Question

MKT2283 Sales Management Week 2 Assignment

Making Sales Management Decisions – Pronto Retail Centers

Sales Management, Analysis and Decision Making, 6^th Edition, Pages 75-76.  Publisher: Thomson-South Western. Re-printed with permission:

Background

Pronto Retail Centers is a well-established company with 125 outlets in the northeastern United States. Each outlet is a combination convenience store, car wash, and Pronto-Lube oil-change center.  Of the 125 stores, 31 are company-owned with the remaining stores leased to independent dealers in a quasi-franchising arrangement.   The independent dealers agree to buy gasoline and motor oil from Pronto’s designated distributors.  They also agree to uphold uniformity and facilities appearance standards as set by Pronto.  The independent dealers are encouraged to by their convenience store merchandise from Pronto’s designated distributors, but they are not required to do so.  Lease payments are collected from independent dealers when gasoline deliveries are made.

Current Situation:

In the past 12 months, Pronto’s growth rate has slowed considerably.  This has been a major concern to Pronto’s upper management, including John Rickles, vice president for sales.  Rickles has analyzed the declining growth rate and found that sales volume at the company-owned stores is growing at a very acceptable 12 percent on an annualized basis.  In contrast, the stores run by independent dealers are lagging behind with an annual growth rate of only 2 percent.  Rickles believes the independent category is under-performing for 3 basic reasons.  First, the independent stores are generally not kept as clean and professional looking as the company-owned stores. Second, many of the larger independent operators have begun buying a larger share of their convenience store merchandise from lower-cost distributors other than Pronto’s designated distributors.  This hurts sales volume results since Pronto’s retail operation gets rebates from their designated distributors, which counts as sales volume in the Pronto financial system. Third, Pronto has suffered volume loses from closed outlets.  Competition has intensified, and turnover among dealers was becoming more commonplace.   It was taking Pronto an average of 60 days to find new dealers when existing dealers decided to leave the business.  When a dealer operation closed, Pronto rarely converted it to a company-owned store, as their aggressive growth strategy at the corporate level left precious little capital for acquisition of existing outlets.  

John Rickles had called his 5 regional managers into his New York headquarters office to discuss the problem with declining sales volume and possible remedies to the problem.  Given that the corporate strategy would continue to be to build market share and sales volume, Rickles outline the following five-point plan:

1. Each salesperson would continue to supervise company-owned sales and independent dealers.
2. Salespeople would be given specific objectives for facilities appearance and percentage of sales of convenience store merchandise purchases from Pronto’s designated distributors.
3. Salespeople would be given mandates that no retail outlet would remain closed for more than 30 days.
4. Sales volume objectives for salespeople would remain in place.  Current year volume objectives would not change,
5. Regional sales managers’ annual objectives would be revised to be consistent with salespeople’s new objectives.

The regional managers saw the need for the revised strategy, but raised several concerns.  They felt that the corporate strategy focused on building market share, but the sales organization was expected to both build and maintain market share.  They complained that the new-dealer team, a corporate group, should be adding new dealers at a faster rate, and that part of the volume short-fall was due to poor performance of the new-dealer team, not the sales-force.   They also pointed out that Pronto salespeople were paid on a straight salary basis, primarily because they had previously functioned more as managers of multiple retail outlets than as pure sales people.   The discussion became heated, and finally Mary McCarthy spoke for the regional managers: “Look John, we know that corporate strategy can shift and we know we have to adapt when that happens.  But this drop in sales volume is partly the fault of the corporate new-dealer team.  We don’t see them having to change their ways.  And we are really concerned that without some incentive pay, it is hard to re-direct our sales people”.  Rickles, having heard enough at this point, replied, “Tell your sale people that their incentive is that if they succeed, they get to keep their jobs!”  With that, the meeting quickly came to a conclusion.

Questions:

1. Is it reasonable to charge Pronto’s sales-force with simultaneously building and holding market share?  If not, what is the alternative?
2. What are the pros and cons of John Rickles five-point plan?
3. Since the meeting with the regional managers ended on a sour note, what should Rickles do now? What should the regional managers do?

Answer 1

Already Answered by me!

****Please please please LIKE THIS ANSWER, so that I can get a small benefit, Please****

Is it reasonable to charge Pronto’s sales-force with simultaneously building and holding market share? If not, what is the alternative?

No I do not think it is reasonable for to charge Pronto’s sales-force with simultaneously building and holding market share, an alternative would be to focusing on having the independent owners building market share and building the 2 percent to be comparable to the 12 percent, during this time the company-owned ones would continue to build market share and the company could have incentives for the independent owners to try and match or beat the company owned locations. Once the two are comparable the company can re-strategize and move into the holding market share.

What are the pros and cons of John Rickles five-point plan?

Pros - The company will not allow for any location to be closed for more than 30 days, this ensures that the company will not be losing out on too much profit and will still stay competitive in the minds of its consumers - Sales will increase for the company as it will be mandatory that all salespeople ensure that a percentage of merchandise is purchased from Pronto’s distributors as well the appearance of the store must be acceptable and meet all of Pronto’s objectives -All sales objectives will be equal between regional sales managers and salespeople, this way there will be no excuse as to why growth between regional and salespeople locations will be different

Cons - Salespeople may disagree with the new rules and try to rebel against them - Having the sales volumes not increase for yearly or for salespeople leaves little room for growth in the company, as the current sales volume objectives aren’t meeting good numbers - Due to the fact that the meeting ended on a sour note, Rickles should schedule a new meeting. This would be beneficial because it would allow for both sides of the party to cool down and would allow for Rickles to apologize for the childish behaviour and allow for both parties to work out a new ending that pleases both parties.

Since the meeting with the regional managers ended on a sour note, what should Rickles do now? What should the regional managers do?

Now, Rickles needs to take the concerns that the regional managers brought up and try to include solutions to them in her plan, making it more of an eight-point to ten-point plan. First she needs to consider a commission plan that motivates salespeople to build and hold market share. Then, she needs to look into the concerns about the new-dealer team possibly making a objective or quota for them to have to meet in a certain time limit (SMART goals). After, she’s looked at all of this, she can email the regional managers and set up another reconciliation meeting.

****Please please please LIKE THIS ANSWER, so that I can get a small benefit, Please****