Towson University: Let's Make A Deal: TU Professor's Research Sheds Light On Sales Process

Press release from Towson University:

Cody Boteler

July 21, 2021

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.”

This press release was produced by Towson University. The views expressed here are the author’s own.