Question

CASE-STUDY

Aggressive Sales Quotas or Unfair Business Practice?

"In the advertising industry, money is the bottom line-regardless," said Peter Allen, a customer service representative for a large-scale online directory. It was 1999 and the online business was booming. Everyone in the city wanted to get in on the Internet revolution, but many didn't really understand what that even involved.

Peter was new to the industry. He was given his territory, the city of San Francisco, and told to sell as much advertising as possible-at any cost-both to the company's existing clients and to new customers. For his first few months on the job, Peter focused on getting to know the existing customers and evaluating their current advertising packages with the company. Peter was surprised to find that many of his customers were small business owners-auto-body shops and family-owned restaurants that already had large advertising packages way beyond their needs. His boss, the director of customer service, had already set Peter's quota at a level that presumed that many more sales were possible. Yet, in Peter's judgment, the market was saturated.

"These small shops thought that the Internet was the next best thing," said Peter. "They didn't even understand what the Internet actually was."

Peter couldn't fathom how these small businesses got persuaded into spending so much money on advertising. "The businesses you would least think to look up online were the businesses with the most expensive advertising packages," said Peter.

Peter was getting daily phone calls from the home office, pressuring him to meet his numbers and sell the most in his territory. Peter complained to the sales manager, who said that Peter had to be honest. "It was my obligation to set things straight," said Peter.

With the support of his manager, Peter told the top executives of the company that the sales team in San Francisco needed to have some leeway in meeting the quota. Unlike other sales territories, San Francisco, as the hub of the high-tech world, was cluttered with competition and, with companies cropping up everywhere in Silicon Valley, Peter and his team didn't have the luxury to selectively pursue businesses. Instead, they had to go after any and every business possible because other online directories were quickly entering the San Francisco market. The executives feared that changing the quota for San Francisco would lead to other territories vying for lower quotas as well. But Peter's case proved strong enough: The executives decided to "look the other way" for the San Francisco territory.

Peter went to each business and gave them an honest evaluation of their advertising needs-often recommending they downgrade their packages with the company.

"We moved them into more appropriate packages and became number one in customer retention," said Peter. "We lost money in the short term, but in the long term we made money through referrals and retention."

Discussion Questions:

• Describe, specifically, the ethical dilemma that Peter faced.
• What are virtues Peter needed to act as he did? What do you think motivated him?
• What were the risks Peter faced in making this decision?
• What factors do you think assist people in making moral decisions in the face of a great deal of pressure?

Jessica Silliman was a 2006-07 Hackworth Fellow at The Markkula Center for Applied Ethics.

Answer 1

Solution

Peter faced an ethical dilemma.He was given a high sales target for his product - Online advertising service.He found out that the market is already saturated and also that most of their existing clients are in the subscriptions that are well beyond their need / requirement.So,in order to meet his increased sales quota he has 2 choices

Choice 1 - To meet his increased sales target by trying and upgrading the existing clients into a much higher ticket size subscription

Choice 2 - To educate the existing customers and downgrading those in line with their requirement.

Choice 1 is an unethical business practice but it Peter can meet his short term sales term but in long-term cannot as due to poor customer retention.The customers in future as soon as they learn about the in-appropriateness in terms of the value of service being provided,they would stop availing this service.The probability of this situation will be more due to severe competition in the online marketing industry as new service providers are emerging and also due to improvement in customer education.

Choice 2 is an ethical choice but by adopting it ,the revenue will reduce in short-term but they would gain the goodwill from the customer which would reflect in higher customer retention and getting more new references from the existing clients.

This would lead to increase in the revenue in the long-term

Since Peter chose the choice 2 as it is ethical he needs to act 100% accordingly and sincerely to implement the strategy and yield the specified results within the specified time so that his ethical action also becomes ethical in the perspective of the company.In company's perspective,it is called ethical when Peter who has been hired for increasing their sales ,will fulfill the requirement.

Risks that peter would face is since he will not be reaching his sales target in the short-term he will have his employment at stake.He can avoid it by explaining his managers and higher officials of his company about his strategy on how it works and the kind of positive results he is expecting from the strategy to yield and other specifications like the time taken for the strategy to yield the results,reason behind him adopting for this strategy.