Bear with me as we set up the facts of this story.
The people and the company involved are very real, but shall not be named. If they must have a name, call them . . . oh, let’s call them Little Brother Bob’s Hardware.
L.B.B.’s Hardware has several stores in southern states. Each summer they stock, and sell, window air conditioners.The company had traditionally offered an incentive program for superior sales performance when it came to air conditioners. Each month´s quota was set at 110% of the sales from the same month a year ago. If any store outsold its quota of air conditioners, there would be a bonus of $25 per additional unit. The bonus money would be pooled, and the store’s manager could distribute to employees according to their contribution.
The company started advertising sale prices on air conditioners.
They bought ads in local newspapers. They passed out flyers in the stores. They mailed those flyers to the regular customers of each store.
First month: the store in our little tale sold 16 units over quota, and earned a bonus pool of $400 for the manager to distribute to assistant managers and salespeople.
Second month: 20 units over quota. $500 bonus.
In the first week of the third month a local builder came in to the store carrying one of the flyers.
He explained that he had just been awarded a contract to remodel a local hotel. He wanted to purchase 200 identical window air conditioners, and wanted to know how quickly he could arrange delivery of such a large number of units.
The manager called L.B.B.’s Hardware’s home office to talk about shipping for a large special order.
The home office took over the sale and dealt directly with the customer.
Within 48 hours a new bonus program had been implemented. Effective immediately, the bonus potential was capped at $500 per month.
In three years since the new bonus program has been in effect, Little Brother Bob’s Hardware has never again exceeded quota. At least, not this store.
Most of us see a cause and effect relationship in this example.
Do you have a bonus program for your salespeople? Is the program working with, or working against your advertising?
How do you know?