Buyer Behavior at a Large Carpet Corporation - Coursework Example

Buyer Behavior at a Large Carpet Corporation MFI markets into three distinct and separate markets. These markets are distinct, in such a way that they have different needs that the company serves through its three product lines. They are not segments of one market, because the needs that MFI fulfills through its products are not similar and overlapping; instead, the markets are distinct in their needs as well as its customer profiles. The markets that MFI serves are all business-to-business markets. The difference among the needs of the three markets are dependent on the needs of the end-users of the customers of these respective markets. For instance, for the carpet fiber market, MFI customers include large carpet corporations that produce carpets for residential and commercial needs. The attributes that these carpet makers look for when looking for suppliers of carpet fibers include quality standards that match the requirements of their end-customers, as well as the price in order to provide a cost-effective input in its raw material cost structure, so that when the carpets retail it will have a bigger chance of saleability. The carpet is the end product which the end-user demands. As for the yarn market, MFI customers include manufacturers of automobile seatcovers, furniture, and grille cloths. In this market, the yarn is needed to produce a component of the product, not the end-product itself like that of the carpet. Although quality of the material, as well as the material is important, the demand is dependent on the buyer of the furniture, grille cloths and automobile seatcovers, which is then dependent on the end-buyer. By looking at the value chain, these MFI customers are a bit farther from the end-user perspective, therefore the concerns of these customers may focus on low price, given a certain quality standard which is required by the clients of these customers. The customers of the industrial fabric markets also have a different set of needs. These customers include manufacturers of bagging (sacks, bales, bags), swimming pool covers, tenting, and tarps. What the end-users of these MFI customers are looking for is durability when it comes to the quality of the industrial fabric. This has been apparent when its miracle fabric has been sold out – durability is the key attribute. The differences in attributes are a result of difference in needs that the three separate markets want MFI to fulfill. I. What is MFI’s product strategy (product strategy means width and depth of the product line and its new products strategy)? What is its manufacturing strategy, meaning how it runs its plants? There is data about carpet fiber manufacturing capacity through 2007, so study that data vs. sales projections given in Case Exhibit 1. The company's product line is comprised of three products: synthetic carpet fiber, synthetic yarn and synthetic industrial fabric. The company's investment in the technology is significantly huge. With this, the company aims to stick to its core products, and implement market penetration and market development strategies instead of product development. MFI is aiming for market penetration for its carpet fiber business; the company is going to sell existing products to the existing markets. This is apparent in its objective which is to increase its current share of business in major high-volume carpet mills. The company aims to increase its business in yarn and industrial fabric using a market development strategy – sell existing products to new markets. Because there are virtually a lot of applications for yarn, the company's aim is to discover these applications in order to open new markets where its products are needed. As for the industrial fabric, the company aims to use both market penetration and market development. MFI will sell higher volumes to its existing customers who use synthetic fabrics for their end-products – this is market penetration. The company will explore new market segments where synthetic industrial fabrics can be used as substitute to natural fibers which are subject to more fluctuations. New product strategy is backed up by research and development such as in yarns and industrial fabric in order to maintain a competitive edge. By looking at the data in Exhibit 1, it is apparent that the company sells yarns at a higher price per pound/square yard than the carpet fibers and the industrial fabrics. This is seen in the yarn's share in dollar sales as compared to its share in production in terms of sales volume. The company's manufacturing focus is on the carpet fibers; its production has increased 2005-2007 due to the increase in anticipated sales of industrial fabric. The yarn, however, has a very small production share among the three products that MFI manufactures. II. At MFI has the original carpet fiber product basically sold itself? If so, what is the role of personal selling here? How is the job of the sales reps changing with the addition of two new product lines? No, the original carpet fiber has not sold itself. According to the case, carpet mills source their raw materials from different fiber suppliers. The role of personal selling therefore is crucial. Strong relationships should be built among the sales representatives as well as the decision-makers within the large carpet mills in order to secure business. By becoming influential among the decision-makers, the sales representatives of MFI get ahead of the competition, are able to secure the sales, maintain a relationship for future repeat purchase and bring more business to the company. With the introduction of the two product lines, however, the sales representatives have lost focus. Not only it is their job to become an all-around liaison between MFI and its carpet fiber customers, they are tasked to look for more businesses in the yarn and industrial fabric markets. These tasks diffuse their energy to serve new and existing carpet fiber customers. Customers within the markets that the two new product lines serve are different from carpet fiber customers – both in terms of geographic area as well as business structures and needs. This has changed the job of a sales representative substantially. III. Analyze each of the five compensation plans in the case —both qualitatively (fit customers, fit marketing and sales strategy?) and quantitatively (how much would Walik, Huston, Beebe, and Gould make under each pay plan?). Based on that analysis, which pay plan is best suited for MFI to sell all three lines (carpet fiber, yarn, and industrial fabric)? The sales team of MFI is crucial to the company's operations – these people bring in the revenue part of the business. In order for the company to achieve its sales goals, it must be able to motivate its salespeople through rewards, mainly through compensation. The straight salary plan does not provide the sales representatives sufficient reward in order to increase the company's business. However, the problem with continuing the current plan is that the plan does not reflect the level of effort that the company sales representatives have contributed to the company's performance. As for the straight commission, the controller does have a point that with a purely commission-based compensation, the company will not be able to increase its profitability by increasing its efficiency because the commission will always be a percentage of the total sales. The fourth compensation scheme, however, relies on vague indicators as to how much quota must be set; because quota depends on certain factors such as territory sizes, producing a 'fair' quota for each sales representative, even the total quota for them is subject to judgment in order to not make it too low or too high that will result in overpayment. As for the last payment scheme, it reflects the costs that the company incurs for every sales person, and to use it to benchmark the quota is a good way to convert those costs to how much the sales representatives must deliver to the company to offset how much the company spends on them. Quantitatively, the fifth scheme shows the level of contribution of each representative as reflected in the bonus. The reward serves to reinforce their behavior and encourage them to increase the business of MFI. In this way, the goals of the company is in line with the sales representatives – they can aim for a goal they set for themselves, which also benefits the company in the form of increase in sales. The quota will ensure that the amount the company spends on the sales representative, aside from the bonus will compensate in the form of a certain amount of sales the representative needs to contribute. Therefore, this scheme should be the one used by MFI. It is not only beneficial in motivating the sales team by rewarding the efforts of the sales representatives, but also economically beneficial to the company, and to ensure further growth of the businesses. Read More