How managers can bolster the performance of their sales reps

It can be vexing to answer the phone only to discover an auto insurance sales rep on the other end of the line. The next time that happens, though, consider cutting the rep some slack. Drivers in the United States spend an average of US$1,771 a year on full-coverage car insurance, with rates in some cities topping US$6,200. But finding and recruiting customers for such plans isn’t easy.

The University of Missouri’s Srinath Gopalakrishna and colleagues studied the auto insurance industry to learn more about what drives sales success. In particular, they wanted to examine the rep’s role throughout the sales funnel, from prospecting for leads to converting those leads into customers. They studied 538 agents at a US$1 billion regional insurance company in the Midwest. The agents were tasked with growing their customer base over the course of two years, which required them to focus on both generating and converting leads. They were compensated on a straight commission basis, which allowed the researchers to more accurately assess motivation than if the agents had been salaried. And the agents had an advertising budget of several hundred dollars each to use as they saw fit.

To tease apart the roles that prospecting and converting played in new customer acquisition, the researchers measured each rep’s prospecting efficacy — defined as the number of potential customers identified — and conversion efficacy, or the share of those prospects who went on to buy policies. They also evaluated extrinsic and intrinsic motivation. Extrinsic motivation was assessed by looking at things such as sales competitions and performance bonuses. Intrinsic motivation was estimated using agents’ responses to survey questions about why they sell: to fulfill a desire to achieve something, to tackle the challenge of selling, or to cherish the feeling of performing a useful service.

The researchers’ analysis showed that motivation, opportunity, and ability drove prospecting efficacy in a straightforward way, but the relationship of those variables to conversion efficacy was more complex. Somewhat surprisingly, experienced reps found fewer prospective customers than novices did. But that didn’t necessarily hurt their overall performance, because they excelled at conversion. Advertising boosted both prospecting and conversion efficacy but was more beneficial among experienced reps. And the suc­cess of managerial levers to enhance both kinds of efficacy depended in part on reps’ level of experience.