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Copy of Outdoor Sporting Products, Inc. Case Study
Transcript of Copy of Outdoor Sporting Products, Inc. Case Study
By: Danny Gorodetsky, Eric Meyers, Minru Wang
Decrease imported products from 50% to 20%, increase self-manufactured products from 35% to 50%, increase domestic products from 15% to 30
Reduce average markup across products to 60 percent
Decrease sales to small and medium sized retail stores from 6,000 to 4,500 stores, increase sales to discount stores from 0 to 1000 stores, increase sales to chain stores from 0 to 500 stores with a market share goal of 20%
Establish a sales contest/promotion for December
Increase commission percentage to 9% on the first $1,000,000 and 10% on all sales over $1,000,000
Encourage salesmen to draw commissions once a month and have a weekly $100 bonus and monthly $500 bonus for the highest commission accumulated
Get rid of guarantees and instead give every salesmen a salary of $20,000
Consultant’s “Ten Percent Self-Improvement Plan”: monthly bonus commission of 10 percent on all dollar volume over sales in the comparable month of the previous year
Get rid of Annual Sales Increase Awards Plan
Get rid of Weekly Sales Increase Award
Comptrollers per diem plan: increased from $70 to $90 Monday through Thursday, $42 for Friday, and $90 for Sunday if the salesman spent Sunday evening away from home
. Keep the merchandise catalog
Increase account contact to four times a year, once at the beginning and middle of both the fishing and hunting season, key accounts should be contacted an extra time in September
Keep Mr. McDonalds “selling formula” and territory accompanying training period
Keep semiannual sales meetings, weekly telephone conversations, mimeographed bulletins and special promotions deals mailed to all salesmen each week, keep required daily call reports and attendance at semiannual sales meetings, keep meetings in January and May to introduce fishing and hunting lines
Keep Monday morning salesmen phone call and daily call reports , but if the salesman does not have increase in sales after one month then have an added sales talk to determine how to find a solution to increase sales, if this meeting is sequentially unproductive after the third time than establish “probation”, if sequentially unproductive after the sixth time than submit employee for removal
- Is the current sales force “successful”? Why?
- How can the sales force be improved?
- How can sales and revenue be increased for the long term?
- Will updating the compensation plan and sales force help increase revenue? How?
Selling Formula and Training
- Reduce guarantees to $250 a week, not drawn against commissions (12,000 yearly salary)
- Keep awards plan and per diem the same
“Ten Percent Self-Improvement Plan”: monthly bonus commission of 10 percent on all dollar volume over sales in the comparable month of the previous year
- Keep guarantees and per diem
Production Manager's Plan
- 5% on first $300,000; 6% on next $200,000; 7% anything over $500,000
-Would increasing commission percentage create a more effective compensation plan? Why?
- What commission percentage would be most effective?
- Does having a zero balance in the commission balance motivate the salesmen? Why?
- What policy for drawing commissions would be most effective?
- $600 guarantees every week drawn against commissions
-Are the $600 guarantees effective or should they be changed/removed?
- If kept, how much should the guarantees provide per salesmen?
- What other forms of “guarantee” could be effective?
- Annual Sales Increase Award Plan: Total of $10,400 paid to the five salesmen having the largest percentage increase in dollar sales volume over the previous year
- Weekly Sales Increase Award Plan: $4 for the first week and an extra $4 for each consecutive week that the salesmen surpassed his sales from the comparable week of the previous year
- Is the Annual Sales Increase Award Plan effective? Why?
- Is the Weekly Sales Increase Award Plan effective? Why?
- Is the comptrollers or the consultant’s awards plan more effective? Why?
- What other awards plans could be effective?
- Salesmen provided their own automobiles and paid for their traveling expenses, of which all or a portion reimbursed through per diem
- Per diem plan: $70 per day Monday through Thursday, $42 for Friday = $322 per work week. Plus $70 for Saturday and Sunday night
- Is the old per diem plan effective? Why?
- Is the comptroller’s per diem plan effective? Why?
- What per diem plan would be most effective to motivate better sales coverage?
- Promote the sales of special items. $4 for each order obtained for designated items of promotion
- Is the current “spiff” plan effective? Why?
- What other “spiff” plan could be effective?
- Is Outdoor’s current compensation plan is effective? Why?
- What compensation plan would be most effective?
- Primary marketing effort, sent to current and prospective clients to help re-ordering and generate interest
- Is the current merchandise catalog effective? Why?
- What other similar forms of marketing could be effective?
- Accounts contacted 2-3 times per year, at the beginning of fishing season and the beginning of the hunting season
- Is the current amount of account contact effective? Why?
- If not, how many times should each salesmen contact their accounts?
- Should there be extra contacts for key accounts? How much?
- Mr. McDonald's selling formula:
(1) Name and catalog number of each item sold by company
(2) Sizes and colors in which each item is available
(3) Wholesale price of each item
(4) Suggested retail price of each item
(5) Primary selling features of each item
- Assigned a territory and accompanied by Mr. McDonald for first few weeks
- Is the current selling formula effective? Why?
- What other factors could be implemented into the selling formula?
- Is the current training procedure effective? Why?
- How can the current training procedures be improved?
- Semiannual sales meetings; weekly private telephone conversations; mimeographed bulletins with product information, prices, and special promotion deals mailed every week; daily call reports and semiannual meetings required
- Is the current structure of sales meetings effective? Why?
- In what ways could the structure of sales meetings be improved?
- What other forms of communication could helpful for the sales team?
- Monday morning phone: learn change in prices, special promotion offers, delivery schedule of unshipped orders. Activities for the week discussed, sometimes asked to collect past due accounts in their territory
- Daily call reports
- Is the current Monday morning daily report effective? Why?
- What other forms of weekly one on one communication could be effective?
- Would the one on one meeting be a good time to discuss any personal sales issues? Explain.
- 35% self-maufactured, 50% imported (mostly Japan), 15% manufactured
- Is the current percentage layout of product sourcing effective? Why?
- How could the product sourcing percentage be improved?
- Wholesale prices established by adding markup of 50 - 100 percent to Outdoor's cost of the item
- Average markup across all products was 70 percent on cost
- Is the current markup percentage effective? Why?
- What percentage of markup would be most effective? Explain.
- Would a lower markup policy help the business over the long run?
- Centered out of Albany, New York, limited by shipping costs
- Salesemn sold to approximately 6,000 retails stories in small and medium sized cities
- Customer coverage very poor in large metropolitan areas =2-3%
- Small and medium sized retail store sales declining compared to large chains and discounters
- Outdoor had not developed much business with discounters
- Is the current distribution of small and medium sized retail stores effective? Why?
- What other distribution of retail stores could be effective?
- Would adding chain and discount stores help to improve customer coverage? How?
- What percent of customer coverage would be considered “successful” for large metropolitan areas?
- Company sales of all products reached their lows during December
- Should Outdoor try to increase sales during its slowest month in December? If so, how?
- What type of promotion/contest would be most effective for increasing sales? Why?
Annual sales volume of Outdoor Sporting Products, Inc., had been stagnant at around $6.2 million - $6.8 million,
Mr. Hudson McDonald, President and Chief Operating Officer, believed this was a weakness in marketing operations due to an inefficient compensation plan.
Mr. McDonald was given 3 options to replace current compensation plan: Comptroller's plan, Production Manager's plan, or Consultant's plan
Goal of improving the compensation plan needs to lead to more effort by salesmen, resulting in a better sales force and more overall sales volume for the business.
- Increased from $70 to $90 Monday through Thursday, $42 for Friday, and $90 for Sunday if the salesman spent Sunday evening away from home
- Keep guarantee and incentive plan the same