Designing sales contests: Does the prize structure mattter?
Noah, Lim Ahearne, Michael Ham, Sung
Noah, Lim
Ahearne, Michael
Ham, Sung
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Publication Type
Journal article
Editor
Supervisor
Publication Year
2009
Journal
Journal of Marketing Research
Book
Publication Volume
46
Publication Issue
3
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Publication End page
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Abstract
Sales contests are short-term incentives that managers use to raise sales effort. The extant marketing theory predicts that the optimal prize structure should have two characteristics: (1) The number of prizewinners should be greater than one, and (2) prize values should be unique and rank ordered. However, this theory has not been empirically examined. This article presents two empirical studies that examine whether the prize structure of a sales contest affects sales performance. In each study, the authors investigate the incremental effects of introducing multiple prizewinners and unique rank-ordered prizes into a sales contest. The first study consists of two laboratory experiments in which participants make decisions that closely reflect the decision trade-offs in the theoretical model of sales contests. The second study consists of two field economic experiments in which trained salespeople sell fundraising sponsorships to companies. The results across the experiments are remarkably consistent: The number of prizewinners in a sales contest should indeed be greater than one. However, introducing rank-ordered prizes into contests with multiple prizewinners does not boost sales effort and revenues.