Norton Brothers, Inc., of Rochester, New York, was a manufacturer of men’s popular-priced neckwear sold under the brand name Snappy Cravats to small and large haberdashers and department stores. Joseph Norton, president and sales manager, was assisted by two people who were assigned primarily to office duties but who doubled as salespeople during the busy season. Three full-time salespeople covered the northeastern part of the United States, but other sections were reached by four side-line people. In addition, many orders were received direct and by phone and mail at the home office. Currently, Norton was faced with the problem of his salespersons’ dissatisfaction with the high costs of traveling and of being on the road for extended periods.
One regular salesperson covered New York State, a second had the Pennsylvania territory, and the third was assigned to New England. The four side-line salespeople sold in distant territories; for instance, one was based in Puerto Rico. The regular salespeople, who reported directly to Norton, were paid on a drawing account plus commission basis. Commissions were 10 percent on regular merchandise, 7 percent on some lower-priced items, and 5 percent on close-out items. This method of compensation was widely used in the neckwear industry, and Norton was convinced that 10 percent was the maximum commission that his company could afford to pay. Although side-line salespeople did not have drawing accounts, they were paid the same commission rates as full-time salespeople and received credit for all orders shipped into their territories.
Norton had been concerned over the high turnover rate in his sales force, but the same condition existed throughout the industry. Norton stated that this was his most perplexing problem. Not only were experienced sales personnel being lost, but large amounts of time and expense were involved in training new people. Furthermore, he felt that the buyers, who were continually being called upon by new salespeople, were becoming more reluctant to place business with the company.
When new salespeople were recruited, Norton Brothers acquired them through the Men’s Apparel Club, a national organization, or advertised in the “help wanted” columns of leading newspapers in the territories where the salespeople were to work. Occasionally, new sales personnel were hired from the ranks of customers’ employees.
Because of the small size of the company, the training program was brief. The new salesperson spent two weeks at the factory becoming acquainted with the stock and general factory and office procedures. Then Norton or one of his assistants would go out on the road with the person, introducing him to the buyers and helping him to get started.
Norton recalled one case in which the expense of breaking in a new person was demonstrated. A new person out on the road with Norton finished making sales calls at 4:00 P.M. and wanted to quit for the day, even though there was time to make one more call that afternoon and to travel to the next city on the route. Norton felt that a veteran salesperson would have made the call and moved on, saving time and obtaining more business.
A manufacturer of noncompeting but complementary lines had proposed a plan whereby a number of firms would jointly share a salesperson’s services. Each business would pay a certain portion of the person’s drawing account and each would pay regular commission rates on whatever goods were sold in each company’s line. Norton was undecided as to whether or not to enter split-draw deals of this type. He felt that it would be well to accept offers of this sort, provided that the salespeople were reasonably certain to work out satisfactorily.
Norton saw no immediate solution to his greater problem, that of keeping sales personnel who did not want to travel. A recent industry study had shown that the average neckwear salesperson was on the road forty weeks each year. The costs of traveling were high, and most people were dissatisfied when they were required to be away from home for long periods. Norton Brothers was attempting to hire only single people and was considering paying different commission rates according to the type of territory. The company had tried in every way to satisfy its sales personnel, but it could not decrease the turnover.
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.