CASE STUDY 4 (The task will be available till the end of Sunday, 22th of Ferbuary!) Decline in sales in the area improvement action plan You are being asked for help by an Area Sales Manager. Your task is to suggest and implement corrective actions, which will improve sales results in the area. Company and Product The company has a developed Trade Department, the aim of which is to realize sales plans created by the Board and sales Director. Trade Department is divided into modern trade (all kind of chains of super- and hypermarkets) and traditional trade (wholesale and retail shops of different sizes). There are 25 Area Sales Managers who manage over 150 Sales Representatives (in traditional trade) and 7 Key Account Field Managers who supervise over 60 Key Account Sales Representatives (in modern trade). Your task Rama margarine sales have been declining for three months in your area. You noticed that when you received numerical sales results after December 2008. `Rama` is one of the key products for your company. There are 9 Sales Representatives working in your area. You are wondering what you should do in two regions covered by sales representatives with a longest experience. Luke Uni has been working for over 4 years, and Tom Lever for almost 3 years. The trend in the remaining 7 regions does not differ from total-country results. Essential information It is an evening of 5th January, 2009. On the basis of all sales data and information from sales representatives and customers, you have prepared an analysis of the situation in your area. Tomorrow at noon, you are going to present your plan of improvement actions to the Area Sales Manager. You are working on it now on the basis of the following data, which you have just gathered.
The results of `Rama` sales in the period of October December 2008: - The sales in whole country are identical with the results of the third quarter of 2008 (Q3 2008). The company forecasted sales growth of 3% in the Q4 2008 (vs. Q3 2008) because of the holiday shopping season. - The sales results in the whole country are 5% lower than those in the Q4 2007. These results are also below expectations. You have expected the sales in Q4 2008 to be identical to those in Q4 2007. - The decline in sales in your area is 4% vs. Q3 2008. - Sales in your area declined by 8% vs. Q4 2007. - The results of gross sales in your area: October 1,250,000 spreads (local currency), November 1,100,000 spreads, December 1,380,000 spreads. - The average margin in the last quarter is identical to that in Q3 2008 and in Q4 2007. - The turnover in Luke Uni s region (LU region) is identical as in Q3 2008 and lower by 3% in comparison with Q4 2007. - The turnover in Tom Lever s region (TL region) is 6% lower than in Q3 2008 and 16% lower vs. Q4 2007. - LU and TL regions are far away from each other. TL region is the most northward region in your area, and MP region is on the south-east periphery of your area. - The margins in both regions are the same as in other regions of your area, and they are similar to an average margin in the country. - All regions in your area have a comparable potential. TL region is the largest one in the area. - In the whole area, Sales Representatives have been observing a slightly increased competitors activity in the margarine segment. Since the middle of 2008, your main competitor ( Temecol ) sellers have been promoting their goods more intensively. They have lowered their margins by 2% on margarines reducing the cholesterol level and are advertising them as healthy nutrition. A few customers have confirmed that they are interested in a competitive loyalty program: `Temecol offer health to yourself`. - Since the end of November, there was an `Omega Margarine` producer s intensive campaign on TV entitled `Omega fatty acid from fish be as healthy as a fish`. `Omega Margarine` producer s sales representatives placed advertisements of that product in most of the shops. You don t know whether they have been organizing any other marketing activities among customers. - Both Luke Uni and Tom Lever emphasize they like their job; however, they are tired of its monotony after those few years. Question On the basis of the above analysis, suggest a plan of corrective actions in LU and TL regions. From the actions suggested below, choose one to three ways of improving performance of each region, and create an optimal combination of the actions. Choose a solution from the five combinations shown in the table below.
Suggested improvement actions: 1. Lowering the margin for `Rama` margarine. 2. Changing targets for Sales Representatives - instead of monthly goals, implementing weekly targets and being more consistent in holding Sales Representatives accountable for delivering the targets. 3. There is no need to change anything. 4. Dismissing the Sales Representative and hiring a new, more engaged person. 5. Implementing typical marketing support for customers in the region (shop visualizations, loyalty programs for shop managers etc.). 6. Visiting key customers together with Luke Uni or Tom Lever. 7. Directing sales representatives from neighboring regions to help in LU or TL regions. The table of solutions: Region combination LU TL A 5 and 7 4, 5, and 7 Improvement actions B 1, 5, and 6 1, 4, and 5 C 3 2, 5, and 6 D 5 and 6 2, 5, and 6 E 5 and 6 1, 2, and 5
SOLUTION TO CASE STUDY 4: Please find the explanation and a model solution of the 4th case study below. You can find your score for this task and current overall score in a pop-up box after loging in at www.unilevergame.com. - - - - - - - - - Answers: Combination D 5 points Combinations C and E 3 points Combinations A and B 0 points Reasons: Luke Uni Region this Sales Representative gained good results. His sales parameters are better than those of the whole company, so most probably he is better at sales than most of the sales representatives. He deserves congratulations. It is also worth observing or asking him what is his way of opposing competition. Tom Lever Region sales are bad in this case. Most probably, Tom Lever has made less effort for a few months. Quick improvement actions are necessary before the competition deprives the company of even more customers. When it comes to this, improving the region s results may last up to a year. Initially, the sales results decline slowly, but after a few months the declines become established. The reason for that is customers stronger attachment to the competition. Suggested improvement actions: 1. Lowering the margin for Rama margarine. 2. Changing targets for the Sales Representative - instead of monthly goals, implementing weekly targets and being more consistent in holding him accountable for delivering the targets. 3. There is no need to change anything. 4. Dismissing the Sales Representative and hiring a new, more engaged person. 5. Implementing typical marketing support for customers in the region (shop visualizations, loyalty programs for shop managers etc.). 6. Visiting key customers together with Luke Uni or Tom Lever. 7. Directing sales representatives from neighboring regions to help in LU or TL regions. Combination A LU Region 5, 7; TL Region 4, 5, 7 The idea of marketing support in both regions is very good. It will let regain at a low cost a part of the customers who have joined 2 competitive companies. Unfortunately, this combination is disqualified by the action no. 7. Borrowing sales representatives from other regions is pointless, and it is a nervous step aiming at a short-term improvement of results in LU and TL regions. The remaining seven sales representatives should most of all take care of their own regions, where the danger from the competition s side is high. Combination B LU Region 1, 5, 6; TL region 1, 4, 5, Tom Lever has most probably been a worse worker recently, but it is not advisable to dismiss him yet. It would be just for the sake of showing off, which is sometimes done by managers to save their heads. At the same time, the Area Manager would lose his long-term relations with customers and all the knowledge about them. Hiring a new sales representative is reasonable when an experienced seller cannot be motivated. Sales representatives often feel monotony after a few years of working (which is wrongly defined as occupational burnout ). The manager s task is to introduce improvement
actions and search for new methods of motivating sellers. It is too early for lowering margins. We will explain it in the combination E. Combination C LU Region 3; TL region 2, 5, 6 Facing Tom Lever with partial goals and accounting for them is a good idea. It will facilitate a better monitoring of his job and make him increase his effort. Another good idea is common visits of TL and the district manager at the most important customers. It will let the manager check TL s relations with key contractors. It will also facilitate a better diagnosis of the situation as well as more successful convincing the customers to buy Rama margarines. We have already commented on the fact that marketing support in both regions should help regain a part of customers. This support has been missing in LU region, and due to intensified competitive actions, it is needed there as in any other region. There is no point in saving money on such inexpensive actions. This way, the combination C is worth 3 points. Combination D LU Region 5, 6; TL region 2, 5, 6 This is the best combination. Improvement actions no. 2, 5, and 6 in the endangered TL region are the best choice. We have written about the role of partial goals for TL, marketing support in his region, and common work with the Area manager. The same marketing support is necessary in LU region. His common visits with the Area Manager at key customers will help the manager to notice good methods of his actions that benefited with good sales results. Perhaps it will be possible to use them in other regions as well. The Area Manager should, however, spend definitely more time on common work in the endangered TL region than in LU region. Combination E LU Region 5, 6; TL region 1, 2, 5 Improvement actions no. 5 and 6 in LU region and actions no. 2 and 5 in TL region are good solutions. Lowering the margin on the margarine can wait. This will help regain a part of customers, but at the same time it will lower the value of net sales. Many sales representatives forget that profit is more important for the company than income. They increase sales results giving the customers better and better trading conditions. At the same time they worsen the profitability of their actions. Such activity is the last resort. However, the combination E is quite a good one, so it earns 3 points. Best regards, The Unilevergame.com team