Transcript Hanover-Bates Chemical Corporation

Hanover-Bates
Chemical Corporation
Sean Gleason
Melaina Brown
Craig Hopkins
Frank Roberts
Benjamin von Wurmb
Background
Leading producer
processing chemicals for
the chemical plating
industry
40 sales reps (7 districts)
Compensation

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
$33k to $45k
Benefits- 15% salary
Commission- .5% $ sales
volume (1% for sales in
excess of quota)
Minimal quality difference
between firms
Introduction
James Sprague- new NE sales manager
Urged to improve profit performance
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
Analyzed poor gross profit
Used North-Central (District 7) as benchmark
Hank Carver
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

Senior sales rep
Passed over for Sprague’s position
Threatens to quit after perceived insult from
Sprague
Statement of Problems
District Profit Performance Low
District 3 Gross Profit Quota poor
Sales efforts misallocated
Conflict between Carver & Sprague
Carver passed over for DM position
Carver sees Sprague plan to improve as personal attack, not
as constructive business strategy
Sprague’s credibility & qualifications in question
Analysis of Problems
High quota setting =
unattainable goals
No incentive to improve
gross profit
Focus currently on dollar
volume
C accounts – lowest
returns
Not capitalizing on
potential accounts
Sprague new, young DM
Must gain respect of
employees
Improve for entire
company
Doing Less With More
High costs incurred
for account coverage
Selling Expenses =
$552,541 in 2001
Exceeded District 7’s
expenses by approx.
$100k
Profit of District 7 over
$100k more than
District 3 on $451,500
less sales.
Assumptions
Carver is going to retire in 3 years
No additions to the product line expected
There is no variation in quality
Advertising is strictly regulated
For calculation purposes, list price and gross
margin will increase at a constant rate, relative
to the container size
Alternative 1 – Fire Carver
Advantages



Eliminate morale
problems
Unload high salary
($51,750, without
commission)
Must hire new,
trainable associate
Can mold to new
company vision
Save approx. $13,800
with associate sales rep
Alternative 1 – Fire Carver
Disadvantages


Lose most
experienced sales rep
Possibility of mutiny
Carver was influential
Create job uncertainty

Training costs of new
rep
Alternative 2 – Fire Sprague
Positives


Very experienced
Increase employee morale
& motivation
Negatives
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Maintaining status quo not
effective
Possibly lose customers
faithful to Carver
New reps not familiar with
Carver’s accounts
Alternative 3 – Refocus Coverage
Too much emphasis
on C accounts

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Small accounts, with
low margins
Sales calls wasted on
smaller accounts
Increase focus to
larger accounts
Push high-margin
products
Alternative 3 – Refocus Coverage
Account Sales by Category:
A
B
C
Total
$
$
$
$
1,372,500
2,521,500
1,215,000
5,109,000
27%
49%
24%
100%
$
$
$
$
1,126,500
2,553,000
978,000
4,657,500
24%
55%
21%
100%
Gross Profits by Category:
A
B
C
Total
$
$
$
$
534,000
934,500
390,000
1,858,500
29%
50%
21%
100%
$
$
$
$
495,000
1,087,500
382,500
1,965,000
25%
55%
19%
100%
Alternative 3 – Refocus Coverage
Advantages

Profit potential increases
Disadvantages

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Lead to alienation of smaller accounts
Sales force struggle to meet quotas
Further sales rep problems a possibility
Alternative 4 - Combination
Make amends with
Carver
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Explain proposed plan
Use his experience to
motivate the team
Change in compensation
plan
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Focus on increased profit
performance
Reward sales of highmargin products &
accounts
Initiate new training
program
Alternative 4 - Combination
Advantages


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Utilizes Carver’s
knowledge and
experience
Establish trust in
Sprague
Bottom up method to
involve Sales Force
Addresses problem of
margin
Disadvantages

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High cost of training
Possible disengaging
of Carver and Senior
Sales Representatives
Summary
Sprague must reestablish credibility with
the staff
Carver should be made to feel like an
important member of the organization
The Northeast district’s profit performance
must improve
Recommendation
All alternatives were
carefully considered
Three points were
kept in mind when
evaluating the
alternatives:

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
Productivity and Profit
Sales force moral
The need to change
both sales methods
and philosophy
Recommendation: Solution 4
Talk the Talk
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
Bottom up Approach
Get Carver on your side as
an opinion leader and
Mentor
Seek Carver’s help with
training and motivating the
Sales Force
Walk the Walk

Use district 7 as a guide to
change operating
procedures
They spend less and do
more

Restructure quotas with a
focus on profit margin per
product sold
Implement point system
1.0 for ZBX, CBX, NBX
1.25 for SPX and BUX
1.75 for CHX

Employee training program
fully prepare sales force
Conclusion
“Everything starts with the sale”
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Get Carver on your side
Implement a margin driven quota
Train your staff to succeed
We are confident that if Hanover-Bates
implements solution 4 they will
successfully resolve the problems they are
currently facing
Johnston
Marshall
Greg W. Marshall
Oklahoma State
University
Mark W. Johnston
Rollins College
Click on the image to give our group an A.
The St. Joes Hawks RULE.
Sales Force Management
Seventh Edition
McGraw-Hill
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