MKT440 assignment #2
MKT440 assignment #2
Please answer the two questions following this scenario in essay form.
Scenario:
You are a sales management consultant that has been contracted by a large industrial products company called Indusco (imaginary name) to help the Vice President of Sales determine why the company’s sales force has been performing very inconsistently over the last five years. Indusco’s target market has grown every year at a rate of 8 to 10%, but Indusco has only managed to sustain a 3.5% growth rate. You are contracted to work with the company for the next six months and ultimately give them recommendations on how to improve the overall performance of the sales force. Your initial meetings with senior management revealed the following.
Sales Force Structure, Composition, and Compensation:
The Vice President of Sales directs all sales activities for the company. He is 65 years old and has been with the company for over forty years. He was a co-founder of the company and is very close friends with the CEO and the President of Indusco. He plans to retire in six to twelve months, and is looking for your recommendations to help him “put plans in place” for a strong future.
The direct sales force accounts for 80% of overall sales, selling all of the company’s products to direct industrial companies throughout the United States. It is structured in five regions, each with a Regional Sales Manager (RSM) reporting to the Vice President of Sales. The RSM range in: industry experience (8 to 25 years), time with the company (1 month to 20 years), and age (30, 32, 50, 59, and 62 years). They all have college degrees, two with a M.B.A., and all are men. Two RSM were recently hired (from outside the company) to replace one RSM that had been recruited by a competitor, and one that had been “let go” suddenly for unknown reasons. RSM total annual compensation ranges from $135,000 to $180,000 depending on performance, and geographic location. The ratio of fixed salary to variable salary is 80/20, with the variable component (20%) based on meeting quarterly sales goals. There are no commissions paid for regional sales. In addition, each RSM has a full benefits package (insurance, 401K, vacation, etc.) and a company car.
Each region has five to eight District Sales Managers (DSM). There are a total of forty-five DSM ranging in: industry experience (3 months to 15 years), time with the company (3 months to 15 years), and age (22 to 48 years). They all have college degrees, a number have a M.B.A., thirty-seven are men, and eight are women. The average turnover rate each year is about 10% (4 to 5), and those that leave are typically younger in age and have two to five years with the company. DSM total annual compensation ranges from $70,000 to $140,000 depending on seniority, performance, and geographic location. The ratio of fixed salary to variable salary is also 80/20, with the variable component (20%) also based on meeting quarterly sales goals. There are no commissions paid for district sales. In addition, there are quarterly and annual sales contests that typically award trips such as cruises or all-inclusive resorts to the top five performers nationally. Each DSM also has a full benefits package (insurance, 401K, vacation, etc.) and a company car.
In addition, there are five Independent Dealer Sales Managers (IDSM) that account for 20% of the company’s annual sales. One of them is a Senior IDSM, who leads the team and reports directly to the V. P. of Sales. They are located at corporate headquarters and manage independent dealers and distributors that buy and resell lower performance, lower price, and lower profit products also manufactured by Indusco. Some of these products overlap (i.e., can be used in the same way) with those sold by the direct sales force and are sold by Independent Dealers to the same customers served by the direct sales force. The IDSM don’t seem to range much in: industry experience (15 to 20 years), time with the company (all 5 years), or age (48, 52, 53, 56, and 57 years). All IDSM joined Indusco when it acquired their company 5 years earlier, all have experience as independent dealer sales representatives, and all are men. IDSM total annual compensation ranges from $50,000 to $100,000 depending on performance. The ratio of fixed salary to variable salary is also 60/40, with the variable component (40%) based on commissions paid for sales to each IDSM’s assigned Independent Dealers. In addition, there are individual annual bonuses of $5,000 paid if the IDSM successfully grows their overall independent dealers’ sales by 5%, and $10,000 if the IDSM successfully grows their overall independent dealers’ sales by 10%. Each IDSM also has a full benefits package (insurance, 401K, vacation, etc.).
Performance:
The direct sales force’s overall performance over the last five years has been poor, averaging 92% accomplishment. In general, each quarter seems to start out very strong throughout the regions but then at least two of the regions always seem to slow way down and miss their sales quota by a substantial amount. On an annual basis two to three of the regions meet or exceed annual quotas and two to three miss by a substantial amount. In the last five years only one region consistently met or exceeded its annual sales quota, the Upper Midwest, and (unfortunately) that RSM was recently recruited away by the competition. DSM performance is similarly mediocre, with very few DSMs able to consistently meet or exceed their quarterly or annual sales quotas. Again, they often seem to start out the quarter strong but fall way off by quarter end. Also, the data seem to indicate that when one quarter’s sales quota is badly is missed, the next quarter’s quota is exceeded. Alternatively, the IDSM sales performance over the same five years has been consistent. Dealer sales have grown 5 to 8% per year and in very rare cases do the IDSM miss their quarterly or annual quotas.
Questions:
Each of the following two questions is in reference to the preceding scenario.
Q1) In your first set of interviews with the V.P. of Sales, several RSM and DSM, and two IDSM you record the following statements. Based on these comments, what would you write in your recommendation regarding possible changes to Indusco’s sale management in terms of compensation, quota management, advancement, and retention?
V.P. of Sales Comments:
“Our RSM and DSM seem to be highly motivated at times and unmotivated at other times. We just can’t seem to get them excited and keep them excited about hitting their numbers. We used to be better at that.”
“When I talk to some of our best customers, they say our reps are nice but not always accessible.”
“I am concerned about our annual turnover with the DSM. It is getting harder to find and keep good ones.”
“I am pretty happy with our independent dealer sales. Buying that business five years ago has certainly contributed to the bottom line.”
“I hated losing the RSM for the Upper Midwest to the competition. It wasn’t so much about his compensation, we just could not seem to satisfy all the business systems and customer response concerns he had.”
RSM Comments:
“I don’t know why we seem to miss, as often as we hit our numbers. The market has changed and we have more competition. These newer DSMs come in very motivated, but we seem to lose the good ones to the competition. The ones that have been with us are content to stay where they are.”
“The independent dealer sales of our products can be a real problem for our sales people – talk about demotivating!”
“These sales contests seem to appeal to the “same winners” in our sales force, but not many others.”
“I have to admit I am looking forward to retirement. You stay in this game too long and it will kill you.”
“I think our future is quite bright and I am looking forward to finding out who will be the next V.P. of Sales.”
“Our systems lack the necessary capacity and functionality to establish accurate quota assessment and tracking.”
“This new social media craze is very disruptive to our sales people and customers.”
“These new DSM don’t seem to have as strong of work ethic as before. They don’t hit their number and don’t seem to care.”
DSM Comments:
“I hate our dealer sales force – they steal business and cherry pick customers.”
“This is a great industry and I like Indusco, but the competition is aggressive and really pays their sales people well.”
“I don’t know why they hired my new RSM from the outside; we have at least two DSM that could have done that job a lot better.”
“I really don’t know where they come up with our quotas, it seems they just spit them out at corporate without any consideration of what is happening in the field.”
“The quarterly bonus is great – when you can hit it. Sometimes though it seems impossible and there is no real recognition for our efforts and how hard it is to sell.”
“Working harder does not necessarily mean success, and I need “a life” also – doesn’t everyone?”
“I love it here. I make good money and enjoy winning a trip occasionally. I have always been pretty self-motivated.”
“Sometimes they treat me like a rookie. Imagine me, a veteran DSM with plenty of experience and sales, having to report on how many customers I call in a day!”
“I feel like my RSM only cares about the numbers without actually helping me figure out how to bring in with my tough customers. I’ve only been here six months and he just talks about hitting quota!”
IDSM Comments:
“This is a great job. When they acquired our company I was worried, but they have taken good care of us and our dealers are very happy with our products.”
“If I can get our dealers the right products at good price they are happy to sell our products. Plus I get a commission on every sale!”
“We don’t really talk much with the outside sales force – I am not sure they appreciate our efforts much.”
“Our dealers really know how to sell to industrial customers – I should know because I used to be one.”
“It’s great here at corporate headquarters. We have many opportunities to talk with the “bosses” and joke around with them.”
Q2) You conducted a second set of interviews, this time with some of Indusco’s customers. In addition, you were even able to interview two ex-DSM, which were recently hired by the competition. Based on these comments, what would you write in your recommendation about Indusco’s sale management in terms of leadership and customer management?
Customer comments:
“They have great products, but I am sometimes confused by what products are best for me and if I should buy them from Indusco or its dealers.”
“Their sales force absolutely does not relate to my company – they don’t look like me, talk like me, and all guys, do you know what I mean?”
“Yes, I like their products, but there are times when their sale representatives are just focused on me placing orders. One even offered me a discount if I would hold on to my order until the next month.”
“I don’t need to talk a lot with sales reps; sometimes the reps from Indusco are totally confused as to what I need, and what I want to talk about.”
“Do not get how to communicate with me – I want quick responses, and not some long email!”
“It seems like there is a level of uncertainty about how the sales force works with Indusco’s independent dealers.”
“I need suppliers that can discuss the future with me and my needs. Indusco has good products, but there is not a clear message from their sales people about the future.”
“Last quarter their sale rep offered to take me to a Red Wings game if I would move up an order to February that I was not planning to place until April.”
Ex-DSM Comments:
“My RSM at Indusco was just creepy. He made me feel like I was his subordinate all the time.”
“Make no mistake, it is a “boy’s club” at Indusco. It seemed that there was always something I was unaware of, but others were.”
“I liked my RSM at Indusco. He could be harsh at times but was always fair. He seemed uncertain about our ability to deal with customer issues.”
“I loved it there, I only left because my new company pays me “tons more” for the same amount of sales, and I totally get where we are going. My RSM had no toleration for missing the sales quota.”
“I guess I would have preferred some more interest by management in my professional development.”
“Why aren’t there any women in senior management?”
“I was happy at Indusco, but they are falling behind in many ways. Not so much in terms of their products, but in the way they manage.”
“It seems like they talked about our corporate mission and vision, but I don’t know how that relates to my sales effort. Plus they were all about numbers, not me”
“They expected me to entertain customers but not spend any money. How does that work?”
“Since the acquisition our vision of the future was unclear.”
“This customer actually asked me if I would go out on a date. I told my RSM and he said, “do what you have to do” when I glared at him he said “well, do what you are comfortable with,” can you believe that?”
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