A few weeks ago, I wrote about an interesting car wash study conducted by Joseph Nunes and Xavier Dreze in 2004 that focused on the threshold at which companies should start paying sales reps on performance. This week, I wanted to look at another aspect of the study that gives some insight into another part of the payout curve: how much to pay as a rep nears and then passes the goal.
In their study on car wash loyalty cards, Nunes and Dreze found that as a loyalty cardholder moved closer to earning a free wash, the time period between washes decreased by half a day. This meant that by the time that the cardholder reached his goal, he was getting his car washed a full four days sooner than when he began the program.
What does this mean for payout curves? First, it shows that a goal is a very powerful motivational factor in and of itself. Second, companies that want to get the most out of their incentive budgets should put accelerators and kickers above goal rather than at goal or below goal.
Let’s consider the car wash users again: As they got closer and closer to their goal, they washed their cars more often. For sales reps, this could equate to more call activity as they move closer to their own goals. This motivation is already there without any mid-point kickers or accelerators. What isn’t known is what happens after the goals are achieved. I would hypothesize that this is the point of risk. Reps in this situation have already achieved their goals and will be looking for their next motivation driver. Accelerating the payout rate above goal or adding a stretch kicker at 105% could be that motivator.
What do you think? Is the car wash study a good indicator for sales goals? What other ways can we motivate our teams to not only achieve their targets, but beat them?