Throwdown (A Multi-Segment Sales Contest) Vs. Traditional (Single Segment) Sales Contests: Evidence from Field and Lab Experiments

Sales managers spend considerable time and effort designing and executing sales contests, which they view as an essential tool to motivate their sales force. A study published in 2016 stated that the annual expenditure on sales contests in the U.S. exceeds $9 billion, and that these contests are prevalent across industries such as retail, automobiles, banking, insurance, and pharmaceuticals.

Traditional sales contests involve salespeople competing on a pre-set metric (e.g., revenue) with winners chosen based on their relative performance over a set period. Proponents of these contests argue that they enable salespeople to satisfy the innate human need to compete, and that they can increase performance. However, critics suggest that sales contests motivate only the top salespeople since middle and bottom performers do not have a fair chance. In 2014, the CEO of a major sales contest platform noted: “If you talk to the bottom 80%, you’ll find that in many cases sales contests actually discourage them because the same top performers win every time.”

Despite massive investments that firms make in sales contests, the effectiveness of these contests has not been tested in a field setting. Companies have continued to design and execute traditional sales contests with all the salespeople competing against each other in a single segment but are yet to explore alternative forms of sales contests.

A working paper designs a new type of sales contest that addresses the criticism that the middle and bottom performers may not be motivated to participate in traditional contests. In this new contest, termed ‘Throwdown’, salespeople are segmented based on their past performance and compete with peers only within each segment. Drawing on self-determination theory, the researchers investigate how the salesperson’s inner regulation focus influences their performance thereby studying the moderating role of autonomous regulation (i.e., the tendency to engage in a contest due to reasons originating from the self) and controlled regulation (i.e., the tendency to engage in a contest due to reasons originating from outside the self).

This study helps Chief Sales Officers answer four key questions:

1. How effective is a traditional sales contest in the field? (i.e., traditional vs. no contest)
2. How effective is Throwdown in the field? (i.e., Throwdown vs. no contest)
3. Is Throwdown more effective than a traditional sales contest? (i.e., Throwdown vs. traditional)
4. Which salespeople respond better to Throwdown? (i.e., moderating effects of autonomous vs. controlled regulation)

The procedure included a series of field studies at a pharmaceutical firm in India as well as experiments in companies based in the United States. In Study 1, salespeople were randomly slotted into three groups – the first not participating in any contest, the second participating in a traditional sales contest, and the third participating in Throwdown. Study 2 was held in a controlled online setting – with the aim to strengthen the internal validity of findings from Study 1. Studies 3 and 4 tested the Throwdown contest in two field studies in the U.S. that involved more than 3,000 salespeople in two different industries.

The results offered four main insights for Chief Sales Officers:

1. Salespeople who took part in the traditional sales contest did not show significant improvement compared to the control group.
2. Across studies, salespeople who participated in the Throwdown exhibited a performance improvement, ranging from 8% to 10%, compared to the no-contest scenario.
3. The field experiment shows that Throwdown, on average, is more effective (7% higher) than a traditional sales contest.
4. The difference in the effectiveness of Throwdown and the equivalent traditional sales contest is greater for salespeople with a higher controlled regulation (13%) but lower for salespeople with higher autonomous regulation (5%)