Outline what you believe to be wrong with the sales efforts at Gardnov Ltd.
The diverse nature of the buying situation means that there are many different types and functions of selling. In the case of Gardnov Ltd., the sales efforts and practises do not seem to be in place and functioning effectively.
The problems seem to begin with the advertising of the businesses products and the distribution of its' catalogues. The present system involves mailing the catalogue out to garden centres and retail outlets "throughout the UK regardless of whether or not they are existing customers"(1). This may well cause problems with customers; new customers should be receiving the catalogue and existing customers should perhaps be receiving a courtesy phone-call or visit to take any orders. Sending out catalogues to existing customers is an additional unnecessary expense and reflects badly on the business. The sales orientated firm focuses all its efforts on not how to produce the product, but how to ensure that the product is sold in a way that revolves around the customer.
This is achieved by the sales team in Gardnov travelling to customers and promoting Gardnov. Jobber and Lancaster define the type of selling that the sales team adopt: Order getters (these are the front-line salespeople), New business salespeople (the selling task is to win new business) and finally Organisational salespeople (they have the job of maintaining close links with existing customers). It appears that the task of each salesperson is so varied that perhaps a system where the team are separated into one of the three ways would make the sales function more effective. Furthermore, the team are "all male". For a customer, perhaps an "all male" team may seem slightly imposing and daunting - a female presence should be experimented with.
The sales employees appear to be lethargic and unmotivated. This can affect the way they perform considerably in the way that productivity will significantly decline and their appearance/decorum when in contact with customers will be poor. This is shown by some employees failing to visit some clients (Priority 'C's). With regard to priority 'B' clients, it is taking up to 6 weeks for them to be visited and there is a satisfactory visiting period for priority 'A' clients. This reflects badly on the company primarily as customers will review their future business with the company. Gardinov must retain as much business as possible, and the fact that customers are not feeling close to the sales-team suggests a poor relationship, poor morale and an unwillingness to work by the employees. To rectify this, they need to stay longer and associate themselves with their clients.
The fact that sales figures are up five percent on average over the past ten years reflects a mediocre effort by the team, and when compared with a total market increase of ten percent reflects poorly. However, this may be due to new entrants into the market - a 'SWOT' analysis detailing "external cohesion" must be performed to identify the competitors, strengths/weaknesses of Gardnov and the current market situation. The final way in which sales efforts could be improved is by the selling concepts used. For instance, Richard Booth's background is with selling double glazing - a hard and aggressive style, similar to selling time shares. This is certainly not the way to sell garden products to retailers. Instead, product knowledge is essential in order to identify the needs of the customer and make a successful sale.
Outline what steps Richard should take to investigate further the problems highlighted by his initial research, whilst gaining/maintaining the support of the sales force.
Richard Booth must investigate the problems further and at the same time maintain or improve the relationship with his sales force.
One way in which he could investigate the problems further is by organising appraisals for each of the staff. This can provide an opportunity to identify his staff's weaknesses and strengths. As Deming says, "It nourishes short term performance, annihilates long-term planning, builds fear, demolishes teamwork, and nourishes rivalry". Richard Booth must know his facts though before organising appraisals - he must know the people that are working for him and know what he wants to achieve by performing an appraisal. One method is to ask the salesperson to explain 5-10 expectations that they hope to achieve in the short-term. Richard Booth will then have to ensure that every form of assistance is given to meet their expectations.
A further way is to monitor the sales team closely and attend visits to clients. This would provide Mr. Booth the opportunity to find out what the content is of the meetings, how long they last and what follow-ups his staff make. The disadvantage of this is that his employees might feel like they are being "constantly watched" and distrust can occur - perhaps feeling of inequity too.
Usually senior managers will make one of the five following errors: They evaluate their sales representatives primarily on the basis of sales volume. Secondly, they rely too much on the number of sales calls made by each of their sales representatives. They compare each sales representative's present sales results with past sales for a corresponding period - for instance, May of the current year against May of last year. Moreover, they expect their sales representatives to follow explicitly the selling methods that worked for them when they were selling. Or they might give their sales representatives too much freedom. Be eradicating these errors and providing solutions i.e. measuring sales in view of how major the client is, varying the year start to year end, and provide a system of supervising and locating staff then Richard Booth might be able to investigate further the problems with the company, whilst maintaining support from his sales force. However, the most significant way is communication with staff and building up a rapport with them - once trust has been built then hopefully an approachable manager will enable the team to become motivated and discuss any problems they have with Richard.
What are the disadvantages of the present salary-only compensation plan?
The salary-only compensation plan is the simplest form of compensation. For example, an agreement will exist between the company and the sales employees that will pay the staff a set amount on a periodic basis. "In return, the company will expect the staff to accomplish a defined task or target"(3).
This method of pay encourages sales people to consider all aspects of the selling function rather than those which lead to a quick sales return. It can also benefit the company in the way that it establishes a fixed cost for it. However, there are drawbacks. The most significant disadvantage is that it does not provide an incentive for the sales staff to increase sales and improve on targets - it will not act as a motivator for them since they already have the security of a fixed salary.
It can also act as a demotivator for those staff who perform above average within the company. As a result, feelings of inequity will set in and productivity will begin to decline for those 'high target' achievers. Employees might move to similar companies and apply for jobs that have more financial rewards.
A further disadvantage is that selling costs will "remain constant in the short-term when sales figures decrease"(2). In this way, this system of payment is not as flexible as other systems such as commission only or salary plus commission or bonuses.
The fixed salary will also not attract top producers to join the company due to reasons that I have mentioned before - there is no incentive for extra effort. The current method of payment for Gardnov will cause the company to have higher direct sales costs, and it will "require up-front working capital"(3). Finally a fixed-salary plan will also require closer supervision by management in order to ensure that there is a balanced sales mix (which there is no incentive for). This closer supervision will take up a lot of the manager's time, will increase anxiety and invoke feelings of distrust between manager and employee as well as increasing sales costs.
Produce some initial recommendations on how Richard might improve sales performance.
Initially, I would recommend that Richard Booth appraise each of his employees.
He could perform them by copying similar organisations reported in the Harvard Business Review (Grote, 2000). For example "design appraisals around behaviours collectively agreed between management and employees". This would mean sitting down with the sales team individually and discussing exactly what each party would like to get out of the appraisal.
In contrast to the argument that I have just made (that labour and management both gain through the appraisal process), labour process theorists have seen the appraisal as a method for "eliciting employee compliance with management objectives" (Newton & Findlay 1999). This is allegedly achieved as the appraisal process encourages employees to perceive themselves in terms of management's perspective, "rewarding adherence to and punishing deviance from apparently rational criteria"(4).
As regards to motivation, (an essential requirement for the job) in a field such as selling where rejections outnumber successes, motivation can be a serious problem. Vroom's expectancy theory is based on three concepts: expectancy, (perceived relationship between effort and performance), instrumentality (perceived relationship between performance and reward) and finally valence (value placed upon a reward). Thus, according to this theory a salesperson will believe that by working harder he will achieve increased sales (high expectancy), or higher sales will signal greater commission (high instrumentality) and finally higher commission (high valence) - this would result in a highly motivated sales person. However different sales people will have different valences, and it is the role of Richard Booth to communicate to his staff what is important and "in keeping" with the company's objectives and targets.
I would recommend that he change the fixed-salary pay for a salary plus commission pay scheme. This would eradicate some feelings of frustration and inequity. Adam's inequity theory points out that inadequacies can occur "when monetary rewards are unfair", or when there is a lack of recognition, or supervisory behaviour (whether it be too much or too little supervision). By monitoring the sales team more, Richard would gain an idea of how they are dealing with their clients.
Tied in with this is the approach and relationship between buyer and seller. A close relationship is vital, and this is not happening according to Booth at the moment. Client Relationship Management (CRM) relates to having a good understanding of who the clients are and identifying what it is they like and want. Key account management is in place with Gardnov Ltd., but a different approach and perhaps some training should take place so that the staff recognise the need to serve higher potential customers and provide special treatment in the areas of marketing, administration and service (taken from "The Adversarial Model"(2)). According to Mari Sako in 1992, trust is also very important and this can come in the form of contractual trust, competence trust and goodwill. An effective CRM 'campaign' should be introduced and should directly contribute to sales figures.
Perhaps Booth could commence an advertising campaign to promote the business. For example instead of sending brochures out to existing customers, the money should be saved and spent on advertising on the radio or in local newspapers.
Furthermore, some incentives for loyal customers would be appreciated by them and would encourage them to stay loyal to the company (increase retention rate) and would attract new customers at the same time.
I would recommend that Richard Booth should set new targets after having consulted/appraised his staff. If the targets are to be effective in motivating his team then they must be regarded as fair and attainable and at the same time offer a challenge.
Each member, I would recommend, should attend training sessions. Sales training involves the development of a programme which develops selling skills. For example, "enhanced product knowledge"(2) of what Gardnov Ltd. Sells, "self organisation"(2) (which entails keeping customer records up to date and organisation of routes), "sales skills"(2) (use of visual aids, ability to close the sale and identification of customer needs)
Finally, benchmarking would be a valuable approach to adopt within the range of knowledge management practise as it brings together communities of practice and creates conditions needed for effective learning with the sales team. Learning about good practices in other organisations could significantly help Gardnov Ltd. The benchmarking process involves learning at both the individual and organisational level. For instance as Per V. Freytag and Svend Hollensen suggest, "The employees have to understand and be willing and able to change their way of thinking, and the whole organisation has to support the actions taken"(5).
Therefore in conclusion, I have mentioned many approaches that Richard Booth could adopt to improve the business. Other more complex and long-term recommendations could be to expand abroad. This however would take a great deal of initial research, investment and finally, risk.