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  • April 2021
  • Article
  • Management Science

The Effects of Quota Frequency: Sales Performance and Product Focus

By: Doug J. Chung, Das Narayandas and Dongkyu Chang
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Abstract

This study investigates the comprehensive and multidimensional effects of quota (goal) frequency on sales force performance. We develop 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 multi-dimensional effort, heterogeneity in ability, product focus, and forward-looking behavior. We test our theory through a field experiment in which we vary the sales force compensation scheme of a major retail chain in Sweden. Consistent with the developed theory, we find that shifting to a temporally frequent quota plan 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. However, we find a decrease in sales performance for high-performing salespeople. In addition, 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.

Keywords

Sales Force Compensation; Field Experiment; Quotas; Quota Frequency; Commissions; Bonuses; Goals; Salesforce Management; Compensation and Benefits; Goals and Objectives; Behavior; Performance

Citation

Chung, Doug J., Das Narayandas, and Dongkyu Chang. "The Effects of Quota Frequency: Sales Performance and Product Focus." Management Science 67, no. 4 (April 2021): 2151–2170.
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About The Author

Das Narayandas

Marketing
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  • Digital Transformation at Tata Steel By: Krishna Palepu, Das Narayandas and Radhika Kak
  • Bajaj Finance: Building an Omnipresent Financial Services Firm By: Das Narayandas and Rachna Tahilyani
  • BTS & ARMY By: Doug J. Chung and Kay R. Koo
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