An Empirical Examination of Economic Rationales for Companies' Use of Sales Contests

German Economic Association of Business Administration Discussion Paper No. 00-07

52 Pages Posted: 13 Jan 2004

See all articles by Murali K. Mantrala

Murali K. Mantrala

affiliation not provided to SSRN

Manfred Krafft

WHU Otto Beisheim Graduate School of Management

Barton A. Weitz

University of Florida - Warrington College of Business Administration

Abstract

The use of sales contests in sales force management is growing in popularity and receiving increasing allocations of sales budgets in many industries. So far, however, the sales management research literature offers little guidance on why and when firms benefit from employing "openended" and/or "closed-ended" sales contests instead of regular commission or quota-based bonus plans to motivate their sales forces. In this article, the authors review economic agency and tournament theory-based rationales for the use of contests as incentives. Based on this review, the authors develop a number of hypotheses about the effects of various characteristics of the selling environment, sales force, sales force control and regular sales force compensation plan, on the likelihood of companies being users of sales contests in general and closed-ended sales contests in particular. The hypotheses are tested on data from two independent surveys of sales organizations in the USA and Germany and many receive empirical support, suggesting that the agency- and tournament-theoretic models can usefully serve to guide sales managers' use and design of sales contests in the future.

JEL Classification: C4, M12, J33

Suggested Citation

Mantrala, Murali K. and Krafft, Manfred and Weitz, Barton A., An Empirical Examination of Economic Rationales for Companies' Use of Sales Contests. German Economic Association of Business Administration Discussion Paper No. 00-07, Available at SSRN: https://ssrn.com/abstract=310063 or http://dx.doi.org/10.2139/ssrn.310063

Murali K. Mantrala

affiliation not provided to SSRN

Manfred Krafft (Contact Author)

WHU Otto Beisheim Graduate School of Management ( email )

Burgplatz 2
Vallendar, 56179
Germany

Barton A. Weitz

University of Florida - Warrington College of Business Administration ( email )

Gainesville, FL 32611
United States
352-392-7166, ext. 1256 (Phone)
352-392-4379 (Fax)

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