Marketing Sales - United Cosmetics, Inc - Essay Example

Analysis of Marketing Cases Case United Cosmetics, Inc: Creating a Staffing Program Introduction and Backgrounder United Cosmetics, Inc. (UCI) is a national manufacturer and marketer of consumer goods sold at retail grocery stores. It has been projected that in the current year, there will be 2,700 vacant sales territories caused by the time-consuming recruitment, hiring and training programs being implemented by the district sales managers. These vacant territories represent lost sales opportunities of as much as $10 million. It is projected that in the current year, there will be only 68 hew hires with 55 of them sourced through employment agencies. The cost of recruitment is estimated at $5,000 per person which is considered too much considering that many of them quit after a short time. According to the company’s executive vice president of sales, what adds to the problem is the drain on the district managers’ time. With the quick turnover of sales people, the district managers’ have to constantly go through the recruitment procedure all over again, depriving them of time to spend on working on their districts. Salespeople are already complaining that their managers are spending very limited time with them, which is also the reason for the high turnover because new hires are left to fend for themselves right after training Moreover, training is not centralized. Training is conducted by district which at worst may mean that ten trainees are being trained by ten managers, a costly and inefficient process. Moreover, the district managers have not really been trained or prepared to handle recruitment, so screening and interviewing depend on individual methods employed by the district managers which may not be correct and appropriate and may be a contributing cause to the high turnover. To address these issues, the job goals set for Al Kantak, the new field sales employment manager are to decrease the cost per hire; to establish a uniform recruitment program; to increase the quality of new hires; to reduce the amount of time managers spend recruiting; decrease the number of vacant territory days per year; and eliminate the dependence on recruitment agencies. Al Kantak’s initial assessment was to come up with a five-year plan where at the end of five years, all the goals set would have been accomplished. However, the plan will also include major results in a few years within the 5-year timeframe. Due to the large volume of recruits needed, Al would be primarily targeting college campuses across the United States. Situation Analysis Based on the information gathered related to the recruitment situation at UCI, a number of key issues have been identified which have been aptly pointed out by the executive vice president for sales. These include lost sales opportunities due to vacant sales territories. The underlying issue to this key issue is the inefficiency of filling up sales positions in the different districts. Another key issue is the unproductive use of district manager time. Instead of developing sales potentials of their respective districts, the managers are spending an inordinate amount of time addressing the recruitment concern. It has become a chicken and egg situation where managers need to develop their territories but also need to find and train people who will work on these territories. The third key issue is the quality of prospective hires. Underlying issues to this are the process of applicant sourcing, the selection process for trainees and the training program itself. Due to these issues, it is deduced that the high turnover among new hires have something to do with the recruitment program. A good recruitment program starts with the definition of the open position for hire. This definition includes a comprehensive description of the job, the qualifications and experience required for candidates, the job responsibilities, the related compensation, benefits and training for the position, as well as general terms and conditions of employment, such as probationary period, whether the job is office or field based, regular work schedules and the like (Hakala, 2008). UCI’s district managers should be closely consulted to be able to formulate the job definition for sales people. Especially in the formulation of compensation and other conditions of employment, past experience regarding certain items in the job description should be investigate as to determine which are attractive to qualified recruits and which are not. According to Rioux & Bernthal (1999), organizations with the most effective recruiting strategies are those which offer candidates good potential for advancement, company reputation, benefits package, corporate culture, and salary scale. Organizations offering candidates a positive culture and learning environment have more satisfied employees and are more successful at retaining them. The next step is to formulate the recruit sourcing plan. As already conceptualized by Al Kantak, because of the volumes required to be recruited, college campuses will be the primary source of recruits. In order to contribute to the efficiency in sourcing, a criteria for determining the best colleges to target should be formulated. Following sourcing, is the screening of candidates, which requires a screening plan and procedure. This may involve inspection of comprehensive resume, interview, and undergoing a recruitment test. Finally, when qualified recruits have been identified, an effective and efficient training program will be implemented. The design and implementation plan for this training program is a separate project to be undertaken. A project evaluation process should be conducted during implementation of all phases, from recruitment sourcing to selection & hiring and then training. Aspects of the plans and processes will be evaluated for effectiveness and consequently adjusted to improve both the plan and the program. Proposed College Recruitment Program For UCI, the following outlines Al Kantak’s initial plan for the college recruitment program. Pre-project implementation and preparation activities will consist of the following: job definition for open positions in consultation with the district managers; detailed college campus sourcing plan that will identify the best colleges to source recruits in terms of types of programs offered, volume of enrollment, and proximity to sales district territories; formulation of the screening procedure as well as formulating or identification of instruments to be use for screening such as a standard format applicant information sheet, interview guide, identification of people qualified to conduct interviews, recruitment tests which will include aptitudeand personality tests; training program design and implementation plan; and finally, the project evaluation plan containing the criteria and measurement procedures for project success. Project implementation starts with actual conduct of recruitment and sourcing activities in the identified college campuses. These activities necessarily include discussions and arrangements with college authorities; program announcements, recruitment schedules, and preparation or training of the personnel who will manage and run the activities in the different campuses. Based on volume requirements, targets for applicants and qualified candidates will be set in order to determine effectiveness of the plan as it goes through the phases. Finally, with a successful recruitment and sourcing phase, training can be implemented in a centralized manner to conserve on training resources in terms of financial costs and trainer time. District managers will have to agree on the format and requirements of the training program so that uniform training can be conducted in different areas. Instead of conducting training by district, trainees will be grouped in manageable batches and will be handled by an assigned district manager for the particular training session. This will contribute to reducing training costs as well as limiting the training time spent by each manager. Case 2 – Mead Envelope Company: Is a New Compensation Plan Needed? Introduction & Backgrounder Mead Envelope Company is a division of a large diversified paper products company. Mead manufactures and markets standard and customized envelopes, with company size estimated at $100 million dollars. The company sells to both direct accounts and distributors. Until 1997, Mead achieved average annual sales growth of 5-6 percent. For future periods, top management would like to aim for higher growth at the 10-12 percent range annually. Hal Jones, the new vice president of sales was hired with the goal of achieving the targeted growth. Jones initial study of the situation at Mead resulted in the following observations. Mead’s large accounts were pleased with the company’s product quality and customer services, as well as their relationship with their account executive. There were 45 account executives for different geographical areas handling a wide range of account sizes. Mead had no national or major accounts program, with informal account planning, and no training for sales people to develop their accounts. However, Jones noted that the account executives were working hard in the face of competition. Account executive compensation consisted of a salary and sales commission. There were 15 customer service representatives who handled accounts which the account executives could not reach on a regular basis. These representatives were paid a salary but no commissions. There were 3 field sales managers who worked with account executives on major sales opportunities. Although spend little time on sales analysis and planning, they were good trainers, motivators, and coaches. The managers are of the opinion that sales would increase if the account executives managed specific types of accounts instead of a wide range. The managers are paid a salary and overriding commissions. There were two product managers, one for the standard product line and another for the customized product line. The manager for standard products was satisfied with sales figures and efforts for the product line, but the manager for customized products was not. Sales of customized products were 50% below target and the manager felt that the sales force were not comfortable with the customized products. Jones investigation of the sales figures showed that sales were behind in their $106 million goal for the year. Standard products which accounted for 80% of the business was on target but customized products were way below target. Situation Analysis From his previous experience, Hal Jones believed that sales performance was related to compensation. However, from his initial study, he does not believe that pay is the only problem. There is most probably a need to come up with a new compensation plan, especially to motivate sales in the customized product line, but this needs to be implemented along with other improvements in sales operations. Critical to making the business grow and prosper are a great sales team with the right compensation plan to keep sales people motivated. With Mead’s competition from both national and local manufacturers, competition for good sales people is also intense. A well-designed sales management program to attract and keep sales talent needs to be implemented to help ensure success and prevent failure (Kehrer, 2008). Sales management is the discipline of maximizing the benefits a company and its customers receive from the efforts of its sales force. This includes sales planning, recruiting and staffing, training, controlling and directing, evaluating, effectiveness and efficiency, and compensation (Sales Management Services, 2007). Prior to coming up with a new compensation plan, there is a need to investigate the differences between sales operations as related to the two product lines. Why is one line performing better than the other? This may mean than different plans, people, training, evaluation and compensation should be implemented for each product line. Sales people may be more motivated to sell standard products than customized products because successes are easier to achieve, aside from the fact that they don’t understand the selling propositions for the customized products. There are several reasons why sales compensation plans fail which need to be looked into, since the current compensation plan as related to customized product sales are not producing the desired results. The common reasons why plans fail are the plan does not reflect how jobs operate within the selling environment and the customer relationship process; the incentive payments are not tied to the correct measures of performance; they do not retain top performers; they increase cost of sales over an extended period of time; they are too complex; the performance tracking and measurement system is not function as intended; wrong goal setting; lack of communication; ineffective plan administration; or are not supported by managers (Davis & Lucy, 2008). Since sales processes and sales compensation is uniform at UCI across the product lines, there is need to differentiate the requirements of each line in terms of sales process and compensation. Proposed Solution The proposed solution for increasing sales in customized products are based on the identified differences between the standard and customized products in terms of product features and target markets, which will help define the strategies for marketing and selling. Two options are proposed. One is to keep the sales processes uniform in that the same sales people handle both product lines or divide the sales force into those handling a specific product line. The advantage of making the same people handle both products would be beneficial in terms of customer relations, if the same customers purchase both product lines. The advantage of keeping them separate, is that specific sales people will be focused on developing the market for the specific product line of customized products. Whatever is deemed feasible, people who are expected to deliver on sales of customer products should undergo training and preparation for the sales activities so that they clearly understand the product, and its target market and their attitudes toward purchasing customized products. Since it is already a recognized fact that achieving sales targets for customized products are more difficult than for standard products, the compensation plan should reflect this difference. Sales people handling customized products should be better compensated than those handling standard products. If the same sales people handle both products, the incentives for selling customized products should be higher than those for standard products. Case 3 – McDonald Sporting Goods Company: Determining the Best Compensation Program Introduction & Backgrounder McDonald’s Sporting Goods Company (MSG), sells sporting equipment, clothing and accessories to the tune of $7.2 to $7.6 million annually. There are 700 items for sale categorized as fishing supplies, hunting supplies and accessories. Fishing supplies accounted for 40% of sales, hunting supplies for 30%, and the balance is accounted for by accessories. Sales of fishing and hunting supplies are seasonal. The MSG market area consisted of several sates in the US but areas of operation are limited by shipping costs. Sales records show that coverage of large metropolitan areas was very poor. Sales performance are a result mainly of the efforts of the sales force since almost no advertising is done by MSG. Further, MSG studies show that patterns of retail distribution in their industry has changed over the past 10 years with market share of small and medium sized sporting goods stores declining as compared with that of discount and chain stores. MSG has not satisfactorily developed their business with discounters, and according to company executives this may be due to MSG’s pricing policies. Overall company profits are satisfactory but sales have not significantly increased from year to year. The president and COO believed that the sales compensation plan was the weakness in the company’s marketing operations. Sales people were paid a straight commissions on their dollar sales volume. They provided their own automobiles and travel expenses, of which all or a portion is reimbursed per diem. Aside from the commissions and per diem, MSG has 2 sales incentive plans where sales people can earn cash awards. One plan awards incentives to the top 5 sales people with the highest percentage increase in sales volume over the previous year. The other incentive plan grants awards on a weekly basis, for increased sales volume in a week compared for the same week in the previous year. Only those employed in the previous year are eligible for the award. There is also additional incentive that can be earned from sale of products featured in promotional campaigns. During recruitment, MSG guarantees weekly income for more qualified applicants as they develop their territories. The guaranteed amounts are drawn from future commissions. MSG believes that its sales people were earning less than comparable selling positions in other companies, which is thought to have affected their ability to retain high-caliber people. Several proposals have been put forward and are being discussed by the president, the comptroller, the production manager, and a consultant, in order to improve the sales compensation plan and make it effective in motivating the sales force to increase sales. Analysis of Proposals The comptroller mentioned that the guarantees for the more qualified people were not working as an incentive to increase sales. These people were earning commissions at half or less than their drawing accounts. People who do not have guarantees are also performing poorly with relatively low sales volume year-to-year. The comptroller proposed that the guarantee be reduce in half but will not be drawn against commissions, instead this will be in addition to commissions. According to the comptroller this will motivate the sales people to rapidly increase sales because incomes will rise directly with sales. The production manager concluded that the salespeople were overworking accounts which were near, 75-mile radius, where they lived, but light in the 100-150 mile radius areas. He surmised that this was because the sales people wanted to spend evenings at home with their families. He proposed increasing the per diems, especially for Monday to Thursday and Sunday. He felt that the Sunday per diem would motivate the sales people to drive to further areas on Sunday and make for a more uniform coverage of their territories, that will increase sales. The consultant proposed that the current guarantees and per diem be retained, the 2 current additional incentive plans be discontinued, and proposing instead a Ten Percent Self-Improvement Plan, which would pay a monthly 10% bonus on sales volume over the same month in the previous year, in addition to existing schemes. Both those with and without guarantees will be eligible for the new plan. Proposed Solution A sales compensation plan that addresses identified problems would work. At MSG, both current and proposed schemes can be made to work as long as it solves the identified problems. If at the onset it does not, then the scheme should be adjusted to make it more responsive to the aspirations of the sales people, the changing marketing environment and the company’s business objectives. Best practices in sales compensation plans show that several factors must be considered before finalizing and implementing the plan (Davis & Lucy, 2008). First is that the plan should be perceived by the sales people as motivating and rewards performance. As the comptroller pointed out, the guarantees do not actually reward performance. Those who are provided the guarantee are not performing in the same way that those who do not have the guarantee are also not performing. However, there is reason for the guarantee and that may be to hold on to the more qualified sales people so it cannot be scrapped. There is therefore merit in the comptroller’s proposal to reduce the guarantee. Next is that, the target total compensation must be market competitive to retain the sales talent already employed as well as attract new ones. Since MSG already knows that their sales people are receiving lower compensation than others in similar positions, then there is definitely a need for increasing them, whether through increased commissions, per diem or special bonuses There is therefore merit in the production manager and consultant’s proposals. Next is that, payouts are timely and aligned with sales-person driven results. Again, the comptroller’s suggestion of guarantees in addition to commissions rather than to be drawn from them, would have merit. The fact that guarantees are drawn from commission and with situations where commissions fall short of the guarantees may be de-motivational as the reward for performance is not earned as it happens. Works Cited Davis, Philip & Lucy, Matthew. “Diagnosing the effectiveness of your sales compensation plans.” May 22, 2008. 25 November 2008. Hakala, David. “The essential guide to recruiting a new employee.” HR World. April 22, 2008. 25 November 2008. Kehrer, Daniel. “Guide to sales compensation plans that work.” Work.com How to Guides for Your Business. 2008. 25 November 2008. http://www.work.com/sales-compensation-plans-that-work-9/ Rioux, S.M. & Bernthal, P. “Recruitment and selection practices.” Development Dimensions International. 1999. 25 November 2008. “What is sales management?” Sales Management Services. 2007. 25 November 2008. http://www.salesmanagementservices.com/what-is-sales-management.htm Read More