Barro Stickney WAC

Barro Stickney

Written Analysis of Case

Submitted by:

Areej Fatima Zia 12P01464

Kh. Muhammad Kazim 12P01391

Mohammed Mobeen 12P01411

Syeda Zainab Qaiser 12P01390

MBA-II

Marketing III

Submitted to:

Prof. F.A. Fareedy

11th March, 2014

Spring Term 2014

Sales Force Management (MKT 606)

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Barro Stickney WAC

Table of Contents

Introduction......................................................................................................................................3

Qualitative statements:.....................................................................................................................4

Quantitative statements:...................................................................................................................5

Problems..........................................................................................................................................5

Core Problem...................................................................................................................................7

Solution & Recommendations.........................................................................................................7

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Barro Stickney WAC

Introduction

John Barro and Bill Stickney had established their small manufacturer's representative agency,

Barro Stickney, Inc 10 years before. John was energetic and gregarious. Even after producing

$1.75 million in sales past year John still made efforts to improve sales. Bill Stickney was

thoughtful and he knew how to get things done and how could they be better. R D Ocean was

BSI's largest principal and it accounted for 32 percent of BSI's revenues. Franklin Key

electronics was BSI initial principal and had remained a consistent contributor of approximately

15 percent of BSI's revenues.

Franklin's representative Mark Heil passed away in a plane crash and BSI could not risk its sales

of over $800000 and were desperate to replace Heil before any customers found other sources.

Franklin offered the territory to BSI and was anxiously waiting for the decision. BSI was not

familiar with the territory but was aware of the sizable orders and specialized sales approach.

Profile JOHN BARRO BILL STICKNEY J.TODD SMITH

Interests

Golf ,Community organizations

Gourmet cookingBoy scout troop

Social Work (Fund raising)

Position Partners in rep agency

Partners in rep agency

Additional Sales personnel

Experience

$1.75 million sales in the last year.

Administrative work of the agencyResource Allocation and territory assignments$1.5 million sales in the last year.

Worked for a nationally known cooperationExperience dealing with large customers.Sales over $2 million in the last year.

Personality

EnergeticGregariousMeeting new peopleNew challenges

Thorough and thoughtful

Enthusiastic

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Barro Stickney WAC

Qualitative statements:

With four people and sales of $5.5 million, Barro Stickney Inc had become a successful

and profitable manufacturer's representative firm.

BSI enjoyed reputation for outstanding sales results and friendly thorough service to both

customers and principals.

It was mainly through Johns efforts that many of BSI's eight principals had signed on

with BSI.

Even after producing $1.75 million in sales John still made efforts to increase sales

Bill Stickney liked to think of himself as someone a person could count on. He was

thoughtful and thorough. Much of the administrative work of the agency such as resource

allocation and territory assignments was handled by Bill.

Mark Heil Franklin's representative from Virginia, perished when his private plane

crashed, leaving Franklin key without representation in its DC/Virginia territory.

Franklin did not want to jeopardize its sales of over $800,000 and wanted to replace Heil

before its customers found other sources.

Franklin offered the territory to BSI and was anxious to hear the decision within one

week. BSI was not familiar with the territory but it did understand that there were many

military accounts.

If BSI's time were evenly divided among its eight principals each would receive 12.5

percent of the agency's time.

Swanson's products are being replaced by the competition's computerized electronic

equipment, a product category the firm has ignored. As a result, the company is losing its

once prominent market position.

According to a seminar at the last ERA meeting, the maximum safe proportion of a reps

firm's commissions from a single principal should be 25 to 30 percent.

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Barro Stickney WAC

The revenue for investment for the manufacturer's representative firm comes from one or

more of several sources. These sources include reduced forthcoming commission income,

retained previous income and borrowed money from a financial institution

Quantitative statements:

With 4 people and sales of 5.5 million BSI had become a successful and profitable

manufacturers’ representative firm.

Bill contributed $1.5 million to total company sales.

John Barro contributed $1.75 million in sales this year and was still making efforts to

contribute more efficiently.

R.D. Ocean was BSI’s largest principal and accounted for 32% of BSI’s revenues.

Franklin Key Electronics was BSI’s initial principal and had remained a consistent

contributor of approximately 15% of BSI’s revenues.

According to a seminar at the ERA meeting the maximum safe proportion of a rep firm’s

commission from a single principal should be 25 to 30 percent.

If BSI’s time were evenly divided among its 8 principals each would receive 12.5 percent

of the agency’s time.

The net income for the year Dec 31 1998 was $238333 which is 7.9% of revenue.

The revenue for BSI principal is as follows: Butler 3%, Dickens 10%, Horizon 10%,

Swanson 14 %, Moore 11% and Knox.

R.D. Ocean had high market saturation and 32% share of BSI's portfolio.

Franklin Key high estimated market saturation and 15% of share of BSI's portfolio.

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Barro Stickney WAC

Problems

BSI is facing a dilemma of which alternative to choose. Firstly, BSI has to decide whether or not

to hire an additional sales person for R.D Ocean. The problem is that it is not easy to find the

right person for the right job and investment concerns are also evident. The second alternative for

Barro Stickney Inc. is the takeover of the territory in Virginia on the request of Franklin Key.

Furthermore, BSI was not familiar with the territory however it did realize that the company can

increase the number of principals by accounting for military accounts. This meant that there was

a potential for sizable orders, although a different and specialized sales approach would be

required to cater to the needs of the clients in that area. The problem with this is that the repute

of the company will be at stake, hence it will be risky endeavor for the company and the military

accounts had their own approach of making purchase decisions.

Due to the distance and the size of the territory, serious consideration was needed as to whether a

branch office would be necessary which meant that there would be less interaction with a greater

independence from the main BSI office. Furthermore none of the current BSI members wanted

to move there however there might be a possibility of hiring someone who was familiar with the

territory. But with this, there was a risk that any successful sales person might leave and start his

or her own rep firm.

Cost Analysis

R.D Ocean:

R.D. Ocean accounts for 32% revenues for BSI and is highly demanding however it is less

difficult to sell due to small marketing investment requirement. Revenue is $96,756 and the

commission rate is 5% and the cost of new hire = Avg. Salary + support costs + safe 30% bonus

That is, $20,000 + $66,000 + (0.3*96,756) = $115,026

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Barro Stickney WAC

Franklin Key:

Franklin Key accounts for 15% revenues for the company however it has moderate demand and

is easier to sell relatively. Franklin Key (Virginia) has total Sales of $800,000 and the profit on

commission is $800,000*5% = $40,000. However, the Cost of new branch:

Compensation ($40,000*0.2 + $20,000) = $28,000

Support Cost = $66,000

Incremental Exp = $24,000

Total Cost = $118,000/year

Fixed cost/annum = salary + transport + insurance + incremental expense = $20,000 + $22,000

+ $16,000 + $24,000 = $82,000

Core Problem

The issue at hand for BSI is to answer the following question:

Is growth possible if BSI expands its territory, sales force or number of its principals as

requested by Franklin Key & R.D. Ocean?

Solution & Recommendations

There are two Key Accounts demands on the table, let’s look at each one by one:

Franklin Key:

Positive aspects:

1. The market is already developed and Sales stand at $800,000. The commissions generating from this client will become TWICE once BSI enters this territiory.

2. Low market investment required for this product category.3. Opportunity for growth is there. As new principals from military accounts can be added. In the

coming years, revenues from Swanson are expected to go down, hence, new avenues for growth have to be tapped now.

Negative Aspects:

1. New Territory – risk increases.

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Barro Stickney WAC

2. Office needs to be purchased. We don’t recommend giving a sales rep the responsibility to single handedly handle this territory because there’s a great risk of him opening up his own sales office (Barro Stickney’s owners did the same thing too when they started their business!)

3. Low capacity to serve new principals. Any new client can lead to drop in customer service.4. Additional opportunity is mainly for military accounts for which B.S.O doesn’t have experience.

R.D.O

Positives:

1. This account gives 32% of revenue. Hence, too much dependency on this account and by simply adding one sales rep. the account will remain happy and satisfied.

Negatives:

1. There’s a high cost associated with hiring a new sales rep and this territory is already saturated for R.D.O. hence, the returns against the costs are not expected to be too great.

What We Recommend:

There’s no question that both the options should be declined and BSI does nothing. It needs

future growth opportunities because one of its existing account Swanson which accounts for 14%

of revenues is expected to face some hard times in the future hence, commissions will go down.

The only real opportunity is in the form of F.K.E’s request to cover Virginia. It’s a relatively safe

way for the agency to expand and increase its size. Also, by expanding this new territory it will

reduce its reliance on R.D.O’s billings.

On the other hand, R.D.O’s demand is purely customer centered and the only interest BSI has in

serving it is to keep the client happy; there’s no real opportunity to be tapped.

We recommend that BSI enters the Virginia territory for Franklin Key and develop its human

resources to cater to military accounts and generate more revenue channels in that territory. As

for R.D.O, BSI’s team needs to reason with the client and tell him how investing further in a

saturated market is not in his interest. If the team is successful the matter will be resolved, if

however, the client exists, BSI should make the hiring because a happy client is a happy

business.

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