$5 Billion a Year in Trips, Fur Coats, Other Prizes : Sales Incentive Programs Booming
Last fall, 40 outdoor lighting equipment salesmen and their wives spent 10 days cruising the canals of Venice and gawking through the art galleries of Florence.
It didn’t cost any of them a nickel.
Each was sent there courtesy of Kim Lighting Co. These leisurely holidays in Northern Italy were rewards for selling a lot of Kim’s lights. The tab for the trip and other 1984 prizes came to nearly $200,000, according to Lou Goren, president of the City of Industry company. But he says that’s a drop in the bucket compared to the millions of dollars in new sales that the incentive program brought to his company.
By offering incentives that vary from free vacuum cleaners to exotic vacations, hundreds of thousands of U.S. companies spend more than $5 billion annually--or about $25 for every man, woman and child in the United States--trying to nudge their workers to sell more widgets, produce more whatnots or simply to show up at work more often.
The Chevrolet division of General Motors spends more than $20 million on travel and merchandise awards every year in the hope that its salesmen will peddle overstocked cars and trucks or coax customers to purchase costly add-ons such as air-conditioning units.
Meanwhile, divisions of Carnation Co. and American Honda Motor Co. both send top salesmen on tropical vacations. One company that makes carpet padding sends top salesmen on free African safaris. Another manufacturer not only sends top salesmen to Hawaii but drops orchids from helicopters on them once they arrive.
Executives call these incentive programs. Psychologists call them the corporate version of positive reinforcement. Skeptics call them hogwash. Regardless of what they’re called, experts say these gift-giving programs are more popular than ever.
“You don’t go over to your neighbor’s house and tell them about the $10,000 bonus you just received,” said Gene Courtney, senior vice president at Motivation Resources in Irvine. “But you will go over and ask them to drop you and your wife off at the airport for the trip to Europe that your company just awarded you.”
Incentive programs, however, are not without their detractors. Critics point out that these programs encourage salesmen to sell consumers slow-moving products that may be outdated or even defective. And all these goodies that salesmen win do not come without a price tag. The cost of the programs, of course, is ultimately passed on to the consumer in the form of higher prices. Uncle Sam, too, gets his share through income taxes on all prizes worth more than $600.
Irv Maltzman, professor of psychology at UCLA, said: “It amazes me how hard-nosed businessmen turn to putty when confronted by smooth-talking (incentive company) operators who pass themselves off as psychologists.” While claiming no expertise in industrial psychology, Maltzman said he has seen little scientific evidence that proves these corporate incentive programs increase business.
“For all their bragging, I’d bet you a bottle of beer that few have done any hard research to see if these incentive programs actually work,” Maltzman said.
To the contrary, said Richard Schiefelbusch, a professor of psychology at the University of Kansas who has researched incentives, “people work harder when you tell them that they can earn a bonus. But it has to be a bonus that they truly want.”
In apparent agreement, nearly 75% of the nation’s top 1,000 industrial companies have some form of incentive programs, experts estimate.
Savin Corp., for example, offers local ski trips to salesmen in its Los Angeles office who sell more than $15,000 worth of office copiers each month. Later this year, the same office will send 12 salesmen and their spouses to Hawaii for beating equipment-sales quotas. “It does make me work a little harder,” said Hector Baldemor, a sales representative. “I want to make that trip.”
Incentive programs have been around for more than half a century. Perhaps one of the earliest and most successful was initiated in the 1920s by John H. Patterson, former chairman of National Cash Register Corp. Rather than giving tie clasps and gold watches to retiring employees, he reasoned that those still on board were the more logical recipients. NCR was among the first to sponsor sales contests.
The programs faded during the Depression, when just finding and keeping a job was incentive enough. The popularity of work incentives continued to skid during World War II when there just wasn’t much merchandise to be sold. But by the mid-1950s, consumers were hungry for newfangled products--especially cars--and companies offered salesmen incentives aplenty to sell them.
About this time, companies specializing in designing incentive programs began sprouting in the East and Midwest. Today there are thousands, varying from the simplest of travel agencies to giant operations that do everything from designing contest brochures to selecting prizes for top salesmen.
Perhaps the real key to successful incentive programs is spouse involvement. When a salesman’s wife is counting on that fur coat or vacation, “it makes the guy want to go that little bit farther,” said Robert H. Webber, national field service director for Anaheim-based California Computer Products Inc., a computer products manufacturer and a division of Sanders Associates Inc. of Nashua, N.H.
Webber oversees 140 computer maintenance employees nationwide, and each quarter eight of them receive $200 in performance prizes, while every year eight top salesmen earn exotic corporate trips such as last year’s jaunt to Hawaii. “It gives them something to look forward to besides a paycheck,” Webber said.
Of all incentive awards, travel seems to have the greatest appeal.
For decades, Chevrolet has awarded its top in-house performers trips to lavish resorts such as the Greenbriar Lodge in West Virginia. There, everyone from local sales managers to senior executives nudge elbows and improve golf swings.
At the same time, Chevrolet spends millions more encouraging its dealers to wheel slow-moving inventory out the door. “When we’re in tough times, it always seems to be incentive programs that pick things up,” said Jed Ellis, Chevrolet’s Los Angeles sales promotions manager. These programs were especially popular at the company three years ago when the auto industry was in the doldrums.
An increasing number of corporations are turning to incentive companies not only to plan their incentive programs but to carry them out from beginning to end. Carnation’s milling division in Los Angeles and American Honda’s parts division both have elaborate incentive programs planned entirely by Motivation Resources.
Carnation sends top salesmen to its 1,250-acre research farm near Seattle, while other Carnation winners are jetted away on trips to Hawaii. Last year, American Honda sent top-selling parts managers on four-day cruises in the Bahamas.
“The average guy comes home from work, gets a beer and, when his wife asks him how work was, he says fine, and that’s it,” Courtney said. “But when a family trip to Tahiti is resting on his day at work, he has to say more than fine.”
But elaborate trips are the exception, not the rule. Typically, companies award salesmen points for meeting or exceeding certain quotas, and these points are redeemed for catalogue prizes varying from lawn mowers to minks.
“We can have the most beautiful mink coats or sailboats in these catalogues, but most people will go ahead and select more practical things like vacuum cleaners,” said Susan Alpert, executive vice president at Motivation Resources.
As corporations seek any hint of competitive advantage, incentive companies reap the benefits. Motivation Resources was a $500,000 company seven years ago, but it expects to post 1985 sales of $10 million, according to Sally J. Tapager, the company’s president. Dwarfing those revenues is Maritz Inc., a 31-year-old St. Louis incentive firm that expects to post sales of $600 million this year compared to $500 million in 1984. Maritz’s client list includes American Telephone & Telegraph, IBM, Xerox, Buick and Chevrolet.
But Maltzman, the UCLA psychologist, says that until companies like Motivation Resources and Maritz scientifically study their services, there is no solid proof that they work. “What is fascinating is that big business goes for this baloney,” Maltzman said.
Despite a payroll of 3,000 employees, “we don’t have a single psychologist on our payroll,” pointed out William E. Maritz, chairman of the company that bears his name. “We haven’t done any psychological studies. All I know is, what we do works.”
