Reference no: EM132189359
Background
Floor-Shine Cleaning Products has been manufacturing and selling household floor cleaning products for more than 60 years. The company offers several brands that can be used to clean a variety of floor surfaces. It stands behind all its products with a “customer satisfaction guarantee.” Any consumer who is not fully satisfied with the floor cleaner on applying it properly may return it to the place of purchase and receive a refund or have the product replaced with another of equal value.
Floor-Shine’s products are distributed in a variety of outlets, ranging from small grocery and convenience stores to huge discounters such as Wal-Mart and Home Depot. Each customer is highly valued regardless of size. According to the company’s founder, Arthur Worthington, “Every customer should be treated as if they are our only customer.” For this reason, the company takes pride in establishing long-term customer relationships. In fact, several of the company’s current customers have been distributing its products since the company was founded. The company’s salesforce was built around this idea and to this day is well noted for its commitment to building strong and satisfying customer relationships.
Current Situation
Vince Coleman, Floor-Shine’s national sales manager, recently asked regional sales manager Bob Herman to coordinate a special fourth-quarter sales push to achieve projected year-end sales goals. Herman, a committed sales manager, was confident he could develop a program that would succeed. He thought a sales contest would be an excellent way to boost fourth-quarter sales in his region. By developing a contest, he could avoid altering the current compensation package, which he believed to be satisfactory to his salespeople.
Herman has 100 salespeople in his region, about 20 percent of whom are women. The region is divided into five districts, each comprised of 20 salespeople. Rather than have all 100 salespeople compete against each other, Herman decided to have five winners, one for each district. Salespeople within each district would compete against each other, and the salesperson with the highest number of sales during the contest period would be declared the winner.
Herman recently heard about a new approach being taken by some companies to motivate their salespeople. Contest winners were awarded a trip to a fantasy baseball camp. Award winners spent a week with baseball legends who taught and coached them. The award proved to be a highly successful motivator. Herman liked this idea and decided to offer this trip to each district winner as the prize for winning the sales contest. Herman contacted the company’s marketing communications group to ask them to design a set of promotional materials to be distributed to each salesperson. He then visited each district, explaining the contest rules to its salespeople. At the same time, he delivered pep talks. “Each of you has an equal chance at victory. Now is the time to seize the moment and go for the gold!”
After all the preplanning was completed, the contest finally went into effect. Most salespeople realized that they could increase their sales either by selling more to current customers or by finding new accounts. One method for increasing sales to current customers was to help them in merchandising so that they could sell more product. This seemed to work well for many salespeople. However, several concentrated on their large customers at the expense of their smaller accounts. The larger customers had much more potential and the input-to-output ratio with these customers had a much higher payoff. Several salespeople’s obsession with their larger accounts got in the way of providing their smaller customers with the service they had come to expect. Some customers even threatened to take their business elsewhere. In fact, Ray’s Groceries, a small but long-standing customer, was so upset with the decline in service that it dropped Floor-Shine as a supplier.
Numerous salespeople got wise to the idea that they could increase their sales by loading their customers with product toward the end of the contest period. Some salespeople asked customers to purchase and take delivery of their next scheduled order early. Others offered customers special incentives if they agreed to order more product than usual. One salesperson went so far as to offer a small kickback.
In an attempt to gain new customers, some salespeople took on customers that were poor credit risks. For instance, salesman Larry Lynn knew a medium-sized hardware store in his territory was in financial trouble, so much so that the store had lost its paint supplier because of its inability to pay. Larry figured he could enhance his sales during the contest period by taking the customer’s order. If the customer was unable to pay, it would not show up until after the contest was over, and Larry would already have these sales added to his total for the period.
About one-third of the way into the contest, Dan Tate, a sales rep in district 3, was able to land a new major account, which meant a tremendous increase in sales for him. At that point, the other salespeople in his district seemed to lose enthusiasm for the contest. As Saul Weber put it, “I don’t stand a prayer of winning the contest now. The only way I would have a chance is to land a similar account. Given my present territory, that is impossible. Doug has this contest wrapped up. He might as well grab his mitt and pack his bags—he’s heading for fantasy baseball camp.” As the contest was drawing to a close, Herman noticed that sales had not increased nearly as much as he had anticipated. Moreover, most of the women in the salesforce did not significantly increase their sales figures. In fact, they were about the same as usual. Herman knew Coleman would want a full assessment of the contest on its completion. As he sat at his desk, he began to think about what went wrong.
Questions
How would you evaluate this contest? What are its pros and cons?
How could this contest be designed to have a better chance of success?