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John H. Patterson and the Sales Strategy of the National Cash Register Company, 1884 to 1922

Published online by Cambridge University Press:  13 December 2010

Walter A. Friedman
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Abstract

This article assesses John H. Patterson's influence on the development of sales management and modern understandings of salesmanship. From 1884, when Patterson started the National Cash Register Company, to his death in 1922, the firm dominated its industry. At the heart of the company's success was its sales force. Patterson created an intricate system of management to monitor and train company salesmen. He gave them scripts to memorize and assigned them territory to cover. He held conventions and thematic sales contests, and pressured salesmen to rid their regions of competition. Patterson sought to create a method of sales management that encompassed all aspects of selling, from the calculation of quotas and commission rates to the motivation of discouraged salesmen. While much attention has been paid to efforts to improve the efficiency of production processes, especially those advocated by Frederick W. Taylor, Pattersons work at N.C.R. reveals a contemporary effort to reform methods of distribution.

Type
Articles
Information
Business History Review , Volume 72 , Issue 4: The Sales Strategy of the National Cash Register Company , Winter 1998 , pp. 552 - 584
Copyright
Copyright © The President and Fellows of Harvard College 1998

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References

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5 The standard biography of Patterson is Crowther, Samuel, John H. Patterson: Pioneer in Industrial Welfare (New York, 1926).Google Scholar See also Johnson, Roy W. and Lynch, Russell W., The Sales Strategy of John H. Patterson (Chicago, 1932)Google Scholar; Charlotte Reeve Conover, Builders in New Fields (New York, 1939)Google Scholar, a “study in heredity” of John H. Patterson and his grandfather Robert Patterson, who founded Lexington, Kentucky; Marcosson, Isaac, Wherever Men Trade (New York, 1945)Google Scholar, a study of the cash register. See also Sealander, Judith, Grand Plans: Business Progressivism and Social Change in Ohio's Miami Valley, 1890–1929 (Lexington, Ky., 1988)Google Scholar for Patterson's factory welfare program and for information on N.C.R. and the city of Dayton.

6 See Hounshell, David A, From the American System to Mass Production, 1800–1932: The Development of Manufacturing Technology in the United States (Baltimore, 1984).Google Scholar There are numerous studies on Frederick W. Taylor and the scientific management movement, including Nelson, Daniel, Frederick W. Taylor and the Rise of Scientific Management (Madison, Wise, 1980)Google Scholar and Kanigel, Robert, The One Best Way: Frederick Winslow Taylor and the Enigma of Efficiency (New York, 1997).Google Scholar

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8 The NCR., 1 July 1902, 409.

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10 Crowther, wrote, “Then a salesman on commission was looked upon purely as a gamble. Selling on commission was not entirely respectable because only canvassers and life-insurance agents worked on commission, and neither class was particularly responsible.” Patterson, 88.Google Scholar See also Johnson, and Lynch: “The straight commission, in those days was the sign of lack of confidence in the goods or in the salesman. It was the badge of the book agent, the lightning rod artist, the insurance solicitor—the confraternity of door-bell pullers more or less tainted with the odor of disrespectability. Or else it indicated the neophyte still on probation.” Sales Strategy, 58.Google Scholar

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13 Transcript of Record, 1:50. There is little information about commission rates of salesmen, as they made contracts with agents rather than the company and were sometimes paid a salary. In the Dartnell Company's Special Report: Sales Method Investigation. Subject: The Experience of 162 Concerns in Setting Sales Tasks (Report No. 300) (1929), C. E. Steffey, general sales manager of N.C.R., reported: “New salesmen are generally employed first on a straight salary basis. Later, as they learn something about our business and commence to make sales, the sales agents give them the opportunity to change their selling basis if they so desire. When a man finally becomes a real salesman, he is usually operated on a straight commission basis. In cities, the salesman on a commission basis receive from one-half to four-seventh of the sales agent's commission. The provincial salesmen generally received from four-seventh to five-seventh of the sales agent's commission, depending on the territory in which the salesman operate, and the expense of operation” (6).

14 Other agencies included Washington, D.C.; Denver; Minneapolis; Albany; Saginaw, Mich.; Louisville, Ky.; Milwaukee; Cincinnati; St Louis; Council Bluffs, Iowa; Atlanta; Newark, N.J.; Grand Rapids, Mich.; Pittsburgh; Dallas; Buffalo; Kansas City; Bloomington, Ill.; Chattanooga, Tenn.; Richmond, Va.; Kalamazoo, Mich.; New Orleans; York, Pa.; Trenton; Helena, Mont.; and Birmingham, Ala. See The N.C.R., May 1888. A few early copies of the N.C.R. are included in the Legal papers of the United States Court of Appeals (1st Circuit) in Baker Library, Harvard University Graduate School of Business. In this collection, see: National Cash Register Co. vs. Boston Cash Register Co., 1886–1896 (Hereafter N.C.R. vs. Boston). Most issues of the N.C.R. from the 1890s and early 1900s can be found at the New York Public Library.

15 N.C.R., 1 Jan. 1897, 24. Patterson had a personal connection to the New England area. He had gone to college in New Hampshire; when he borrowed money for the company in the late nineteenth century, it was first from a Providence, Rhode Island, financier, and then from a Bostonian. Also, he married a woman from Massachusetts. In 1888, at age forty-four, he married Katherine Dudley Beck of Brookline. The two had only been married six years when she died of typhoid in June, 1894. They had had two children, Frederick Beck Patterson, b. 1892, and Dorothy Forster Patterson, b. 1893. The children were raised largely by Patterson's sister, Mrs. Joseph Crane. See The N.C.R., 15 June 1894, 149.

16 Carstensen, Fred V., American Enterprise in Foreign Markets: Studies of Singer and International Harvester in Imperial Russia (Chapel Hill, N.C., 1984), 4Google Scholar; Wilkins, Mira, The Emergence of Multinational Enterprise: American Business Abroad from the Colonial Era to 1914 (Cambridge, Mass., 1970), 37.Google Scholar For a general history of Singer, see Davis, Roberty Bruce, preface to Peacefully Working to Conquer the World: Singer Sewing Machines in Foreign Markets, 1854–1920 (New York, 1976)Google Scholar; ibid, 18.

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19 Smaller levels of sales had also been recorded in Holland, Mexico, and Cuba. The N.C.R., 1 Jan. 1897, 24.

20 The N.C.R., 1 jan. 1894, 17.

21 Crowther, , Patterson, 91Google Scholar; Johnson, and Lynch, , Sales Strategy, 85.Google Scholar

22 The N.C.R., 20 June 1888, front page. Patterson explained, “During the past year we have employed, at our own expense, inspectors whose business it has been to ascertain and report to us, in writing, whether or not the Registers in use have been properly operated by the clerks. Typewritten copies of these reports have been mailed to the proprietor showing the time and the inspector entered the place of business, the time he left, and giving a description, as nearly as possible, of the transactions made during his presence, and whether all sales made were registered by clerks.” See The N.C.R., 15 Nov. 1889, 1.

23 ”Removing Temptation—E. B. Wilson,” The N.C.R., 15 Nov. 1900, 505.

24 The Hustler 9:75 (1893); N.C.R. vs. Boston, folder three.

25 See Crowther, Patterson; Johnson and Lynch, Sales Strategy.

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32 The N.C.R., 1 Feb. 1899, 72. The term “P.P.” was used throughout N.C.R.'s early history to designate “probable purchaser” and was changed by the company in 1897 to designate “possible purchaser” for the “sake of accuracy.” The N.C.R., 15 June 1897, 260.

33 See “Work of the Convention,” The N.C.R., 15 June 1895, 436.

34 The N.C.R., 1 Nov. 1891, 408–409.

35 The N.C.R., 1 Jan. 1894, 10.

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39 Transcript of Record, 1:50.

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42 The N.C.R., 15 May 1892, 577.

43 Dartnell, Soles Method Investigation. “Each one of the National Cash Register Agency Offices develops its own type of score board, but the general method of arriving at monthly quota is outlined by the general sales manager, C. E. Steffey, at the beginning of each vear” (10).

44 See Crowther, , Patterson, 101.Google Scholar

45 The NCR., 15 May 1892, 577. See Crowther, , Patterson, 186Google Scholar, for information on N.C.R. finances. Eventually Patterson borrowed fairly substantial sums to finance expansion during the depression. From 1895 to 1899, Patterson borrowed approximately three-quarters of a million dollars from Joseph and John Banigan of Providence, Rhode Island. He then turned to a Boston financier A. C. Ratshesky, who helped him repay the Banigan loans through a stock issue; N.C.R. became a New Jersey-chartered concern; in 1906 it incorporated under the laws of Ohio at a capitalization of ten million, with almost all the stock held by Patterson and his brother, Frank. See also Marcosson, Isaac F., Colonel Deeds, Industrial Builder (New York, 1947), 93.Google Scholar

46 See Biggart, Nicole Woolsey, Charismatic Capitalism: Direct Selling Organizations in America (Chicago, 1989), esp. 130–135.Google Scholar See also Alfred C. Fuller, A Foot in the Door; The Life Appraisal of the Original Fuller Brush Man; and Ash, Mary Kay, Mary Kay (New York, 1981).Google Scholar

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48 Gibbs, E. D., “N.C.R. Rates Factory Visits High in Advertising Value,” Printers' Ink 77:3 (19 Oct. 1911): 17–20.Google Scholar

49 Much of the 1 Feb. 1902 issue of The NCR. was devoted to diet and health. See The N.C.R., 1 Feb. 1902.

50 The N.C.R., Aug.-Sept 1905, 219. It is worthwhile to note that phrenology played a significant role in early twentieth century efforts to draft general rules of salesmanship. A number of books, most more popular than scholarly, used phrenological charts to create tables of types of customers. See, for instance, Morrell, Edwin, The Science of Judging Men (Cleveland, 1917)Google Scholar, and National Salesmen's Training Association, Handling the Prospect According to His Head (Chicago, 1922).Google Scholar

51 Allyn, Stanley, My Half Century with N.C.R. (New York, 1967), 34.Google Scholar

52 When Stanley Allyn went to work for N.C.R. in 1913, he recalled his father saying that Patterson was a “lunatic.” Allyn, , Half Century, 1.Google Scholar

53 The pyramid was prominent in Rosicrucian and Theosophical traditions; Theosophyfounder Madame Blavatsky claimed mathematical, scientific and astrological truths could be discerned in the geometry of the Great Pyramid of Egypt. Two popular works of the latenineteenth century also used the Great Pyramid to comment on biblical scripture—Taylor's, JohnThe Great Pyramid: Why was it Built? And Who Built it? (London, 1859)Google Scholar and Smythe's, Charles PiazziOur Inheritance in the Great Pyramid (London, 1864Google Scholar; revised editions until 1890). Smythe's work inspired the founding in 1879 of an International Institute for Preserving and Perfecting Weights and Measures in Boston that aimed at using the measurements of the Pyramid as standard units; the Institute had an auxiliary branch in Patterson's home state of Ohio. See Gardner, Martin, In the Name of Science (New York, 1952), 178–179.Google Scholar Wrote Martin Gardner: “Both Taylor and Smyth made a good deal of the fact that the number five is a key number in Pyramid construction. It has five corners and five sides. The Pyramid inch is one-fifth of one-fifth of a cubit. And so on. Joseph Seiss, one of Smyth's disciples, puts it as follows: ‘This intense fiveness could not have been accidental, and likewise corresponds with the arrangements of God, both in nature and revelation. Note the fiveness of termination to each limb of the human body, the five sense, the five books of Moses, the twice five precepts of the Decalogue.’”

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56 “The Science of Selling,” N.C.R., 1 Aug. 1903, 492.

57 Crowther, , Patterson, 104Google Scholar; see also Johnson, and Lynch, , Sales Strategy, 140.Google Scholar This was the first agents convention, though not designated as such. Patterson put five agents up in style at the Phillips Hotel and had a coach and four horses took them out to the Soldiers’ Home.

58 The N.C.R., 1 Nov. 1891, 408–408.

59 Transcript of Record, 1:738.

60 Marcosson, Isaac F., Colonel Deeds, 85–86.Google Scholar

61 ”Don't be Satisfied,” The NCR, 1 May 1899, 224. Patterson, in an interview with Crowther, said: “I am always dissatisfied; I preach dissatisfaction.” Crowther, , Patterson, 173.Google Scholar

62 Testimony of Courtright, W. S., Transcript of Record, 1:593.Google Scholar

63 ”I want to thank you, Mr. Patterson, for the fine job you are doing working for me,” said one agent at a convention. “My stock of merchandise, my inventory, was furnished by the company on consignment, costing me nothing. I needed no advertising manager, for Mr. Patterson, working with a big advertising department and printing plant at the factory, took on that job for me.” See Friedman, Walter A., “The Peddlers Progress: Salesmanship, Science, and Magic, 1880 to 1940” (Ph.D. Dissertation, Columbia, 1996).Google Scholar Similarly, see Marcosson, , Wherever Men Trade, 153–4.Google Scholar

64 Sklar, Martin J., The Corporate Reconstruction of American Capitalism, 1890–1916: The Market, The Law, and Politics (New York, 1988).CrossRefGoogle Scholar

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70 The N.C.R., 1 May 1893.

71 The N.C.R., 1 June 1893, 898.

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73 The N.C.R., 15 July 1893, 922. See also: “The Work of 1893 and the Prospects for 1894,” The N.C.R., 1 Aug. 1893, 2.

74 The N.C.R., 1 Oct. 1900, cover.

75 Gibbs, , “How N.C.R. Gets 100 Per Cent” 76:1 (6 July 1911): 1–7Google Scholar; Johnson, and Lynch, , Sales Strategy, 240.Google Scholar

76 The N.C.R., 1 Jan. 1897, 16.

77 The N.C.R., 1 May 1901, 226–230.

78 Transcript of Record, 1:748.

79 Henry, T. C., Tricks of the Cash Register Trust (Winchester, Ky., 1913), 8–9.Google Scholar

80 Sealander, , Grand Plans, 37.Google Scholar

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83 Patterson, John H., “Wives: Assistant Salesmen,” System: The Magazine of Business 34 (July 1918): 34.Google Scholar See also Sealander, Grand Plans.

84 Gibbs, , “How N.C.R. Gets 100 Per Cent” 76:2 (3 July 1911): 17–20.Google Scholar

85 Transcript of Record, 1:737–738.

86 ”What They Said and Did at the N.C.R. Convention,” Sales Management (Mar. 1919): 100.

87 The N.C.R., 1 Apr. 1903, 309–310.

88 See The N.C.R., 1 Jan. 1901, 6–7; Transcript of Record, 1:122.

89 ”A Parting Word,” The N.C.R., 15 June 1897, 1.

90 The N.C.R., 1 Jan. 1899, 14.

91 The N.C.R., 1 Jan. 1903, 295, 311.

92 The N.C.R., 1 Jan. 1897, 24. See also World NCR (July 1906): 5, available in Loeb Library, Harvard University; Wilkins, , The Emergence, 296 n. 12.Google Scholar

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94 The British N.C.R., 1:12 (Dec. 1899): 283. Available at the New York Public Library.

95 The N.C.R., 1 Sept. 1904, 236.

96 The British N.C.R., (Mar. 1900): 30.

97 The British N.C.R., (Mar. 1900): 30–37.

98 N.C.R. Corp., Celebrating the Future, 1:29.Google Scholar

99 ”Selling National Cash Registers in the Sandwich Islands,” The N.C.R., 1 Apr. 1901, 174.

100 The N.C.R., Mar.-Apr. 1907, 17.

101 The N.C.R., 20 June 1888, 2.

102 Ibid.

103 Transcript of Record, 2:9–10.

104 The N.C.R. described the expenses of one trip by National men to “knock out” competitors: “Crane & Corwin's expenses during their two month's trip on the coast amounted in round numbers to $250 per day. This is what is costs to hold a monopoly, hence, make hay while the sun shines and rush in all the orders possible. This amount includes travelling expenses, salaries, lawyers and detectives' expenses and the loss on our machines in making exchanges. Add to this our expenses in knocking out and fighting Bensinger in other sections of the country and we have a total of over $500 per day.” The N.C.R., 22 May 1890, 2.

105 The N.C.R., 15 May 1892, 575–576.

106 The N.C.R., 1 Nov. 1891, 415. It would later be named the “Competition Department.”

107 One agent, Sundwall, J. A., recalled receiving “$50 a week and $10 a day expenses money for the knockout business,” around 1900. Transcript of Record, 1:296.Google Scholar

108 Transcript of Record, 1:279.

109 Prosecutor's Brief Patterson et al ν. United States. Circuit Court of Appeals, Sixth Circuit. March 13, 1915. No. 2571, p. 6, National Archives, Great Lakes Region.

110 Transcript of Record, 1:175–176, National Archives, Great Lakes Region.

111 N.C.R. vs. Boston, folder 11, letter of 26 Nov. 1892.

112 The vast majority (seventeen) of these acquisitions came from 1900 to 1906. From 1893 to 1906, N.C.R. made the following acquisitions. In 1893: The Kruse Cash Register Co. (for $23,500) and the Lamson Cash Register Co. ($325,000). In 1900: the Boston Cash Indicator & Recorder Co. ($30,000) and the Osborn Cash Register Co. ($90,000). In 1902: the Toledo Cash Register Co. ($75,000), Henry Theobald Agency ($40,000), and Luke Cooney Agency ($10,000). In 1903: the Ideal Cash Register Co ($12,000). In 1904: the Brainin Cash Register Exchange ($30,000), Metropolitan Cash Register Co. ($8,000), Sun-Simplex Cash Register Co ($4,855), and the Globe & Century Cash Register Co. ($25,000). In 1905: Isaac Freeman Agency ($15,000), The Foss Novelty Co. ($8,000), the Chicago Cash Register Co. ($8,000), and the Weiler Cash Register Co. ($9,000). In 1906: the Southern Cash Register Co. ($12,364), A.J. Thomas Cash Register ($17,122), and the Union Cash Register Co. ($80,000). Transcript of Record, vol. 2.

113 Transcript of Record, vol. 2. Lee Counselman, head of the competition department from 1902 to 1905 estimated the “percentage of business in cash registers … carried on by the National Company” at 95 percent. “We knew how many cash register were made by the National Company that were in use, and we knew approximately how many cash registers made by other companies were in use … as the salesmen reported all competing machines.” Transcript of Record, 1:415.

114 Federal Reporter, 55:605–607. The charges included many that pointed at the sales force: threatening, harassing, and intimidating competitors; inducing agents to leave competitors; employing spies to obtain information; inducing purchasers to break their contracts with competitors; and other actions which indicated an organized conspiracy.

115 Thorelli, Hans B., The Federal Antitrust Policy: Origination of an American Tradition (Baltimore, 1955), 371Google Scholar, 594. N.C.R. informed its agents through a house organ that a deal “has just been consummated in Boston, a consolidation of the leading cash register companies of the country, by which the bitter warfare and expensive litigation, which has heretofore existed between them, was brought to an end.” The cash register offices of the two companies would be consolidated, and the manufacture of the machines would be carried on exclusively in Dayton, . The Hustler 9:75 (1893)Google Scholar included in N.C.R. vs. Boston, folder 3.

116 See Thorelli, , The Federal Antitrust Policy, 371, 594Google Scholar, and Jones, Eliot, The Trust Problem in the United States (New York, 1921), 477–479.Google Scholar

117 Most accounts of the reversal credit Patterson's efforts in during the Dayton flood for improving his credibility in the eyes of the public and the federal government. The flood had come in March, 1913 and had devastated the city. N.C.R., under Patterson's direction, turned from building registers to making flafboats, which were sent out to rescue. Such actions may in fact have contributed to the reversal of the criminal conviction. But in fact, N.C.R.'s lawyers had put together a thorough case for appeal that challenged the admissibility of evidence and protested the fact that competitors had infringed on Nationals patents. See Brief for the Plaintiffs in Error, John H. Patterson, et al, v. United States, United States Circuit Court of Appeals, Sixth Circuit, No. 2571., 2; see also Federal Anti-Trust Decisions, vol. 5, 1912–1914, 110; Federal Reporter, 222:632. For the Dayton flood, see Charlotte Reeve Conover, The Story of Dayton (Dayton, Ohio, 1917), 199–200.Google Scholar

118 Sealander, , Grand Plans, 35.Google Scholar

119 Allyn, , My Half Century, 43.Google Scholar

120 Interview with Senator William Benton Ohro, Oral History Research Center, Columbia University, 13.

121 Chandler, , Visible Hand, 381.Google Scholar

122 Stanley Allyn, noted, “He liked to fire his best men, especially if they began to crowd him at the top,” Half Century, 15.Google Scholar

123 Ibid, 42.

124 Ibid, 46, 54.

125 Ibid, 51, 55.

126 Braver, Elizabeth, George Eastman: A Biography (Baltimore, Md., 1996), 161.Google Scholar

127 ”How N.C.R. Gets 100 Per Cent Efficiency Out of its Men: Part I” Printers' Ink 75:13 (29 June 1911): 3; “Part II” 76:1 (6 July 1911): 3; “Part III” 76:2 (13 July 1911): 17; “Part IV” 76:4 (27 Julv 1911); “The National Cash Register Advertising Policy” 76:11 (11 Sept. 1911): 3; “The N. C. R. Advertising Methods” 76:13 (28 Sept. 1911): 29; “How N.C.R. Worked out its Window Displays” 77:2 (12 Oct. 1911): 26; “N.C.R. Rates Factory Visits High in Advertising Value” 77:3 (19 Oct. 1911): 16.

128 For laudatory accounts of Patterson's career, see Crane, Frank, Business and Kingdom Come (Chicago, 1912)Google Scholar; Crowther, Patterson; and Lynch and Johnson, Sales Strategy.

129 Explaining the function of a Burroughs salesman in a trade magazine, G. A. Nichols wrote, “[He] is, first of all, an analyst. Whether he is undertaking to sell a bank, a public utility, a manufacturing concern, a mercantile enterprise or whatnot, his first task is to study in detail the customer's accounting situation. “Hiring, Training and Directing 1,500 Salesmen: How Burroughs Increases Efficiency and Adds to Volume Through New Centralized Control Plan,” Printers' Ink Monthly (July 1923): 23.

130 For information on Burroughs, see the Burroughs Papers, Charles Babbage Institute, University of Minnesota, especially Abele, Ray, The Burroughs Story (n.p., 1975).Google Scholar

131 Crandall, and Robins, , The Incorruptible Cashier, 46.Google Scholar

132 Strong, E. K., Psychology of Selling and Advertising (New York, 1926), 25.Google Scholar See also Elmo Lewis, E. St., Creative Salesmanship (Chatam, N.Y., 1911).Google Scholar

133 Marden, Orison Swett, Selling Things (New York, 1916)Google Scholar, Hawkins, Norval, The Selling Process (Detroit, 1916).Google Scholar See also Carnegie, Dale, How to Win Friends and Influence People (New York, 1937).Google Scholar Carnegie was the most well-known exponent of positive-thinking for salesmen. The book grew out of his lectures on public speaking which he began delivering in 1912. Carnegie, a former salesman for the Armor Company, was deeply influenced by writings on salesmanship. Many of the speakers at Dale Carnegie's early courses had similar backgrounds. A list of those who spoke at an introductory meeting held in the Hotel Pennsylvania sometime before 1936, included a chemical salesman, an insurance agent, and a whiskey salesman.

134 Marden, , Selling Things, 63.Google Scholar