPIs), which are cash rewards granted to salespeople for meeting interim performance goals within the regular sales quota period (monthly, quarterly, etc.). Because firms often institute multiple SPIs, the authors are able to investigate whether different sales achievement trajectories have differential impacts on salespeople's period-end sales performance. The authors find that a steadily growing sales trajectory in a sales period is more strongly associated with period-end success than a sales trajectory that is relatively flat early but has a sharp spike later in the period. Furthermore, although salespeople who had high performance in the prior month (i.e., high-performance state) may be able to draw on superior selling strategies (compared with other salespeople), they too experience a boost in sales performance in the current month by earning SPIs. Notably, the authors also find that although earning SPIs benefits all salespeople, there is a U-shaped relationship between a salesperson's performance state and his or her month-end sales performance. For any specific number of SPIs earned, the probability of meeting and exceeding month-end quotas is boosted more for salespeople with low- and high-performance states than for salespeople with a medium-performance state.