Srinath Gopalakrishna and colleagues at the University of Missouri created a two-year study to learn about what drives success in the auto insurance world, particularly the rep’s role throughout the sales process from finding leads all the way to converting them. They studied 538 agents at a large Midwestern insurance company. These agents were told to focus on both generating and converting leads in order to grow their customer base over the course of two years. The agents were compensated strictly on commission, making the delineation of motivation clearer than if they were paid a salary, and each agent was given an advertising budget of several hundred dollars to use as they pleased.
The researchers measured each agent’s prospecting efficacy, or number of potential customers identified, and conversion efficacy, or the percentage of those leads who purchased a policy.
They also analyzed the extrinsic and intrinsic motivation for each rep. Things like sales competitions and performance bonuses comprised extrinsic motivation, while intrinsic motivation consisted of agents’ responses to questions about why they do what they do, whether it was to feel like they had achieved something, to take on an exciting challenge, or to feel proud of performing a useful service.
The study showed that the relationship between motivation and prospecting efficacy was fairly straightforward, but the analysis of conversion efficacy revealed some surprising results. Even though experienced reps didn’t find as many leads as newer reps did, their skill at converting them meant their overall performance didn’t suffer. Gopalakrishna and his team came up with a few recommendations for sales managers looking to boost productivity amongst new and seasoned reps alike.
Don’t let sellers spread themselves thin by generating too many leads to follow up on. “Prospecting is not just throwing a quote out to interested buyers,” Gopalakrishna told Harvard Business Review. “To generate a quality prospect you have to talk to each person to figure out their needs. You have to provide a highly-informed quote. That takes time—and if you do too much of it, you won’t have enough time to close others.”
Some companies prefer to have newer sellers focus exclusively on prospecting (BDRs/SDRs) and seasoned reps focus exclusively on closing deals. But it’s more prudent to consider each seller’s individual skills in both categories and work with them to find the balance between prospecting and closing that works for them. “If you hire people only to prospect, they’ll feel a sense of incompleteness,” Gopalakrishna told HBR. “Salespeople like to see the end of the funnel. If you tell them to stop in the middle, they will feel cheated out of the best part of the job.”
Hire for intrinsic motivation, especially in more experienced roles, which positively affects both prospecting and conversion efficacy. Sales reps with long track records of success in similar roles are more likely to be driven primarily by intrinsic motivation than by bonuses or commissions, and they’re probably more intrinsically motivated than people who have moved through different industries or roles throughout their careers.
Focus external motivation efforts around getting seasoned reps to boost their prospecting — since they’re the best at closing deals, it will be worth the effort. It’s also prudent to spend advertising money on experienced sellers who know how to maximize the potential of ad messaging, as opposed to novice sellers who didn’t gain much from using their advertising budgets in the study. But there’s a balance to be struck — less experienced sellers still need help growing their networks in the form of ad spending, too.
“Our findings show that it’s important to understand the entire sales process, not just to think about the end results,” Gopalakrishna told HBR. “Too many sales managers have a purely bottom-line mentality.”