Hanover-Bates Hanover-Bates Chemical CorporationChemical Corporation

Sean Gleason Sean Gleason Melaina Brown Melaina Brown

Craig Hopkins Craig Hopkins Frank RobertsFrank Roberts

Benjamin von WurmbBenjamin von Wurmb

BackgroundBackground

Leading producer Leading producer processing chemicals for processing chemicals for the chemical plating the chemical plating industryindustry 40 sales reps (7 districts)40 sales reps (7 districts)CompensationCompensation

$33k to $45k$33k to $45k Benefits- 15% salaryBenefits- 15% salary Commission- .5% $ sales Commission- .5% $ sales

volume (1% for sales in volume (1% for sales in excess of quota)excess of quota)

Minimal quality difference Minimal quality difference between firmsbetween firms

IntroductionIntroduction

James Sprague- new NE sales managerJames Sprague- new NE sales managerUrged to improve profit performanceUrged to improve profit performance Analyzed poor gross profitAnalyzed poor gross profit Used North-Central (District 7) as benchmarkUsed North-Central (District 7) as benchmark

Hank CarverHank Carver Senior sales repSenior sales rep Passed over for Sprague’s positionPassed over for Sprague’s position Threatens to quit after perceived insult from Threatens to quit after perceived insult from

SpragueSprague

Statement of ProblemsStatement of Problems

District Profit Performance LowDistrict Profit Performance LowDistrict 3 Gross Profit Quota poorDistrict 3 Gross Profit Quota poor

Sales efforts misallocatedSales efforts misallocated

Conflict between Carver & SpragueConflict between Carver & SpragueCarver passed over for DM positionCarver passed over for DM position

Carver sees Sprague plan to improve as personal attack, not Carver sees Sprague plan to improve as personal attack, not as constructive business strategyas constructive business strategy

Sprague’s credibility & qualifications in questionSprague’s credibility & qualifications in question

Analysis of ProblemsAnalysis of Problems

High quota setting = High quota setting = unattainable goalsunattainable goals

No incentive to improve No incentive to improve gross profitgross profit

Focus currently on dollar Focus currently on dollar volumevolume

C accounts – lowest C accounts – lowest returnsreturns

Not capitalizing on Not capitalizing on potential accountspotential accountsSprague new, young DMSprague new, young DM

Must gain respect of Must gain respect of employees employees Improve for entire Improve for entire companycompany

Doing Less With MoreDoing Less With More

High costs incurred High costs incurred for account coveragefor account coverage

Selling Expenses = Selling Expenses = $552,541 in 2001$552,541 in 2001

Exceeded District 7’s Exceeded District 7’s expenses by approx. expenses by approx. $100k$100k

Profit of District 7 over Profit of District 7 over $100k more than $100k more than District 3 on $451,500 District 3 on $451,500 less sales.less sales.

AssumptionsAssumptions

Carver is going to retire in 3 yearsCarver is going to retire in 3 years

No additions to the product line expectedNo additions to the product line expected

There is no variation in qualityThere is no variation in quality

Advertising is strictly regulatedAdvertising is strictly regulated

For calculation purposes, list price and gross For calculation purposes, list price and gross margin will increase at a constant rate, relative margin will increase at a constant rate, relative to the container size to the container size

Alternative 1 – Fire CarverAlternative 1 – Fire Carver

AdvantagesAdvantages Eliminate morale Eliminate morale

problemsproblems Unload high salary Unload high salary

($51,750, without ($51,750, without commission)commission)

Must hire new, Must hire new, trainable associatetrainable associate

Can mold to new Can mold to new company visioncompany visionSave approx. $13,800 Save approx. $13,800 with associate sales repwith associate sales rep

Alternative 1 – Fire CarverAlternative 1 – Fire Carver

DisadvantagesDisadvantages Lose most Lose most

experienced sales repexperienced sales rep Possibility of mutinyPossibility of mutiny

Carver was influentialCarver was influential

Create job uncertaintyCreate job uncertainty Training costs of new Training costs of new

reprep

Alternative 2 – Fire SpragueAlternative 2 – Fire Sprague

PositivesPositives Very experiencedVery experienced Increase employee morale Increase employee morale

& motivation& motivation

NegativesNegatives Maintaining status quo not Maintaining status quo not

effectiveeffective Possibly lose customers Possibly lose customers

faithful to Carverfaithful to Carver New reps not familiar with New reps not familiar with

Carver’s accountsCarver’s accounts

Alternative 3 – Refocus CoverageAlternative 3 – Refocus Coverage

Too much emphasis Too much emphasis on C accountson C accounts Small accounts, with Small accounts, with

low marginslow margins Sales calls wasted on Sales calls wasted on

smaller accountssmaller accounts

Increase focus to Increase focus to larger accountslarger accounts

Push high-margin Push high-margin productsproducts

Alternative 3 – Refocus CoverageAlternative 3 – Refocus Coverage

Account Sales by Category:A 1,372,500$ 27% 1,126,500$ 24%B 2,521,500$ 49% 2,553,000$ 55%C 1,215,000$ 24% 978,000$ 21%Total 5,109,000$ 100% 4,657,500$ 100%

Gross Profits by Category:A 534,000$ 29% 495,000$ 25%B 934,500$ 50% 1,087,500$ 55%C 390,000$ 21% 382,500$ 19%Total 1,858,500$ 100% 1,965,000$ 100%

Alternative 3 – Refocus CoverageAlternative 3 – Refocus Coverage

AdvantagesAdvantages Profit potential increasesProfit potential increases

DisadvantagesDisadvantages Lead to alienation of smaller accountsLead to alienation of smaller accounts Sales force struggle to meet quotasSales force struggle to meet quotas

Further sales rep problems a possibilityFurther sales rep problems a possibility

Alternative 4 - CombinationAlternative 4 - Combination

Make amends with Make amends with CarverCarver

Explain proposed planExplain proposed plan Use his experience to Use his experience to

motivate the teammotivate the team

Change in compensation Change in compensation planplan

Focus on increased profit Focus on increased profit performanceperformance

Reward sales of high-Reward sales of high-margin products & margin products & accountsaccounts

Initiate new training Initiate new training programprogram

Alternative 4 - CombinationAlternative 4 - Combination

AdvantagesAdvantages Utilizes Carver’s Utilizes Carver’s

knowledge and knowledge and experienceexperience

Establish trust in Establish trust in SpragueSprague

Bottom up method to Bottom up method to involve Sales Forceinvolve Sales Force

Addresses problem of Addresses problem of marginmargin

DisadvantagesDisadvantages High cost of training High cost of training Possible disengaging Possible disengaging

of Carver and Senior of Carver and Senior Sales RepresentativesSales Representatives

SummarySummary

Sprague must reestablish credibility with Sprague must reestablish credibility with the staffthe staff

Carver should be made to feel like an Carver should be made to feel like an important member of the organizationimportant member of the organization

The Northeast district’s profit performance The Northeast district’s profit performance must improvemust improve

RecommendationRecommendation

All alternatives were All alternatives were carefully considered carefully considered Three points were Three points were kept in mind when kept in mind when evaluating the evaluating the alternatives: alternatives: Productivity and ProfitProductivity and Profit Sales force moralSales force moral The need to change The need to change

both sales methods both sales methods and philosophyand philosophy

Recommendation: Solution 4Recommendation: Solution 4

Talk the TalkTalk the Talk Bottom up ApproachBottom up Approach Get Carver on your side as Get Carver on your side as

an opinion leader and an opinion leader and MentorMentor

Seek Carver’s help with Seek Carver’s help with training and motivating the training and motivating the Sales ForceSales Force

Walk the WalkWalk the Walk Use district 7 as a guide to Use district 7 as a guide to

change operating change operating proceduresprocedures

They spend less and do They spend less and do moremore

Restructure quotas with a Restructure quotas with a focus on profit margin per focus on profit margin per product soldproduct sold

Implement point system Implement point system 1.0 for ZBX, CBX, NBX1.0 for ZBX, CBX, NBX1.25 for SPX and BUX1.25 for SPX and BUX1.75 for CHX1.75 for CHX

Employee training program Employee training program fully prepare sales forcefully prepare sales force

ConclusionConclusion

““Everything starts with the sale”Everything starts with the sale” Get Carver on your sideGet Carver on your side Implement a margin driven quotaImplement a margin driven quota Train your staff to succeedTrain your staff to succeed

We are confident that if Hanover-Bates We are confident that if Hanover-Bates implements solution 4 they will implements solution 4 they will successfully resolve the problems they are successfully resolve the problems they are currently facingcurrently facing

Johnston Marshall

Mark W. JohnstonRollins College

Greg W. MarshallOklahoma StateUniversity

The St. Joes Hawks RULE.

Sales Force ManagementSeventh EditionMcGraw-Hill

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