Case 1 Pilgrim Drug Company

Case Presentation

Marketing 458 – Sales Management: Kellen Blomquist

Chase Hughes

Elizabeth Martin

Hilson Merrill

Brad Ruleman

Eustace Winn

Outline

Case Background Business Case Issues Analysis Business Problem(s) Solution

Case Background

74 wholesale drug divisions in the U.S. 18,000 products. All in store except

periodicals. Each division an autonomous unit:

maintaining warehouse, sales, purchasing, and accounting departments.

Case Background- business model

Sales reps visit current and potential accounts

Sales calendar for each division Compensation- commission based.

Determined by the margins of the products sold.

Market analysis records Sales territories divided geographically

Competition

Only two main competitors. One carries roughly the same line as Pilgrim The other carries a more limited line than

Pilgrim

Business Case Issues

Performing less than adequate Senior reps less educated than young MBAs Schultz did not adhere to regulations set

forth by New York office. Nelson wanting Brooks’ accounts

Analysis of Current Situation

Compensation-– Commissions paid to the sales reps varied depending on

the product mix being sold.– Rolling commission rate. Paid on the basis of margins. – Certain products are pushed with higher commissions

The share of the Syracuse market for wholesale purchases of retail drugstores held by Pilgrim Drug was 20%, compared with a 48% share for some of the other divisions.

Analysis

Plans were implemented that would focus sales reps’ efforts to minimize the handling cost of their sales and to maximize profits

The company promoted a three step sales plan for increased profitability

– Sales of larger quantities of an item or of high value items were encouraged because the cost of processing and filling each line of an order was practically constant.

– Sales of larger total values were encouraged because the profit made on sales to individual account is related closely to delivery expense. The larger the total proportion of the account’s business that went to Pilgrim, the greater the profits as delivery expense remains more or less constant.

– Because some manufacturers offered margins considerably larger than others, sales of higher-margin items were encouraged.

Questions

Any questions so far?

Business Problems

Diverse Sales Force

Strategy and Policy enforcement

Territory Issues

Business Problems- Diverse Sales Force

Veteran Sales Reps – Seniority Issues– Focused on Relationships

Newer Sales Reps– Educated and Driven

Vets vs. Newbies

Strategy and Policy Enforcement

Strategy: – Sell High Volume or Sell High Margin

Policy: – Sales Calendar coordinating activities and accounts.

Neither was adopted heavily by Veteran Sales Reps.

Territory Issues

Supposed to be divided using Sales and Market Analysis Record System.

Actually Divided by Seniority and Geography– This heavily favored the Vets and left the Newbies with

less than perfect accounts

All territories were picked through and not worked to its full potential.

Solution

A mix of old and new

-sharing of accounts between old and new reps.

Certain product quotas

-make quotas for high margin products Mix of salary and commission

Solution

Sales rep retreat for division– Train and reiterate sales policies and strategy– Build bond between old and new reps

Compensate based on total sales and not per product profit margin basis

Behavioral monitoring – Call records– Account checksheets

Questions and Class Discussion

Are there any questions?