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Scripto, Inc. (B)1
At one time, Scripto, Inc., utilized the services of Audits and Surveys, a national marketing research firm, but, owing to budgetary restraints, Scripto eliminated marketing research and channeled its financial resources in other directions. As a result, the company had little of the data it required for important marketing decisions. For example, the company experienced great difficulty in securing comparative data for sales of its products and competitive products in retails outlets.
Determined not to let the void of data affect the 19¢er, Scripto management decided again to consider using marketing research. While management was in general agreement that marketing research was an essential ingredient in marketing orientation and sales strategy, there were two viewpoints as to the type of marketing research needed. One group believed that market studies and data were most crucial to the success of the ¢er; hence, they favored using the services of marketing-research companies, such as Audits and Surveys or A.C. Nielsen Company. Both Audits and Surveys and Nielsen prepared bimonthly reports measuring sales and movements of products through stores (the former was used by Papermate). The major differences between the two research companies were (1) cost and (2) type of retail outlet sampled. It would cost Scripto $20,000 to use Audits and Surveys and $25,000 to use Nielsen. Audits and Surveys recorded sales and products movement primarily of mass merchandisers (variety stores) and a relatively small sample of drugstores and grocery stores, while Nielsen sampled more drugstores and grocery stores than A and S but a smaller sample of variety stores.
Another group, however, preferred a different course of action – the use of a marketing research firm that specialized in consumer buying patterns rather than market studies per se. This group contended that consumer research was more instrumental in the future of the 19¢er. Such research was typified by the data generated by the National Consumer Panel of Market Research Corporation of America.
Decisions were required on (1) whether or not to again use marketing research; (2) if so, the type of marketing research most important for Scripto’s 19¢er, market studies and/or consumer buying patterns; and (3) the relationship between sales and marketing research. Management was especially concerned about the relationship between sales and marketing research.
Case 1 Questions:
What is your position on the three problems that had to be solved by Scripto? Defend your arguments.
Holden Electrical Supplies Company
Holden Electrical Supplies Company, Cincinnati, Ohio, manufactured a wide line of electrical equipment used in both home and industry. The sales force called on both electrical wholesalers and industrial buyers with the greater part of their efforts concentrated on industry buyers. The industrial products required considerable technical expertise upon the part of salespeople. Sales offices situated in twenty cities spread over the country had two hundred sales personnel operating out of them. In the past eight years sales volume increased by more than 50 percent, to a level of nearly $150,000,000. The fast rise in sales volume and the accompanying plant expansion created a problem in that more sales personnel were needed to keep up with the new accounts and to make sure the additional plant capacity was used profitably.
In addition, Holden’s sales recruiting problem was compounded by a noticeable decline in the number of college seniors wanting a selling career. Holden recruiters had observed this at colleges and universities where they went searching for prospective salespeople. Another indication of the increased difficulty in attracting good young people into selling was aggressive recruiting by more and more companies. These factors combined to make the personnel recruiting problem serious for Holden; consequently, management ordered an evaluation of recruiting methods.
Virtually all Holden salespeople were recruited from twenty-five engineering colleges by district sales managers. Typically, Holden recruiters screened two hundred college seniors to hire ten qualified sales engineers. It was estimated to cost Holden $600 to recruit a candidate. Management believed the college recruiting program was deficient in light of the high cost and the fact that only 5 percent of the candidates interviewed accepted employment with Holden.
Evaluation of the college recruiting program began with the College Recruiting Division of the company asking district sales managers for their appraisals. Some district managers felt that Holden should discontinue college recruiting for various reasons, including the time required for recruiting, the intense competition, and the candidates’ lack of experience. Other district managers, however, felt the program should continue with a few modifications, such as recruiting college juniors for the summer employment more or less on a trial basis, concentrating on fewer schools, and getting on friendly terms with placement directors and professors.
Holden’s general sales managers favored abandoning the college recruiting program and believed the company should adopt an active recruiting program utilizing other sources. He reasoned that, while engineering graduates had a fine technical background, their lack of maturity, inability to cope with business-type problems, and their lack of experience precluded an effective contribution to the Holden selling operation.
The general sales managers felt that the two hundred sales engineers currently working for Holden were an excellent source of new recruits. They knew the requirements for selling the Holden line and were in continual contact with other salespeople. By enlisting the support of the sales force, the general manager foresaw an end to Holden’s difficulty in obtaining sales engineers.
The president preferred internal recruiting from the nonselling divisions, such as engineering, design, and manufacturing. He claimed that their familiarity with Holden and their proven abilities were important indicators of potential success as sales engineers.
A complete analysis of Holden’s entire personnel recruiting program was in order, and, regardless of the approach finally decided upon, it was paramount that the company have a continuous program to attract satisfactory people to the sales organization.
Case 2 Questions:
Evaluate Holden’s recruiting program, suggesting whether or not the company should have continued in college recruiting of sales engineers.
CASE 3: Marquette Frozen Foods Company
The Marquette Frozen Foods Company manufactured a wide line of frozen foods sold directly to all types of food stores. The company’s 100 salespeople worked out of thirty-five district sales offices located throughout the United States. Annual sales were nearly $50 million. Although the sales picture was quite favorable, certain recent developments indicated a possible need for redesign of sales territories.
Sales territories were established using population as the base and were composed of one or more counties, depending on each county’s population. The aim was to assign each salesperson to a territory containing about 1 percent of the country’s total population. Since the total population was approximately 205 million (exclusive of Alaska and Hawaii), an attempt was made to assign each person a territory consisting of about 2,050,000 people. Population statistics were obtained from the U.S. Bureau of the Census and were modified according to local area statistics.
The method of territory design was illustrated by the Northeast I sales territory, including Maine, New Hampshire, and part of Massachusetts. The Northeast I territory included the following Maine counties, along with their populations; Aroostook, 95,000; Piscataquis, 16,000; Penobscot, 125,000; Androscoggin, 91,000; Cumberland, 193,000; Franklin, 22,000; Hancock, 35,000; Kennebec, 95,000; Knox, 29,000; Lincoln, 21,000; Oxford, 43,000; Sagadahoc, 23,000; Somerset, 41,000; Waldo, 23,000; Washington, 30,000; and York, 112,000. Maine population: 994,000.
The following New Hampshire counties and their population were included: Belknap, 32,000; Carroll, 19,000; Cheshire, 52,000; Coos, 34,000; Grafton, 55,000; Hillsborough, 224,000; Merrimack, 81,000; Rockingham, 139,000; Stratford, 70,000; and Sullivan, 31,000. New Hampshire population: 737,000.
Finally, the following Massachusetts towns were included to increase the sales territory population to the desired figure (the first six towns listed were in Essex County, while the last two were in Middlesex County); Amesbury, 13,000; Newburyport, 18,000; Haverhill, 46,000; Lawrence, 67,000; Salem, 41,000; Marblehead, 21,000; Tewksbury, 23,000; and Lowell, 95,000. Massachusetts population: 321,000. Total population in Maine, New Hampshire, and parts of Essex and Middlesex counties in Massachusetts: 2,055,000.
Analyses of population statistics were made every three years. When warranted by population changes, sales territories were redesigned: however, most changes were minor. The company supplied each salesperson with a detailed map showing the counties in his or her territory, the cities and towns, population, and the exact territorial assignments and to ensure a salesperson’s exclusive rights to a given territory.
The Marquette sales manager had proposed and received acceptance of this method of determining sales territories several years ago. He favored this procedure because it guaranteed equal territories and similar sales opportunities for all company sales personnel and therefore eliminated an important cause for poor morale. With total population divided evenly, it was easy to compare relative performances of the sales force. Total population divided was an accurate estimate of potential demand, according to the sales manager, because everyone was a potential customer for frozen foods. In addition, he said that the simplicity and economy of this approach made it even more desirable.
Careful analysis of a number of call reports, however, confirmed the sales manager’s suspicions that many salespeople were “skimming the cream” or concentrating on the larger and easier-to-sell accounts, neglecting altogether a substantial number of prospects. Consequently, he concluded that territorial coverage was unsatisfactory. He believed that this situation could be remedied by reducing the size of the territories, permitting more intensive coverage.
The sales managers was aware that there were many reasons why reduction of the size of sales territories was difficult to implement. First, the sales personnel would feel that something was being taken away from them; in some cases they would lose accounts they had cultivated over a long period. The result was a possible morale problem. Second, high costs were involved in redesigning sales territories. Third, there would be a need to hire additional salespeople to cover the new sales territories. Fourth, someone would have to convince the sales force that the changes were in the best interests of the sales staff, the company, and the customers. It would be essential to secure the sales force’s acceptance of the new plan.
Since substantial problems were associated with reducing the sizes of the sales territories, the Marquette sales manager was still undecided whether to redesign the present sales territories.
Case 3 Questions: Evaluate Marquette’s method of designing the sales territories – strengths and weaknesses. Should the company reduce the size of its territories?
Alderson Product, Inc.
Alderson Products Inc., a $15 million company, had recently become a wholly owned subsidiary of National Beverage Corp. of Baltimore, Maryland. National had purchased 100 percent of Alderson stock. The acquisition brought with it a number of problems common to such ventures, with the most pressing problems centering around the control of the sales effort.
Alderson Products, Inc., produced and sold packaging equipment exclusively to the soft drink industry. The company, located in Detroit, was established in 1951 by the
Alderson brothers, Jim and Frank, both of whom had worked for General Motors for several years but who wanted to be in business for themselves. After a five-year search while they were still working at GM, they decided to enter the packaging equipment industry when an opportunity came up to buy out a small bottle capping machine producer. For the first year of operation, Alderson produced only a limited line of bottle capping machinery. However, gradually at first and then more rapidly, the Alderson product line was expanded to include capping machines, decapping machines, bottle lifters, case painters, case rebanding equipment, parts, lubricants, blenders, fillers, water-coolers, carbonators, saturators, packers, decasers, washers, water treatment systems, conveyors, rinser load tables, warmers, water chillers, and refrigeration units. Most of the equipment bearing the Alderson name was manufactured by the company itself. Some equipment was purchased from other makers: the cappers and decappers came from the Zalkin Corp. (France), the bottle washers from Firton Manufacturing (Pennsylvania), rinser and warmers from Southern Tool (Louisiana), water chillers from Dunham Bush (Georgia), and the refrigeration units came from Vilter Manufacturing Company (Wisconsin).
The products offered by Alderson came in several different sizes to match the various different applications in the soft drink industry. In addition to the new products manufactured or purchased by Alderson, the company sold used equipment and machinery. The company got into used equipment after finding that a large number of its customers were too small to afford new equipment and could not perform extensive maintenance and repairs on their present equipment.
The market for used equipment grew to the point where it contributed 30 percent of v Alderson’s net sales. Most of the used sales were from rebuilt machinery. Alderson bought the used machinery from bottlers, brought it to Detroit, reconditioned it, and sold it. Other used machinery was sold “as is.” This was machinery that was bought in acceptable operation conditions and required minor modifications or repairs. Usually, the “as is” machinery was transported top the buyer directly from its original location.
The “rebuilt” phase of the business called for the customer to make a 25 percent of deposit on the order before the particular unit went through the shop. Once in the shop, the equipment was dismantled to its basic components and parts were added as required. The customer ended up with a “like new” machine or piece of equipment. Savings to the customers were typically about 30 percent with a new unit. Alderson’s rebuilt equipment carried a warranty. As an additional service, Alderson tried to maintain an adequate stock of spare parts for older units, even if the original manufacturer no longer made them available. There was some concern among management as to the future of the rebuilt equipment part of the business. About two years ago, the company began experiencing difficulty in acquiring used equipment that could be rebuilt. The supply of older units was dwindling, and competition for the used equipment was forcing prices up considerably. Alderson also found that more and more bottlers were reconditioning their own units. Although it constituted a profitable segment of the overall operation, there was some thought that it might be best for Alderson to get out of the used equipment business and concentrate on its growing business for new machinery and equipment.
Alderson served only the soft drink industry, despite the suitability of the company’s products and services for other industries, such as the beer or fruit juice producers. No attempt had been made to branch out into the other markets, largely because the Alderson brothers felt they knew the soft drink industry best. The company served primarily local and regional bottlers; however, plans were underway to increase coverage to national and, possibly, international markets. Future expansion plans did not include markets outside the soft drink industry.
Distribution of Alderson products was through two company salespersons and six manufacturers’ representatives. Both salespersons were paid straight salaries. One salesperson spent about one-fourth of his time appraising and procuring used equipment. The other salesperson spent about one quarter of his time piloting the company airplane. The representatives received a commission for their services, according to the following schedule: 5 percent for the first $50,000, 2.5 percent for the next $50,000 (up to $100,000) and 1 percent for anything over $100,000. This was bases on individual sales. The representatives received a sales commission on any sale in their territory, regardless of whether the company (Alderson) or the representative closed the sale.
In addition to using the personal selling, Alderson promoted its products through advertising, trade conventions, and direct mail. Alderson advertised in six trade publications, averaging one insertion every two months in each of the journals. The direct mail consisted of a newsletter, “Alderson’s News,” mailed to current and potential customers.
With the takeover complete, National sent its auditors to Alderson Products for a routine evaluation. Among other things, it soon became apparent that Alderson had been very lax in its sales control efforts. In particular, there was no evidence that a sales budget was used and there had been no attempt at a sales analysis. The sales manager, who had been in his position for two years after four years as a salesperson with Alderson, said there had been no sales budgeting or sales analysis effort for three years prior to his becoming sales manager. He did mention that a sales budget was used for a time before that, but he was unaware of its details. When questioned by the National auditor as to why he had not instituted sales control procedures, the sales manager said he had discussed it with Frank Alderson and they came to the conclusion that the company was moving along very well and there really was no need for tight control. He was, though, on the alert that, should sales results taper off, it might be necessary to have some controls at a future date. The sales manager also pointed out that he was so busy working on a personal basis with the company sales personnel and the sales representatives that he just didn’t have the time for budgets, quotas, sales analysis and “things like that.”
Case 4 Questions:
Was there a need for sales control at Alderson Products, Inc.? Why or why not?
What would have been the components of a good sales control program for Alderson products? Be specific and give your reasons for each element of sales control.