PMC

FEATURESTORY

When Should You Push Top Performers?

Successful salespeople are typically self-driven, but even the best need encouragement and enticing occasionally. When is the best time to galvanize a salesperson or an entire sales team to achieve a predetermined goal?

To formulate his hypothesis on this question, Columbia University Professor Ran Kivetz borrowed from behaviorist Clark Hull's goal-gradient research from the early 1930s. Hull showed that rats ran faster through a maze as they neared the reward of cheese at the end. Similarly, Kivetz theorized, participants in an incentive program will accelerate the behavior necessary to receive a reward as they get closer to that reward.

Why incentives?

■ Fewer than one in four
American workers is working
at full potential; half of all
workers do no more than
directly asked, and 75% of
employees say they could
be more effective in their
jobs, according to the Public
Agenda forum.

■ 70% of unhappy
customers abandon vendors
because of poor service,
according to the Forum Corp.

■ A 5% increase in
customer retention can
increase lifetime profits
from a customer by 75%,
according to the Loyalty
Effect by Frederick
Reichheld.

■ Competitive pay and
a rich benefits program
may attract talent, but a
Towers Perrin survey of
6,000 employees working
for major North American
companies shows that
recognition programs,
advancement opportunities,
a culture of teamwork and
innovation, and a clear
line of sight between what
employees do every day and
how the business performs
are more effective in
engaging workers on a daily
basis.

In his field studies, Kivetz found that participants in a café reward program accelerated their purchases of coffee as they neared the 10-cup total that would earn them a free coffee. In analyzing 950 redeemed cards (nearly 10,000 individual purchases), Kivetz found that the average length of time between purchases decreased from almost 3 1/2 days for the first, second and third cups to about 2 1/2 days for the sixth through 10th cups.

Why non-cash incentives?

■ Nearly three-fourths of respondents to 2005 survey of workplace managers agree that they can build more exciting and memorable incentive programs around travel and merchandise rather than cash.

■ In the same survey, 53% of respondents believe that employees tend to look at bonus payments as "something they are due."

■ A USA Today survey found that 93% of those polled prefer travel over other awards, mainly because it's something that many people are not able to buy for themselves.

■ A University of Chicago study found that while most people stated a strong preference for cash, their performance was markedly better when they were in pursuit of a non-cash incentive. If you ask workers what they want, "cash" is usually the instant reply. But the right question, says Scott Jeffrey, assistant professor of management sciences at the University of Waterloo in Southwestern Ontario, is "What will you work hardest for?"  And whether they realize it or not, tangibles is the answer.

Consistent with the idea that motivation depends on the distance from the goal, participants who finished one card and started a second increased the time between purchases at the beginning of the second card and accelerated again as they neared the 10-cup goal a second time. Similar results were seen in a program sponsored by a developer of music organizing software that offered free downloads after visitors rated a certain number of songs.

An additional significant discovery was that the "illusion of progress towards the goal" also motivated purchase acceleration. A separate group of participants was given a 12-cup coffee card with the first two cups already credited. Despite needing to fulfill the same 10-cup quota as the first group to qualify for the free coffee, the 12-cup group reached that mark almost three days faster than the 10-cup group.

What does all of this mean for sales managers attempting to motivate the troops?

"People will accelerate their effort in your incentive system as they get closer to their goal," says Kivetz. He also found that people are significantly less likely to drop out of incentive programs as they near the reward, and those who reach the goal are highly likely to stay involved.

Kivetz's recommendations for sales incentive programs as a result of these findings:

■ Create highly visible reward meters so participants know how close they are to receiving a reward

■ Target and time communications and promotions to participants as they get closer to a goal

■ Create the illusion of goal progress by starting participants off with points or some other credit that instantly vests them in the program

■ Build an accelerating or tiered reward structure that allows participants with equity to improve their status

 

See also in the article:
Why Cash Incentives Fail
  Lock In On Luxuries
  When Should You Push Top Performers?
  Cut the Cards


 

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