Expert: Manufacturers should incentivize salespeople and managers, not one or other
Sarah Magnotta, an associate professor in the Department of Marketing, didn’t set out for a life in academia. After graduating from James Madison University in 2005, she began a career in sales.
Magnotta, who joined the College of Business & Economics in 2015, started selling office furniture. And, she says, right out of college, she was making about a quarter of her income from an unconventional source: spiffs.
A spiff, Magnotta explains, is a bonus given to a salesperson or sales manager, that comes from a manufacturer, not the salespersons’ employer. A spiff might be a cash bonus offered by a manufacturer for every until sold, or a percentage of the total sale. Manufacturers might also offer specialized training as another benefit.
Magnotta starting asking questions about her own motives in sales after receiving so many spiffs, she says. Those questions are what inspired her to pursue an academic career, and to research the relationship between manufacturers and salespeople.
For example, Magnotta says, a salesperson at a big box hardware store might receive a $50 spiff every time they sell a lawn mower from Company A but only a $25 spiff from Company B for selling a similar product. The salesperson would then be incentivized to sell the product that earns them the higher spiff, she says.
“I just thought there was something really weird going on with that. But on the flip side,” she adds, “From the manufacturer’s perspective, what choice do you have?”
Her research looked at spiffs and other incentives from a manufacturer’s perspective. Magnotta and others set out to answer the question if you’re a maker of a product, how do you make sure it’s getting sold to customers in stores?
In a paper published in the Journal of Marketing Research, the team shared its answer.
“Spiffs work best when you incentivize and motivate the salesperson and the sales manager the same way,” Magnotta says.
For example, if a producer of an item gives a cash payment to a sales manager for every unit sold but offers training to salespeople—without cash payments—the salespeople may feel they’re getting overlooked.
The research spanned multiple years and involved working closely with a large printer manufacturer. Magnotta and her colleagues surveyed salespeople and their managers and looked at real sales numbers.
“We could link what the salespeople said about themselves, with what their managers said about their performance, with what their actual sales numbers were,” she says. “In the paper, we say that the manager legitimizes the salespersons’ pursuit of spiffs and makes it feel acceptable.”
There’s been some interest in her research from manufacturers and distributors, Magnotta says, looking to understand how to utilize spiffs. It’s an area of research she anticipates continuing.
“This starts the exposure of spiffs in the academic world,” she says. “Manufacturers and distributors are interested in how it will affect their salespeople.”