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

Abstract

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.