Hammacher Company: Manufacturer – Use of Sales Incentives

Wallace Bain, sales manager of the Hammacher Company, was considering whether or not to make some basic changes in the annual end-of-the-year travel incentive campaign. Many companies used travel incentives; Hammacher Company had used this incentive for almost twenty-five years. The method of operation had been polished and perfected so that sales personnel were moti­vated to greater and greater effort. Sales records were broken every year, and sales last year had been 12 percent better than the year before.

The main incentive for sales personnel meeting their quotas was an expense-paid “holiday” at a glamorous resort. Last year’s meeting had been at the Hotel Fontainbleau in Miami Beach, Florida, in April. Although the­oretically every salesperson had the opportunity to attend this convention, last year only 275 of the 500-person sales force had earned an invitation. Hammacher also awarded prize points to all sales personnel in accordance with their sales records. These were redeemable for merchandise selected from a prize catalogue. Despite the merchandise prizes, Norton Dowdy, sales vice-president, thought that nothing made the sales staff sell quite so well as the chance at that free four-day vacation. He described it as a grand holiday, more in the nature of a reward than anything else. At the Florida convention, business meetings had been scheduled on only two mornings, a total of six hours. These sessions were conducted primarily by home office executives and were of an inspirational nature. The remainder of the time was set aside for recreation and pleasure. Among the activities available were boating and fishing, swimming, golf, sightseeing, entertain­ment, and fine dining.

The Hammacher annual sales incentive program was scheduled from October 1 through December. Each salesperson was assigned a campaign quota derived from his or her sales volume during the year, his or her years of experience, and his or her market potential during the contest period. The sales staff was then divided into five groups with approximately equal quotas, to ensure that each person competed with others whose personal quotas were comparable. Branch managers formed a sixth group. All sales personnel selling their quotas received invitations to the convention.

A still stronger incentive was provided by the opportunity to earn membership in the Hammacher sales leadership club, a very exclusive honor organization. To become members, sales personnel had to sell a specified volume above their contest quotas, or a specified volume of busi­ness for the entire year. The highest honor of all, designation as an officer and board member of the club, was given to sales personnel with the highest percentage of sales above campaign quotas. These officers received an additional award—eligibility to attend a special two-day meeting just before the regular convention. Branch managers became eligible for the same honor by achieving their branch quotas during the campaign.

Wallace Bain, who was responsible for the incentive campaign, began the promotional program in August. The goal was to build suspense and interest through a barrage of notes and letters. He started by sending branch managers an August reminder to make preliminary preparations for the campaign. This was followed by detailed campaign instructions in September. Then, in late September, he provided a pep talk for managers to use for their group kickoff meetings with the sales personnel on October 1.

In July, when Bain met with Norton Dowdy to plan the campaign for the coming fall, he asked about the possibility of considering modifica­tions. He pointed out that in any contest the average sales team is divided into three parts: one-third who say confidently that they will win, and usually do; one-third who think they can, and try hard to do so; and one- third who give up before the start because they are sure they cannot win. Hammacher had always tried to make the incentive good enough to moti­vate the top third to sell even more, to increase the number of winners in the second group, and to convince members of the third group that they at least had a chance to win if they tried. Nevertheless, Bain believed that the annual campaigns were not really getting a satisfactory increase in effort upon the part of the third group.

In addition, Bain wondered whether the company was getting value for the money spent. Did the chance to attend a convention where company business was discussed really motivate anyone, or were sales personnel working harder because of the honor and prestige attached to being invited? Would the same money invested in travel or merchandise incen­tives that could be selected by the winners (and that allowed the salespeo­ple’s spouses to participate in the reward) provide stronger motivation? Should the prizes or rewards be forthcoming sooner than four months after the end of the campaign? Dowdy believed that they shouldn’t rock the boat. Past campaigns had continued to increase sales performance.

Source: Richard R. Still, Edward W. Cundliff, Normal A. P Govoni, Sandeep Puri (2017), Sales and Distribution Management: Decisions, Strategies, and Cases, Pearson; Sixth edition.