Case Study - Orbit Furniture Company.

University Degree Business and Administrative studies

Course: BABM

Year: 3

Module: Sales Management

Student: Jennifer Winn

Student ID: 11209431

Date: 19th December 2003

Assignment: Case Study – Orbit Furniture Company

Introduction

After having carefully read the information given to me about the company, I have a few ideas that may help improve the sales of the companies over the next 18 months. I have looked at and addressed some of the issues raised by your good-self and hope that you find some of my ideas acceptable so that we can put them into action immediately.

Discussion of Problem Areas

Staff Turnover and morale is the first issue you have raised, the turnover of sales staff has risen to 14% indicating a problem of diminished morale amongst staff. High turnover can become a problem for competitive reasons as some staff will leave your company to begin employment with a competitor, taking with them their experience and valuable knowledge of your targets, performance and strategies. Turnover can be decreased by raising morale and esteem amongst the sales force by motivating them at work. This can be a challenging task, especially with salespeople as they are constantly experiencing rejections day in day out, with the number of declined sales being far higher than the number of successes.

There are many theories on how to motivate people, however I feel the most appropriate one in this situation is Hertzberg’s Dual Factor Theory. Hertzberg identified factors which can cause dissatisfaction but cannot motivate and factors which can cause positive motivation. Hygiene factors are things such as physical working conditions, security and salary. These can cause dissatisfactions amongst staff but do not motivate them if they are at a satisfactory level. Motivators are things such how interesting the work itself is and the degree of achievement and recognition of that achievement an employee would experience. Motivators, when fulfilled have a positive effect on the motivation of an employee to be successful at work (Selling & Sales Management, p366).

It is also important that the sales force are confident with what they are trying to sell, lack of knowledge can cause de-motivation as staff will fear questions they cannot answer from prospective buyers. There has been a lack of sales training completed within this company and I think that the sales staff would benefit greatly from some product knowledge training to ensure they know everything there is to know about each and every product. Prospective buyers will always try to cause problems for sales people by hypothesising problems and asking difficult questions. It is imperative that our sales force are equipped with the highest level of knowledge of the products they promote, in order to overcome these problems and provide solutions to the customer, leaving them without an excuse for turning the product down. The sales person needs to be able to realise the needs of the customer and match those needs with a suitable product.

This is a preview of the whole essay

A key motivator for any person in employment is their salary and the benefits that go with it such as healthcare and pension schemes etc. These can also be very costly to the company, especially one looking to improve revenue dramatically. Our field sales staff receive a basic salary of £18,700 per annum and in addition to this they have the potential to earn up to and beyond a further £11,300 in commission on their sales. You have highlighted this arrangement as not being challenging enough for the staff and I completely agree. I feel the basic salary is too high and a higher proportion of their final salary should be exhumed from commission. I propose a review of the pay structure and I think a good idea would be to reduce the basic salary and increase commission per sale. Therefore, the sales force would have to secure more sales to earn the same amount of money. In accordance with employment law, any change to an employee’s contract would need to be improved by the employee. We could sell this new arrangement to them by proposing that although their basic salary has decreased, they have the potential to earn more overall as the commission for their sales has increased.

You have questioned whether a replacement RSM is needed for Region 2, there is an argument for and against recruiting a replacement. In favour of replacing the RSM I would say as there is a RSM in every other region, the sales reps in Region 2 may feel penalised or insignificant at not being allocated a Regional Sales Manager, this would then have a negative impact upon morale and turnover. In favour of not replacing the RSM I would say that in view of the number of sales staff in Region 2 and in comparison with the other regions, the revenue from that Region has not suffered a detriment. Personally I think we should find a replacement for the RSM to bring the region in line with all the others and prevent a possible dip in morale. I also think that although the region has performed to a reasonable standard without an RSM, we may help to maximise its potential for the future by employing a RSM.

I also think there are other alterations we need to make to the size and structure of the sales force. Region 3 and Region 4 have a higher number of sales reps than the other three regions, they also have the highest sales revenue. There seems to be a direct correlation between the number of sales reps in a region and the amount of revenue that region achieves. I propose to increase the number of sales reps in each region to 25 (this will mean relocating one existing sales rep from Region 4). Although this will increase costs to the business it should also increase it’s profitability.

The information I have been provided on the existing sales force itself shows that an alarming 20 salespeople are going to retire within the next 5 years. There is also another possible 16 sales people who may retire within the next 10 years due to the fact that women retire at 60 and there are 16 sales people in the 50-60 age range. Out of a salesforce of 90 people, a possible 36 may retire in the next ten years. That is over a third of the whole sales force. It is also concerning that in Region 1 there are 12 members of sales staff, 6 of which will retire within 5 years and 4 of which who may retire within 10 years. That almost wipes out all the sales staff in that region!

I am happy with the geographical basis that the sales force works on and I don’t think the territories should be changed as this would cause a number of problems for the company. The staff that are now separated into regions would find it difficult to visit certain customers, we would incur increased transport costs, some customers would be used to dealing with specific members of sales staff and then would have become used to dealing with someone else causing disruption and a loss of the rapport built with that customer. The territories have remained unchanged for 5 years and I think this is a good thing and we should continue to operate on the same geographical basis.

You have proposed that Key Account Management (KAM) would be beneficial to the company as we have 11 customers purchasing over £400,000 from us each year. Key accounts are those with one or more of the following qualities; high sales value, complex buying systems or complex decision making units (DMU’s). In our case, we have 11 customers with high sales value. KAM involves the building of relationships with a wide range of people in the Key Account, organising personnel and resources to meet the needs of the Key Account and the co-ordination of sales, support and supply activities to all parts of the Key Account, (Lecture 10 notes, Peter Williams).

Some advantages of KAM are; improved communication and co-ordination, increased level of sales to large customers, improved co-operation in product and service design, development and planning, lower costs through improved scheduling and increased career opportunities. There are, however, also disadvantages such as potential neglect of small accounts, vulnerability to relatively few customers, managers having responsibility without authority, escalating demand for service from preferred suppliers and the impact on the sale team and attitudes of non-KAM sales people (Lecture 10 notes, Peter Williams). I think that a certain degree of KAM will be advantageous to our company and I propose the best way of doing this is picking out our best sales staff and setting up a KAM team who deal solely with key accounts in all regions. We need to ensure we don’t lose sight of the importance of the smaller accounts though, they still need to be valued and looked upon as a potential key account I the future because as out own business is flourishing and expanding so are the others around us.

It is evident from the literature you provided me that there has been no Customer Relationship Management (CRM) structure within the company. Sales staff have kept their own records; therefore we have little collated information about our customers at a central source as there should be. CRM is all about getting to know your customers and identifying their needs, over time we then build up a portfolio of each and every customer which allows us to do things such as tailor our marketing style to suit them (ie, emailing an offer to them rather than sending a letter). The first thing we need to do urgently in this company is implement a central system/database where we store everything we know about our customers and details of every time we have contact with them. That way, the internal sales support staff would be better informed on current issues with customers that may call them, minimising the risk of further complaints from both field sales staff and customers. We would also have a central source of customer data which could be analysed and utilised when devising new advertising campaigns and even new products, if we can identify what our customers need we can fulfil that need in some way.

Regional sales managers produce reports in different styles and of differing quality, this also needs to be standardised through proper training to ensure high quality reports, and perhaps a report template so that each RSM writes their reports in the same style. The RSM’s also need a standardised procedure for evaluation and feedback on the performance of their staff to ensure fair treatment across the board.

The annual sales expenditure budgets and sales targets have already been set. I would like these to be reviewed on the following basis. A decision should be made as to how much we want to increase revenue by in the next 12 months, we then need to decide how many additional sales we need to make in order to achieve that goal. Then we should make these proposals to the sales force themselves and ask them how much money they predict they will need to achieve the sales needed. This way we are involving the sales force in a major decision whilst also listening to them and valuing their input. As a company we need to have an idea of how much we can offer the sales team, however if they come back to us with a smaller figure then we have gained from this method of budgeting, if however they come back with a figure higher than what we had in mind we could negotiate with them and they would still feel like they have had an input into the budget even if we still use our original figure.

The sales targets we set for each region may need to be accompanied with some incentives such as a regional award for the top performing region that year for example. The sales targets also need to be realistic, if we come up with some huge targets, the sales team will be de-motivated as they will feel they are not achievable and therefore not try to meet them.

Action Plan

My first aim is to increase morale amongst the sales team and this will impact upon and reduce staff turnover. I will increase morale through the changes I wish to implement in the company as a whole, they will all be motivating factors to the sales force. I will develop a training package which covers all of our products and provide Product Knowledge training for all sales staff including management and office based staff. This will begin immediately with the training ready to commence within 3 months and a sales force of 90 people will take approximately 9 months to be put through the training. Training will increase confidence and morale amongst staff as they will feel better equipped to be successful at their job.

I wish to review the salaries of the sales staff and propose a lower basic salary with increased commission per sale, therefore a potential for staff to earn more but they have to perform better in order to do so. Each employee will need to be consulted individually about this matter and then notice given before a change of contract is implemented. It will take 4-5 months to address each employee and agree the change in contract and agree a sufficient notice period in accordance with their current contracts of employment. I predict the notice period would be between 1-3 months so hopefully the new pay structure would be in place in 8 months at the most if the negotiation began with immediate effect.

I propose to increase the sales force by 35 sales representatives over the next 2-3 years in order to get 25 reps in each region. This should increase revenue massively but we would need to allow time for relationships to be built with new customers etc before we would see the benefit of this movement. As each new salesperson commences employment we should see an increase in sales within 6 months.

I also propose to implement a CRM system with immediate effect and have all the customer data from the reps collated and stored in a central source of customer information which everybody in the company has access to. This will enable office staff to deal with telephone enquiries more effectively. It will also require updating every time we have contact with the customer with the reasons as to why they have called us or why we visited them and the outcome etc. It will also need to be updated every time we receive a new piece of customer information. This system will also help to boost morale as the workplace will be more structured and run more smoothly, everyone will know where to go for the information they need.

Executive Summary

The key recommendations in this report have been: