Sales compensation plan type and sales opportunity coverage: “Double-edged” sword effects on sales performance

Abstract

Sales compensation plans affect salespeople's prospecting activity and sales opportunity coverage because they shape behavior in terms of how reps manage their territory and broader portfolio of customers. Drawing on goal-setting theory, the authors propose and test a theoretical framework which unearths a “double-edged” sword moderating effect whereby the number of pursued sales opportunities impacts the main effect of sales compensation plan type on resultant sales (performance). The reported empirical study examines salesperson data prior to and after the implementation of a new compensation plan. We then utilize the metaphor of the “double-edged” sword to further explicate the findings, whereby the volume of sales opportunities is found to moderate sales goal and quota achievement (i.e., amplifying the main effect). The research also finds that pursuit of too many sales opportunities can become overly burdensome, thereby overloading salespeople and reducing goal commitment and performance. Implications for both research and practice are discussed.