Multi-Segment and Single-Segment Sales Contests: Evidence of their Effectiveness and the Underlying Mechanisms

Bommaraju, Raghu; Arunachalam, S.; Hohenberg, Sebastian

Abstract

Sales contests are vital motivational tools, yet their effectiveness remains unclear. This research provides valuable insights by examining two contest types: (1) single-segment contests, where a salesperson competes against all other salespeople, and (2) multi-segment contests, where salespeople are divided into homogeneous segments and compete only within their respective segments. The authors compare both contests using different theoretical lenses and integrate managerial insights. For the empirical assessment, the authors carried out a field experiment with two treatment groups, each participating in a different contest type, and a control group that did not participate in any contest. To strengthen the internal and external validity of the findings, they conducted four supplementary studies, which comprised two additional field studies and two experimental studies. Findings reveal that, on average, single-segment contests do not outperform a no-contest situation, whereas multi-segment contests enhance not only the average performance but also the performance across the segments. This performance improvement is mediated by a higher perceived chance of winning and motivation. Additionally, the authors compare multi-segment contests with “duel-style” contests, where a salesperson competes in one-on-one duels within the same segment. Results indicate that the former yields superior results.