final project selling and sales- editing today
TRANSCRIPT
Lindt Chocolate By
Donal Murray
Sinead O’Connell
Selling and Sales 3/10/14 DT 364 year 3
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Contents
Corporate strategy ...................................................................................................................... 3
Gary Hamel and C. K. Prahalad’s model of core competencies: .................................... 6
Marketing Strategy ..................................................................................................................... 8
Place ..................................................................................................................................... 12
Price ..................................................................................................................................... 13
Product ................................................................................................................................ 14
Promotion............................................................................................................................ 14
Sales strategy ............................................................................................................................ 15
The relationship between Corporate, Sales and Marketing strategy ............................ 17
Convenience Stores ................................................................................................................... 19
Competitive analysis: ......................................................................................................... 19
Masterfoods SWOT Analysis ............................................................................................ 19
Weakness: ......................................................................................................................... 20
Opportunities: ................................................................................................................... 20
Threats: ............................................................................................................................. 20
Nestle SWOT analysis ........................................................................................................ 21
Strengths: .......................................................................................................................... 21
Weaknesses: ...................................................................................................................... 21
Opportunities: ................................................................................................................... 22
Cadbury’s SWOT analysis:............................................................................................... 22
Strengths: .......................................................................................................................... 22
Weaknesses: ...................................................................................................................... 23
Opportunities: ................................................................................................................... 23
Threats: ............................................................................................................................. 23
Pre Key Account plan ............................................................................................................... 23
Key Account Selection .............................................................................................................. 24
Defining Key Account Management ......................................................................................... 25
Advantage ........................................................................................................................... 26
Disadvantages ..................................................................................................................... 26
The relationship development model ........................................................................................ 28
Pre KAM ............................................................................................................................. 28
Early KAM.......................................................................................................................... 29
Mid KAM ............................................................................................................................ 29
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Partnership KAM............................................................................................................... 30
Synergetic KAM ................................................................................................................. 30
Growth of Key account ............................................................................................................. 31
Key Account Plan ..................................................................................................................... 32
Current Performance Analysis of Musgrave Group ...................................................... 33
Key Account Overview ............................................................................................................. 34
Sector analysis: ................................................................................................................... 34
SWOT Analysis of Musgrave’s:........................................................................................ 34
Strengths:.............................................................................................................................. 35
Weakness:............................................................................................................................. 36
Opportunities: ....................................................................................................................... 36
Threats: ................................................................................................................................. 37
Major Challenges...................................................................................................................... 39
Objectives and Strategy ..................................................................................................... 40
Customer portfolio matrix ................................................................................................. 41
Customer Alignment................................................................................................................. 42
Customer’s critical success factors and supplier relative performance: ...................... 42
The importance of critical success factors: ...................................................................... 44
Relationship management ......................................................................................................... 44
Implementation Plan................................................................................................................. 48
Tactics for Implementation plan:....................................................................................... 48
Sales Rep Budget: .............................................................................................................. 48
Estimated Budget for Sales Rep: ....................................................................................... 49
Risks and Contingencies .................................................................................................... 49
Theories of Motivation .............................................................................................................. 51
Self-appraisals...................................................................................................................... 55
Peer reviews ......................................................................................................................... 55
Graphic Rating Scales.......................................................................................................... 56
360 Degree Performance Appraisal .................................................................................... 56
Recruitment and selection......................................................................................................... 59
Sales experience 3.9......................................................................................................... 62
Important indicators of success ........................................................................................ 63
Sales process ............................................................................................................................. 64
The Select Selling process .................................................................................................. 64
Understanding the buyer needs ........................................................................................ 64
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Qualify the Opportunity .................................................................................................... 65
Plan and manage the pipeline-Precall planning .............................................................. 65
The approach- Target customer selection........................................................................ 65
Negotiation and close ......................................................................................................... 65
Soft Side of Selling and Sales .................................................................................................... 66
Targets and Incentives for Sale Representatives ....................................................................... 68
Deployment............................................................................................................................... 69
Sales Territories........................................................................................................................ 70
Conclusion ................................................................................................................................ 73
Bibliography ............................................................................................................................. 74
Corporate strategy
Corporate strategy “refers to the direction an organization takes with the objective of
achieving business success in the long term.” (Bloomsbury, 2007) According to (Thompson,
J, 2001, P7) “Corporate strategy, essentially and simply, is deciding what business the
organisation should be in and how the overall group of activities should be structured and
managed… it is perfectly acceptable for a business to elect to stay focused on only one
product or service range”. There are a number of models used to develop corporate strategy,
such as “Michael Porter’s Five Forces model and Gary Hamel and C. K. Prahalad’s model of
core competencies”. (Bloomsbury, 2007)
Michael Porter’s Fiver Forces model consists of:
1. Threat of new competition:
“Unless the barriers to your market are formidable, new players can enter and poach your
share of it.” If a business wants to enter a new market, they want these barriers to be low.
(Parthasarathy, S. 2010).
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2. Power of suppliers:
“The model assumes that they can exert significant influence over a corporate customer.”
Businesses in developed countries, such as Ireland, typically have a bigger basin of high
quality suppliers. (Parthasarathy, S. 2010).
3. Power of buyers:
“Although customers can be influential, the truth is that most accept the price of the product,
either because they feel they cannot affect its price or because they lack knowledge about its
true cost and value.” To reduce the price of a product would be an accomplishment. “The
bargaining power of buyers is also more disguised by tariff regulations.” (Parthasarathy, S.
2010).
4. Availability of substitute goods:
“A substitute is generally understood to be the closest equivalent.” (Parthasarathy, S. 2010).
5. Competition within the industry:
“Lack of competition at the top affects how the other four forces apply.” (Parthasarathy, S.
2010). All companies should be aware of their competition. If one of their competitors
introduces a new product to the market, the company might raise the question, “why did we
not think of this first?” It is important to keep an eye on all of their opponents. “A
competency model is a framework, which lists the competencies required for effective
performance in a specific job or group of jobs.” (Kashi, K and Friedrich, V, 2013). A
competency consists of knowledge, skills, self-concepts, traits and motivation. (Vazirani, N.
2010).
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(Vazirani, N.
2010).
David McClelland best shows these competencies in an iceberg. Knowledge and skills are
visible at the top of the iceberg whereas self-concepts, traits and motivates are under water
level and are a larger portion of the iceberg. (Vazirani, N. 2010).
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Gary Hamel and C. K. Prahalad’s model of core competencies:
(Prahalad, C.K and Hamel, G. 1990).
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For example: Canon
(Prahalad, C.K and Hamel, G. 1990).
“More recent approaches have focused on the need for companies to adapt to and anticipate
changes in the business environment.” (Bloomsbury, 2007)
“The formulation of corporate strategy involves establishing the purpose and scope of
the organisation's activities and the nature of the business it is in, taking the environment in
which it operates, its position in the marketplace, and the competition it faces into
consideration. Corporate planning and business plans are used to implement corporate
strategy.” (Bloomsbury, 2007)
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Marketing Strategy
The are many different definition of market strategy for example “Chang and Campo-Flores
refer to market strategy as being crucial and central issue to the use of marketing functions,
Luck and Ferrell as being fundamental and Kotler as being a grand design” (Greenley, 1984).
But in 2007 American Marketing Association (AMA) “adopted the following as it new
official definition of marketing strategy; marketing is the activity, set of institutions, and
processes for creating, communicating, delivering and exchanging offerings that have value
for customers, clients, partners, and society at large” (Varadarajan, 2010) In an article journal
carried out by (Greenley, 1984), he outlined the meaning of marketing strategy by examining
the following five components:
Market Positioning
Product Positioning
Market Mix
Market Entry
Timing
Market positioning is concerned with “deciding which approach to adopt regarding the
segmentation of the market and the selection of segments” (Greenley, 1984).
Snacking on the go Hot chocolate to go
Tablet bars
Pick n’ mix
Special occasions Easter chocolate bunny
Christmas chocolate Santa
Box of pralines
The graph above represent the two segments Lindt wish to penetrate through Centra stores,
by offering selected product at their target audience. The first segment is “snacking on the
go” concept. In recent years growth in the “snacking and grazing culture, as consumers are
increasingly tending to eat a number of smaller snacks instead of three big meals a day”
(Lane, 2006). Snacks have become easily available to “buy, store and eat, with an increasing
number being eaten on the move” (Lane, 2006). With this segment Lindt needs to target
“consumers in full-time education and employment as they are most likely to purchase”
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(Mintel, 2013) food on the go due their busy lifestyle. With “growth in sales of tablet bars up
by 37%” (Morris, 2012) Lindts Excellence tablet bars will be marketed “as a convenient
snack option” (Mintel, 2013). With increasing demand in the “snack and go” segment,
customers are requiring products that are specially designed to either “buy to share or finish
off later to eat” (Morris, 2012) both the pick n mix and tablet bars facilitates this need as the
packaging allows customers the ability to “twist, close and save which empowers the
customers loyalty” (Morris, 2012) to the brand.
And finally the “hot chocolate to go” is a new proposition for Lindt operating in Centra
stores. We purpose to install a vending machine specially designed to dispense Lindt hot
chocolate. The features on the machine would include “two large easy to use button, one for
9oz cup and one for 120z mug” (International, 2012). The design of the vending machine
would include “graphics panelling design” (International, 2012) of Lindts logo. Creating a
reminder to the consumer of the “brand and create taste appeal” (International, 2012). The
machine would be made of “durable stainless steel, have a low-maintenance design, touch
button operation and electronic self-clean facility” (International, 2012). The dimensions of
the vending machine will be W23cmx H67.5cm x D46cm, ensuring it will be compact, so
that it will fit neatly on the counter and is visually appealing in store. The picture below is an
example of the design spec we hope to achieve for the in store vending machine.
A study conducted has shown “hot chocolate is the most likely hot drink to be consumed with
snacks such as chocolate, biscuits and crisps. This illustrates that there is a huge opportunity
for vending operators to drive cross category purchase” (International, 2012). In conjunction
with the Lindts hot chocolate operating in Centra stores, we wish to offer with each hot
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chocolate purchased a complementary Lindt chocolate ball from the pick n’ mix section. This
will assist to create a premium experience for the consumer “where they can enjoy their hot
chocolate as an indulgence” (International, 2012), accompanied with their Lindt snack to go.
The next segmentation is “special occasions” which involves gifting chocolates for both
seasonal times of the year or for an important gathering. It is very “popular among affluent
Irish consumers and those in full time and self-employment” (Mintel, 2013). The customer
profile would be a “consumer who works long hours” (Mintel, 2013) therefore the
convenience of these products available in the Centra stores would appeal to them.
Once the segment has been chosen Lindt has the option of “pursuing all segments, only one
segment or several” (Greenley, 1984). The choice may depend on how it will effect Lindts
growth in the Irish market, Lindts competitors within the segment and also synergy created
by strengths and weakness. “The component is seen as being logically the first decision to be
made” (Greenley, 1984).
Next is product positioning. Product positioning can be defined as "manipulate what is
already up there and retie the connections that already exist in customers mind" (Trout et al.,
1980). This can be achieved by “selecting different segments for each product for market
scope and also the number of products that Lindt needs to offer to each segment must be
determined” (Greenley, 1984) as well. This decision will greatly impact on the corporate
strategy components of growth and Lindt competitors if product positioning is executed
correctly in the Irish market. In a recent Mintel report it outlined that confectionary
companies such as Lindt still have lavage to take advantage of the Irish market. Even though
Irish consumers’ disposable income has remained low, “the perception of chocolate
confectionery as being a good value treat” (Mintel, 2013) is still in existence. The graph
represents a survey carried out my Mintel questioning families in both the North of Ireland
and the Republic on whether they agreed with the statement “chocolate is a good treat for
young families by representing how children was in the family” (Mintel, 2013).
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Marketing mix involves the next crucial decision in formulation of the marketing strategy
plan. Deice decisions are required for the marketing team to make informed outcomes, such
as how to “order to market, the selected products and as well as deciding the relative degree
of importance” (Greenley, 1984) that will satisfy the market requirements. This will require a
great deal of market research to be carried out to determine the optimal level of stock
required for each Centra store.
Market entry is the next step involved in the marketing strategy components. Market entry is
mainly concerned with how Lindt “intends to enter, re-enter, position itself or re-position
itself within each of the selected market segments” (Greenley, 1984). To help to re-position
the Lindt brand, Lindt could develop their bestselling products within the market by
introducing different variations of that product. An example would be creation of
“mainstream recipes that are designed to encourage new consumers and target their
Excellence devotees to expand their repertoire within the Excellent product range” (FMCG,
2013) . By “investing heavily in research and development” (Lane, 2006) this will help Lindt
maintain and try to grow their competitive position. Also Lindt could re-enter the market by
collaborating with a comparable company that would see the combination of both their
products and re-entre the market with a new product. An example of Lindts competitor who
recently carried out this process is Cadburys collaborating with Ritz crackers to re-enter the
Irish market with the following product;
49 51
43 45
58
47 46 46 48 48
0
10
20
30
40
50
60
70
80
90
100
All None One Two Three ormore
% NI
RoI
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(Cadbury, 2014)
And finally the last component is timing. It relates to point in time when components of the
marketing strategy needs to be implemented and when “tactics within the marketing mix are
ready to be implemented” (Greenley, 1984). As outlined by (Jain, 1981) Lindt can decide to
be “first to implement, or to be an early follower of the first company or take laggards
position by being the last one to implement” (Greenley, 1984). Another approach in which
Lindt could choose is “selecting the right time to follow relevant indicators from the external
environment” (Greenley, 1984). They can range from “economic indicators, industry trends
to seasonal trends” (Greenley, 1984). Time within marketing strategy strongly relates to
selecting the optimum time to exploit a particular market at a particular time.
Place
It is widely known that chocolate can be “seen as an impulse purchase, which is becoming
increasingly popular everyday among consumers” (Morris, 2012). Convenience store are the
“major driver for chocolate lovers who want a bar of chocolate from their local shop”
(Morris, 2012) as they are quick and assessable. Convenience stores also have a competitive
advantage as they are able to capitalise on “cash-rich, time-poor society” (Lane, 2006). It is
due to theses competitive advantages we purpose that Lindt operate in convenience store such
as Centra to help maximise their growth in the convenience sector.
Taking a look on a global scale the following graph represents Global chocolate retailer’s
market share in 2011. It is clear to see that the discounter’s stores and supermarkets are
performing the best. Centra, a small grocery shop that Lindt will be operating in, is ranked a
close second in the market share. The graph indicates discounters and supermarkets have the
highest share as they are able to operate on economy of scale and offer low discount prices.
Important information can be withdrawn from the graph such as the importance of pricing,
which leads onto the next point.
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Price
In the Irish market it is estimated that “volume growth in the chocolate market during 2014-
18 is expected to outpace value growth during this period by 2%” (Mintel, 2013) . Even
though disposable income is rising in emerging markets, trends indicate a large proportion of
Irish consumers will continue to look for the cheapest option” (Morris, 2012) with “price
value will account for a large proportion of the estimated 8% volume growth during this time
(2014-18)” (Mintel, 2013). As Lindt is deemed as a premium brand, which is positioning
itself in Centra stores, it needs to bear in mind the sensitivity around product pricing.
Especially if Lindt is to compete with discounters and supermarkets as there is a temptation
by consumers to switch from the more expensive branded and artisan chocolate to “low cost
own label chocolate as they represent a better value low-cost treat” (Mintel, 2013).
If Lindt are to reduce their prices they must “try and retain some quality differentiation”
(Wong, 2012), otherwise Lindt will struggle not to reposition itself at a lower quality price
brand. It is believed that the value perception of a products will be increased by a higher
price. When two brands are “similar price, their target customers will not have any significant
preference” (Wong, 2012). If “price of one of the brand is higher, customers tend to choose
that brand because the higher the price indicates higher quality and value. However, if the
price difference is too high, customers will return to a cheaper choice” (Wong 2012; Dale
2011) “especially if they believe the price of the brand is too high compared to its benefits”
(Wong 2012; Aaker 2002). Therefore it is vital for Lindt to find the optimal price for their
products.
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Product
Through are endeavour we intend to target the snack and go segment and the occasion
segment. Lindt is well known for the various choices of fine chocolate bars, truffles. The
different combination of ingredients that Lindt uses within its Excellent range includes the
Sea Salt, Raspberry, Chilly etc. which makes the chocolate have such a unusual taste and is
an unique selling point within the confectionary market in Ireland. Also the special Easter
Bunny and the Teddy bear for Christmas are easily recognised now in the market, and have a
huge impact on sales at the specific time. However the diverse truffle flavours are Lindts
biggest range. They come in two different box sizes but also in a “Pick n Mix” format. By
introducing this format to convenience stores such as Centra, people will be able to mix as
many flavours as they want and not having to buy a box of one flavour. It is convenient and
we’re hoping to increase sale growth by doing so. (Lindt Annual Report 2012). As
highlighted above are aim is to introduce a Lindt hot chocolate vending machine into Centra
stores nationwide.
Promotion
The three strategies that Lindt use to promote and create brand awareness are advertising,
sales promotions and sampling. The advertising is huge with TV commercials by the famous
Swiss Tennis Player, Roger Federer who is easily recognised by lots of people and quickly
associates him with Lindt Chocolate. “They chose Federer in order to symbolize the perfect
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“match” between the number one premium in chocolate and the number one in the world of
tennis (Lindt, 2011). The “Airport” commercial with Federer takes a humorous approach in
order to show that people will do whatever they can to get this chocolate (Lindt, 2011).
He became the global ambassador of Lindt and his personal experience could easily attract
and convince people to purchase Lindt Chocolate. Also the advertising is increasing now
through social media like Facebook and Twitter, reaching customers faster and
communicating with them easily by having competitions etc. They also have some sale
promotions in stores on specific days or seasons, like in Dunnes Stores they have 30%
promotion on Lindor boxes. Through Centra stores we purpose to promote Lindts products
through sampling. During seasonal times of the year Centra will offer customers a free Lindt
Teddy Bear or a Gold Bunny when they spend over €25 on their shopping. Also as discussed
above we hope to offer a complementary chocolate ball with every hot chocolate purchased.
Through sampling we aim to “encourage new consumers” (FMCG, 2013) to buy and to
increase repurchases from existing customers, thus leading to an increase in the growth of the
convenience sector.
Sales strategy
To find out how corporate, marketing and sales strategy work together in a relationship, we
must look at each of them separately to understand how they connect and work in tandem.
Sales strategy works differently to both corporate and marketing strategy. The corporate
strategy gives the sales function the direction it has to go but the sales strategy is a very
specific function in that it has to translate from corporate. The marketing plan is different also
as it is just a basic game plan for the company and for the plan to be successful the sales
department must create a good strategy to help the marketing plan run smoothly.
To understand what the sales strategy consists of we need to know what it involves. Ingram
and La Forge (1992 p.154) says that the sales strategy is important to a business for two
reasons that are both different, it has a big impact on the organisations sales and performance
in regard to profit and the other reason that the sales strategy is important is because it
influences the decisions of the sales management team in relation to training, hiring and
evaluation of performance. According to Ingram and La Forge (1992 p.161) there are two
basic strategy’s. These strategies consist of Relationship strategy and sales channel strategy.
Relationship strategy has come about due to the importance of creating a good customer
relationship. In the relationship strategy that Ingram and La Forge (1992 p.163) suggested ,
they say that there is two different types of relationships between buyers and sellers, they also
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state that there is different activities that a sales person should undertake in relation to each of
the relationship strategies. In the first of the two relationships is the seller business taking the
roles of a “counsellor”. In this situation the customer understands that they have a problem
but does not know how to fix this problem. For example a company understands that they
need an operating system for the business but they do not know what type of system they
need, so a sales person would take a counsellor role in this situation. This type of customer
will place high value on the personalized approach from the sales person. The supplier is
another role that the sales business can take in a relationship; this means that the customer
knows exactly what they need but just want to be supplied with what they need. For this
relationship to work the sales person must be able to produce the specific product or service if
asked by the customer. The third type of relationship that a business and a customer can have
is for the selling organisation to take the role of a system designer; this role consists of the
sales person showing the other business how to do something more efficiently. Having
relationship strategies within the sales strategies can improve the way the company’s sales
people communicate and interact with customers.
The second mini strategy within the whole sales strategy is the sales channel strategy. This
involves ensuring that your sales account receives enough attention in terms of being
effective and efficient. This is obtained by covering the organisations selling coverage, by
using different methods which include.
Company Sales force
Industrial distributors
Independent representatives
Team selling
Telemarketing
Trade shows
The benefit of using these methods can help the organisation give as much attention to each
account effectively. Having an industrial distributor can be very beneficial to a company with
a small scale sales force because Ingram and La Forge(1992 p. 165), says ), industrial
distributors typically employ their own field sales force and these companies can carry either;
products from only one manufacturer, non-competing products from the same manufacturer
and finally competing products from different manufacturers. The use of these industrial
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distributors is a very cost effective way to look after accounts. Using this part of your sales
strategy adds another member to the distribution channel. Ingram and La Forge (1992),
suggest that firms employing a personal selling approach to deal with their customers can
benefit from using independent representatives. These representatives can cover accounts that
the company feel are being neglected and don’t have time to take care of because they may
not be a big account compared to others. However these reps sound very similar to the
industrial distributor, but there are some distinct differences such as, the reps get paid on
commission, they don’t carry inventory with them. Team selling is also involved in the
overall sales strategy according to Ingram and La Forge (1992). These sales teams are
effective when it comes to dealing with multiple person buying centres. Different situations
will require a different size team. The organisation knows when to use a selling team and
how big the team should be for each selling situation and different accounts can be very
beneficial to the organisation. Overall a basic sales strategy consists two different element to
it, the first being the relationship strategy and the second being the sales channel strategy.
The relationship between Corporate, Sales and Marketing strategy
In an Organisation it is clear to be seen that the relationship between Corporate, Marketing
and Sales strategy affects each other in one way or another. In a business comes the
company’s corporate strategy which arises from corporate management, this deal with areas
such as the company's corporate mission, their strategic business unit definition and
objectives as well as any corporate growth strategies. This is then used as a guideline for
what the marketing department must do for their strategy which would concern itself with
decisions in areas of marketing mix and promotional mix development and also target market
selection. After the marketing strategy is established the sales function must then use both the
strategies made by the marketing management and corporate management to develop their
sales strategy, which will deal with areas such as sales channel strategies and relationship
strategies. Each different level of the organization must understand what each other strategy
involves in order for them to implement them successfully.
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The image above from Cravens (1994) shows the relationship between the different strategies
in a simple, yet effective way. Cravens (1994) says “An understanding of business purpose,
scope, objectives, resources, and strategy is essential in designing and implementing
marketing strategies that are consistent with the corporate and business unit plan of action”
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Convenience Stores
According to recent research (ámarach, 2012) retailers have seen many changes in customer
behaviour over the recent years. The key changes include buying more items on “special
offer” and shopping around more between the different stores. In order for Lindt to increase
their sales in convenience stores such as Centra and Spar, they would need to appeal to the
customers by doing special offers to attract their attention. It has also shown that retailers are
seeing their customers more often. This reflects the need for customers to control and manage
their spending. According to the national consumer agency, price is the number one
determining factor as to where customer will shop. Convenience stores such as Centra and
Spar do weekly offers within their stores; this will appeal to customers and attract new
customers. Centra has announced a retail sales growth of €1.48 billion in 2013 this was up
3.5% from the previous year despite the on-going challenges of the economic climate
(kelleher, 2014). This proves to be a promising market for Lindt product to be established in.
Spar has also seen a growth in sales with a recorded 2.8% increase in 2012. With these to
promising convenience stores within Ireland Lindt have two very strong markets to distribute
in. In order to appeal to the customers Lindt must be placed on special offers in entice
customers.
Musgrave will be the main distributor of Lindt chocolates to Centra and Spar and all
independent owned convenience stores. In order to increase sales of Lindt products within
these stores new strategies will be introduced such as a “Pick’n’Mix” and “special offers”.
Also within the larger stores the convenient “hot chocolate to go” will also be available.
Competitive analysis:
“Ireland has the highest per capita consumption of chocolate in the world” (Hamill, G. 2008)
Lindt’ main competitors are Masterfoods, Nestle and Cadbury. To understand how Lindt can
grow in the confectionery sector, they must conduct a SWOT (Strengths, Weaknesses,
Opportunities and Threats) analysis of their competition.
Masterfoods SWOT Analysis
(mars.com, 2014)
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Strengths:
1. Mars Chocolate portfolio includes some world renowned chocolate brands. Galaxy,
Mars and Snickers amongst the most recognized brands
2. To tackle the more informed health conscious consumer master foods have devised
treat size bars with 100 calories or less.
3. Maltesers is one of the fastest growing bite size brands in the market.
4. The Mars bar is the number one filled consumer bar worth over 10 million.
5. “Mars Chocolate is one of the world’s leading chocolate manufacturers and employs
more than 16,000 Associates across 21 countries. Twenty-nine brands in total,
including five billion-dollar global brands - M&M’S®, SNICKERS®,
DOVE®/GALAXY®, MARS®/MILKY WAY®and TWIX®. Other leading brands
include: 3 MUSKETEERS®, BALISTO®, BOUNTY®, MALTESERS® and
REVELS®.” (mars.com, 2014)
6. Mars and Snickers are firmly established as global iconic brands
7. “At the end of 2007, Mars became the first chocolate company to voluntarily stop
advertising and marketing directly to children under age 12 worldwide.” (mars.com,
2014)
Weakness:
1. They are not a premium brand compared to Lindt.
Opportunities:
1. To increase social media such as their Facebook page, twitter and Instagram
Threats:
1. smaller companies may be a threat to Masterfoods as they have a sole objectives, whereas
Masterfoods caters to a broad range of brands.
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Nestle SWOT analysis
(Nestle.com, 2014)
Strengths:
1. Good brand image
2. It is a large scale organisation with abundant funds and has the capability of acquiring
weaker firms and throwing them out of competition.
3. Growing sales and profits: “The 2012 results demonstrate…Sales were up 10.2%”
(Nestle, Annual report 2012)
4. Good marketing
5. Efficient distribution networks throughout the country
6. Quality products
7. Solid financial position
8. It is a fair trade company
9. “Nutrition is Nestlé’s core.” (Nestle, Annual report 2012)
Weaknesses:
1. It is not seen as a global premium chocolate label.
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Opportunities:
1. Introduction of new products.
2. We expect, therefore, to deliver the Nestlé Model once again in 2013: organic growth
between 5% and 6% together with an improved trading operating profit margin and
underlying earnings per share in constant currency, as well as improvement in our
capital efficiency.” (Nestle, Annual report 2012)
Threats:
1. Trends towards healthier eating competitors such as Lindt, Cadbury (nestle.ie, 2014)
Cadbury’s SWOT analysis:
(Cadburygiftsdirect.co.uk, 2014)
Strengths:
1. Well-known brand: “Cadbury Schweppes is one of the world’s biggest confectionery
companies with a number one or number two position in 20 of the 50 largest
confectionery markets across the globe.” (Datamonitor, 2014)
2. Good marketing and advertising campaigns
3. Variety of products
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Weaknesses:
1. Product recalls. “Cadbury Schweppes has recalled a number of products in the recent
past. In June 2006, the company recalled seven of its Cadbury branded product lines
in the UK and two in Ireland.” (Datamonitor, 2014)
Opportunities:
1. Expand the company into existing and new markets
2. Target health consciousness consumers: “The company’s wellness (including
products like sugar-free and fat-free products, and medicated candy) sub-category,
accounted for around 30% of confectionery revenue in 2007. The company thus is
well positioned to benefit from the rising demand for healthy foods worldwide.”
(Datamonitor, 2014)
Threats:
1. Other conventioneer companies: “In May 2008, Mars, the world's largest chocolate
maker announced its plans to acquire W M. Wrigley Jr, America's largest chewing-
gum maker for $23 billion (£11.5 billion). A combined Mars-Wrigley entity would
overtake Cadbury Schweppes as the world's biggest confectionery company. After the
deal, Mars would be the biggest player in the global confectionery industry with a
market share of 14.4%, overtaking Cadbury's 10.1%.” (Datamonitor, 2014)
2. Calorie conscious people
Pre Key Account plan
Many companies still conflate ‘key customer’ with ‘large customer’. An alternative
description has been provided by McDonald, Millman and Rogers: ‘Key accounts are
customers in a business to business market identified by selling companies as of strategic
importance’ (McDonald, Millman and Rogers, 1996). They argue that strategic importance
should be objectively decided on the basis of a customer portfolio matrix constructed from
two perspectives: the attractiveness of the customer and the customer’s perception of the
supplier’s business strengths (see Figure 1). The latter is important because the degree to
which a key account plan might succeed is dependent on the customer’s buy-in as well as that
of the supplier. (L. Ryals & B Rogers, Key account planning: benefits, barriers and best
practices.)
24
Choosing the right Key Account from the start is very important for the company.
Select the accounts that should be part of the program.
Identify the benefits a key account will have and the problems.
To develop a plan, objectives need to be set
What strategies are used to achieve the objectives
Selling approach need to change into a longer term developmental business
The development of KA relationships requires a strong internal network as well as an
understanding of different fields of expertise. ( S. Natti & T.Palo; Key Account
management in business to business expert organisations: an exploratory study on the
implementation process, 2011)
Much of the motivation to undertake the development of a KAM approach comes from
the assumption that, in the B2B setting, fewer larger customers generate more profit than
a larger group customers (Boles, Johnston, & Gardner, 1999; Stevenson, 1981)( S. Natti
& T.Palo, 2011)
Key Account Selection
According to Diana Woodburn(2011 ) “Good Practice” companies were defined as those
using a systematic process and a range of criteria (Zolkiewski and Turnbull;2000) rather than
those talking selecting for granted or using only sales revenue as the selection criterion,
which are both quite common (Pardo, Salle and Spencer, 1995’SAMA, 2008). In Woodburn
and McDonald (2001) the criteria used by suppliers to assess key accounts for selection
purposes reflected three factor groupings. Since each was linked to a fundamental
requirement of relation effectiveness, as shown below, these factors could be considered as
sufficient to identify key accounts from the supplier’s side (Woodburn D., 2011)
Scale of potential outcomes → Business size and growth
Appropriate customer needs → Business capture and longevity
Customer attributes/behaviour → Business quality and profitability
This could be a great way for Lindt to identify which criterion is best to select their Key
Account. The above should be taken in consideration, especially the customer needs, before
developing the Key Account. Since Lindt is looking to expand more into the convenience
25
sector, recognizing what customers are looking for, in the chocolate region, will have a huge
benefit and succeed for Lindt Key Account Plan. Success will also be linked to the supplier’s
effectiveness in terms of relationship management. Woodburn and McDonald (2001)
suggested that customer attractiveness would be mediated by the supplier’s relationship
management activities to achieve relationship success and that customer attractiveness should
be considered as an antecedent to relationship activity ( Zolkiewski and Turnbull,2000).
Defining Key Account Management
Key Account Management, also known as KAM, can be defined as “customers in a business-
to-business market, identified by the selling company as the most important customers, and
serviced by the selling company with dedicated resources” (Workman, Homburg, and Jensen
2003 as citied by Richards and Jones, 2009). “This definition makes the distinction between
regular accounts and those served with dedicated resources”. (Richards and Jones, 2009).
“The notion of segmentation and positioning suggests that not all customers are equal, and
some customers (e.g. key accounts) would account for disproportionately high percentage of
the sale or profits of a firm. As such, suppliers would typically try to maintain or improve
their relationships with these key accounts by dedicating more or unique resources to enhance
the value proposition offered” (Weinstein 2004 as citied by Ming-Huei and Wen-Chiung,
2011).
In order to develop and have an understanding of your key account you must differentiate
from your competitors. Developing KAM gives both an advantage to the consumer and the
frim:
The Firm The Consumer
Improved customer insight Better product information
Understanding of customer needs Ability raise individual profile
Better product knowledge Better information on services
Improved performance information Better product benefit knowledge
Link between business plan strategy and
customer strategy
26
Advantage
KAM can also deliver the following benefits:
Increased sales due to pursuing high potential accounts and opportunities
Increased market share
Improve customer retention through stronger more loyal relationships
Customer needs are met
Disadvantages
Although KAM has significant benefits such as financial gain for the firm and a better
understanding of the key consumer wants and needs, it is also met with a few limitations such
as: Difficulty in determining key account.
Direct vs Indirect
Direct channel of distribution can be defined as “a situation in which the producer sells a
product directly to a consumer without the help of intermediaries. A direct chain of
distribution may involve face-to-face sales, computer sales or mail order but does not involve
any form of distributor other than the original producer.” (Time, F. 2014).
“(Singh, S. 2012) defines indirect distribution as, “one or more middlemen between the
manufacturer and consumers. There is no direct contact between the producers and the
customers.”
To sell Lindt products to a convenience store, the company should use a three-level
distribution channel which is an indirect distribution channel. This means that the
convenience store is supplied/serviced from trucks owned by another intermediary, a
wholesaler-distributor. This makes the intermediary the secondary customer and the
convenience store the tertiary customer. From there the product is sold to the final user.
(Warwick J. Thompson 2012).
This method will reach the target customer, provide the best customer service and be the most
competitive. (Warwick J. Thompson 2012).
27
(S.C. Bhatia 2008).
The above diagram shows the different distribution channels a chocolate confectionary
producer might choose to use. For the convenience store, it is recommended to use a
wholesaler. (S.C. Bhatia 2008).
(S.C. Bhatia 2008).
28
The diagram above shows distribution using intermediaries and distribution without
intermediaries. In diagram (b), using intermediaries help create structure within an
organisation. In diagram (a) shows how distributors are important in transporting a product
without causing confusion.
The relationship development model
The relationship development model above illustrates the “typical progression of a buyer-
seller relationship based upon nature of customer relationship” (Lancaster, 2009) and whether
it is transactional or collaborative. The model also determines the level of involvement is
higher or lower in some instances. In relation to Lindt and Musgrave’s, the buyer referrers to
Lindt and supplier is Musgrave’s. The model has five stages that are identified by Millman
and Wilson.
Pre KAM
This is the earliest stage of the relationship, it starts before trading between the two parties
begins. It can be looked at as the stage of “investigation and development of understanding”
(woodburn, 2007). Failure to find potential key accounts early on is a waste of opportunities.
This happens in a lot of companies and they do not react to the potential that is on offer. This
means that they burn up time and resources, tendering for contracts that are just very basic
and have no potential to become a key account. To decide whether a potential customer is
29
deserved to enter the pre KAM stage it is important that the supplier looks at customers that
are interested in the same corporate strategies, such as entering new markets.
Early KAM
Early KAM is just a basic sales relationship. This stage implies that the KAM manager and
the purchasing manager are in regular contact but their organisations are still aligned behind
them instead of along with them. “ the interest level on both sides is limited, so the
relationship is managed as efficiently as possible and, indeed , channelling interaction
through a single point of contact should be efficient, even if it has other downsides”
(woodburn, 2007). There is not a whole lot of information shared in the early KAM stage.
The characteristics of the early KAM stage are as follows, Transactional, emphasis on
efficiency, driven by price, success measured by price, seen as easy to exit, single channel of
communication, business relationship only, very little information sharing, driven by personal
reward structures.
Mid KAM
This relationship stage is somewhat like a loose network. The purchasing and KAM manager
work very close together now. The relationship involves a wider range of people with a lot
more interaction. There is a bigger appreciation of the business then in the pre KAM stage.
“Although the relationship draws in more people and harnesses more resources, it is not
highly organized state, so there are many things that can go wrong” (woodburn, 2007). This
style of relationship is hard to manage, clear lines of communication have not yet been
established and there is a lot that can go wrong. E.g. if a sensitive deal has been done in the
customer organization, your accounts receivable department has put this customer on stop
because they have reached their credit limit. A breakdown in communication can have
occurred where by the accounts department had not heard that the customer had acquired a
higher credit limit. An exterior relationship begins to form due to social events that the
supplier has involved some of the customers in, such as golf outings, sports events and other
events such as lunches and dinners. Some of the best and most important gatherings are the
more casual meetings, such as after work drinks, dinners, this helps to get to know everyone
in a more relaxed atmosphere. Some of the important characteristics of the mid KAM
relationship are as follows: selling company adds value to relationship, may be preferred
supplier, exit not particularly difficult, relationship still mainly with buyer, organisation
mainly standard, limited visits to customers, limited information sharing, forecasting, not
joint strategic planning, not really trusted by customer.
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Partnership KAM
In this relationship, the organisation collaborates across a range of functions. The buyer and
seller both recognise the importance of the relationship that they have, they trust each other
now. If these two key points are missing then there is no partnership. “The kAM manager
does not do everything themselves in this relationship, they figure out how to co-ordinate
other people and create a good level of visibility of activity” (wilson, 1995). There is a lot of
activity in this relationship, the relationship has become less casual. The selling company has
become the prime supplier and the customer now sees them as a strategic external resource.
Information sharing has become a lot stronger and the two are now sharing sensitive
information, they also undergo joint problem solving. The characteristics of the partnership
KAM are as follows: Both acknowledge importance to each other, principal or sole supplier,
exit more difficult, larger number of multifunctional contacts, developing social relationships,
deep understanding of customer, high volume of dialogue, streamlined processes, exchange
of sensitive information, proactive rather than reactive, development of trust.
Synergetic KAM
In this relationship the two entity’s come together to operate as one. The internal and external
boundaries in both companies’ now disappear and ineffectively can be seen “as part of a
larger entity” (Lancaster, 2009). Synergetic KAM means that the companies operate in cross
boundary functional or project teams. Top management between both parties have a duty of
care to “manifests itself in joint board meetings and joint business planning, research and
development and market research” (Lancaster, 2009) to ensure the “integrate activities to
deliver value to customers” (Earl D. Honeycutt, 2003). The two entities’ become so
intertwined, that employees often feel more affinity with their focus group rather than their
primary employer. The role of the key account manager and the purchasing manager has now
changed. Competent teams are now in charge of the day to day processes and develop
specific projects, this means the purchasing and KAM manager can obtain a more strategic
role, making sure the business is moving in the right direction. The benefits of the partnership
stage are becoming more evident. There is huge confidence in the trust and commitment of
both parties. “This allows further disclosures such as transparent costing and openness on
even the most sensitive subjects” (woodburn, 2007). The characteristics of the Synergetic
KAM are as follows: little in number, sole supplier, possibly handling secondary suppliers,
high exit barriers, exit is traumatic, transparent costing system, joint long term strategic
planning, and better profits for both.
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Growth of Key account
In recent years it is common knowledge by industry experts that most business cannot
function on the “basis of once only customers” (Scott B. Friend, 2011) instead firms
nowadays view customers of “having a lifetime value in which they provide increasing
revenue” (Scott B. Friend, 2011) by accepting that “customers are heterogeneous (Eli, 2009)
with respect to the value they provide to the firm” (Hunt and Morgan 1995; Niraj, Gupta, and
Narasimhan 2001; Eli, 2009) firms are focusing mainly on their key account management to
help retain customer . A key account can be identified “as customers in business markets
identified by selling companies as of strategic importance” (Millman & Wilson, 1995). Key
accounts are seen from the “supplier’s perspective with their most importance being their
customers” (Scott B. Friend, 2011). A key accounts manager duties within a firm include
“targeting key accounts by providing them with special treatment in the areas of marketing,
administration and service” (Barrett, 1986).
As key account management “has emerged in the last decades as one of the most important
concepts in business-to-business (B2B) marketing” (Spiros Gounaris, 2012), to help further
grow the business Lindt chocolate’s key account manager is obliged to strengthen and
maintain the “multiple contact points between different business partners” due to the firms
heavily “dependency of customers on their key accounts” (Ivens and Pardo, 2008; Hanna
Salojarvi, 2009) as Lindt “cannot afford to lose them” (Hanna Salojarvi, 2009) .
Research has shown that for the success of a growth of key account, within Lindt the
following attitudes and behaviours need to be imbedded into the main structure of the
company such as “customer orientation, interfunctional coordination and top management
commitment towards key accounts” (Spiros Gounaris, 2012). These values within Lindt will
help demonstrate to the customer, Lindts willingness to develop the “necessary skills for
identifying and responding to the needs of key account” (Spiros Gounaris, 2012).
Key accounts represent 20% of customers who provide 80% of the companies’ profits. To
continue the growth of key accounts management, Lindt must take into consideration “the
matrix key account management at the functional level and it must be considered as a highly
relevant decision alternative” (Wengler, 2005) as it helps to enhance “cross functional
communication and coordination within the key account management processes” (Wengler,
2005). With the newly improved internal marketing management process, it will help to grow
Lindts key account as they are closer to the “customer, the supplying company is capable of
highly customizing the product-service offers for the key account” (Wengler, 2005). To
32
ensure the matrix is utilized to its full potentially “key account management controlling”
(Wengler, 2005) is deemed to be the following procedure for the application of the decision
model. By applying the decision model in key account management controlling will help the
company to evaluate the adequacy of the implemented key account management (Wengler,
2005)
Key Account Plan
Selecting the right key account for the organization is crucial and there are different criterias
to make sure the right key account is chosen. According to Ryals and Rogers (2007) the latter
between the attractiveness of the customer and the customer’s perception of the supplier’s
business strengths is important because the degree to which a key account plan might succeed
is dependent on the customer’s buy-in as well as that of the supplier. Also attractiveness
factors may include volume but however will almost always include customer profitability,
potential growth and their attitude to partnership. Woodburn and McDonald (2001) sought to
establish the criteria for selecting and categorizing key accounts used by good practice
suppliers, in order to identify a coherent and manageable approach with a foundation in
theory, and to suggest best practice.
According to Ryals and Rogers (2007), the content of a Key Account plan should include the
following: Relationship Overview/Executive Summary, Key Account Overview, Objective
and Strategy, Customer Alignment, Relationship Management and Implementation Plan. Our
chosen Key Account is Musgrave Group (wholesaler) which are a food and grocery
distributor. In our following report we will discuss in great detail the following headings from
above, whilst relating it back to Lindt on how we are going to implement our innovative plan
to increase Lindts sales through convenience stores.
Before implementing our plan for our key account we decided to do a current performance
analysis of our chosen key account-Musgraves. This involves evaluating Musgraves
competitors through a SWOT analysis. This gave us a clear understanding of our key
competitors and what we must take into consideration in order for our plan to be
implemented successfully. A SWOT analysis of Musgraves was then conducted in order to
give us an understanding of how the company are doing during this current economic
downturn and to be aware of the major challenges facing Musgraves. Our strategy and
objectives for this Key Account Plan is to increase Lindt sales by 21% through indirect
33
distribution by Musgraves. We will also be using Sales Representatives from Lindt to visit
the independent convenience stores to make sure the Lindt products are displayed correctly in
each store. The critical success factors within this report describes clearly the critical factors
needed to make our products successful within the convenience sector. The final part of this
report depicts our implementation plan. This is how we have decided to implement our tactics
and objectives which we hope will be successful and increase sales. This includes our tactics
for getting the Lindt product into the convenience sector such as stores like Centra and
Independent Stores. Within this section we have also included a budget for the use of a Sales
Representative and any risks and contingencies we might encounter.
Current Performance Analysis of Musgrave Group
“Local retailers and the communities they service have always been centerstage in the
modern Musgrave business. This has never been more important than in the current
climate.”(Chris Martin, Musgrave Group, 2012 p.4). In Ireland, Musgrave own the
Supervalu, Centra, Daybreak and DayToday brands – the leading network of independent
supermarkets and convenience stores in the Republic of Ireland and Northern Ireland. The
network in the Republic comprises a total of 810 stores which are owned by progressive
independent food retailers (Musgrave Group 2009). However since we are looking more into
convenience stores, according to the Musgrave’s Annual Report in 2012, “Centra is the
leading convenience brand, with bright, accessible stores and a reputation for quality, value
and friendly service”. Also they have continued to “develop the Centra offer in 2012 through
a strong focus on innovation, compelling offers and market own brands.” As stated by the
Musgrave Group Plc. in the Annual Report they had a total of €4.9 billion sales in 2012 by
which €3.11 billion in ROI of which € 1.7 billion of the sales in Centra considering it as a
huge figure. There are also 465 Centra store in the ROI owned by the Musgrave Group which
makes it a great target and opportunity for Lindt to collaborate with them to get their products
into the convenience sector. Musgrave furthermore announced in 2012 that for the future
they will “aim to be the lowest cost business that is easy to do business with by continually
reviewing the aspects of our structure and operation” to support the development of their
brands. (Musgrave Group Annual Report 2012)
34
Key Account Overview
Sector analysis:
Lindt Ireland has 15,209 likes on Facebook, 594 twitter followers and 343 followers on
Instagram.
Market analysis:
“The Irish confectionery market has experienced moderate value and volume growth in
recent years and this is forecast to continue through to 2017.”
(1)Kevin O’Shea, regional manager for retail Musgraves group stated: “Musgraves are the
longest retailer in the convenience sector. There was a growth of 3.7% in 2012.” The value
and volume growths in the Irish confectionary market and in the convenience sector therefore
grow together.
Lindt new signature products are Lindt Coconut Truffle, Lindt Chocolate Bark, Lindt Classic
Recipe Caramel with Sea Salt Bar and Lindt Chocolate-Covered Fruit & Nuts. (2)
SWOT Analysis of Musgrave’s:
Conducting a SWOT Analysis is used to “determine what strategies the customer needs to
implement in the next three to five years. If the customer has not already been involved in the
process, it is important to try to check these assumptions with them” (Ryals, L & Rogers, B.
2007, P9)
Musgraves have established itself in a niche market of the wholesaler industry placing a
strong emphasis on being a dependable brand for local sourcing. (Musgrave Group, 2013. P4)
stated that Murgraves “established a strong niche in the market as a reliable brand for local
sourcing which is a key strength as consumers prefer local produce more. However,
European economy is witnessing a steep downturn impacting the consumer spending and, in
turn, may adversely affect the group's revenues”. We have conducted the following SWOT
Analysis for Musgraves as Lindt’s Key Account to drive growth in the convenience sector.
Strengths Weakness Opportunities Threats
Strong local food
offering competitive
advantage
Lack of Scale Strong growth in the
convenience sector
Adverse macro-
economic conditions
Unique Business Increased Intense competition
35
Model penetration of own
label products
(Musgrave Group, 2013. P4)
Strengths:
Strong local food offering a competitive advantage -
In these current economic times it is clear that many consumers are opting to be less loyal to
one particular store or shop and are striving more towards buy local. A lot of consumers may
do their big grocery shop once or twice a month in big stores such as Tesco but a lot more are
buying their day to day needs in the local convenience store such as Centra. For a long time
there was a myth that convenience store were a “rip off” and should be avoided by the
shopper trying to save. But, we can see now that that is changing, “Perception is everything
and it takes a lot to change that, especially for a cash conscious consumer who is seeking
value in everything. For the last two to three years, symbol operators have been trying to
eradicate the consumer’s perception that the local c-store denotes high prices, with many
convenience brands lumped in under the rip off merchant umbrella. However, that notion is
changing... Symbol groups like Centra, for example, continue to highlight the 'community'
aspect of the brand, with virtually every symbol now using 'local' as a selling point...”
(Reaper, L 2011. P57). As Musgraves work extremely close with Centra this gives Lindt the
perfect opportunity to get their product in to a strong branded convenience store and boost
sales.
Musgraves also deals with local stores that have a strong focus on local sourcing “An
industry research suggests that consumers increasingly prefer local produce. Concerns about
supporting local entrepreneurs and perception that local food is fresh and healthy are some of
the driving factors... Thus, the reputation of Musgrave as supporter of local sourcing and
increased demand for such products will drive the sales and also give an immense
competitive advantage” (Musgrave Group, 2013. P4) Also, (O’Connor, B 2010) “While the
recession is seeing consumers focus more on price, they are still concerned with supporting
local jobs and businesses; as well as being aware of where their food has come from, with
locally sourced foods being considered to have added value”.
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Unique Business Model –
Musgraves have a unique business model in the sense that they encourage retailing in the
local community such as convenience stores, which enabled them to establish themselves
quite strongly in this niche market. According to the regional manager of Musgraves that we
met with Musgraves actually turn away about 50 retailers a year as they do not fit the
Musgraves criteria that must be met in order to do business with them. This shows that
Musgraves feel quite strongly with who they deal with in particular in the local community,
giving them a unique business model compared to other wholesalers. “. The group's retail
partners focus on expertise about local consumers and are highly motivated due to the
ownership model they operate in… The core to these operations is the unique community
retailing which the business model allows. Musgrave's business model has inherent strengths
and focus on further improvements will lead to higher efficiencies, leading to better revenues
and profitability” (Musgraves Group, 2013, P5).
Weakness:
Lack of Scale –
With large scale corporations such as Tesco having such a strong global buying power, this
means that Musgraves are at a competitive disadvantage in terms of scale. According to
(Musgraves Group, 2013. P5) large scale corporations such as Tesco “have been constantly
wielding efficiencies in their businesses due to their scale and global buying power. They
have been constantly increasing the market share and making it difficult for smaller players to
compete with”. Because of these larger scale corporations with a strong global buying power
this could cause problems for Musgraves with regard to the niche they have established with
retailers as they may not be able to withstand the competition.
Opportunities:
Strong growth in the convenience sector –
According to the regional manager of Musgraves that we met with Musgraves are doing
exceedingly well with regard to the convenience sector. Musgraves are the longest retailer in
convenience with a growth of 3.7% 2012. (O’Connor, B 2010) claims that “customers are
using local shops more frequently to top up their shopping with fresh produce or food for
now”. As customers are shopping more in convenience stores and seen as Musgraves have
such a strong relationship with conveniences stores such as Centra this should lead to
37
significant rise in sales if both retailer and wholesaler work together to give the consumer
what they want and when they want.
Increased penetration of own label products –
With many convenience stores having to face strong competition from large discount and
grocery stores there has been a significant rise in the amount of retailers opting to retail many
own branded products to compete with this larger discount stores. Own branded products has
enabled “convenience retailers to cut their prices and have a value offering to compete with
discounters. Price being the top concern for consumers, they have been actively trading down
to own label brands”. (Musgraves Group, 2013. P5) Musgraves now cooperate with retailers
to produce own label products. “Musgrave enhanced competitiveness of its brands by
investing more than E20 million in the development and launch of the SuperValu own brand
range in February 2012. The new line-up covers more than 1,500 products, the biggest
product launch by SuperValu so far…, the group also successfully launched its private label
range for both Budgens and Londis” (Musgraves Group, 2013. P5). This own brand range
proved to be very successful in the larger grocery stores such as SuperValu and in smaller
convenience stores such as Londis but, it must be noted, it was hugely successful in the
convenience store Centra. The Centra own brand range was launched in early 2013, it
consisted of over 900 products in its 460 stores. As consumers are more open to buying own
brand products this will lead to a rise in sales. Also, as these own brand products are
exclusive to each individual store this should lead to more loyal consumers. It must be noted
that this is an opportunity for Musgraves but a serious threat for Lindt. With more and more
consumers purchasing own brand products this is something Lindt need to address as they are
considered a luxurious brand.
Threats:
Adverse macro-economic conditions –
The Irish economy and, indeed, the European economy is in the middle of an economic
downturn which can have very strong effects on multiple industries. With such a high
unemployment rate in Ireland this mean that the consumers are more price conscious and
consumer spending is reduced. “. As a result, they tend to save more and spend less. A further
deterioration in the economy could be detrimental for Musgrave”. (Musgraves Group, 2013.
P7)
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Intense Competition –
Musgraves operates in an extremely competitive market; they face strong competition from
Tesco, Shamrock Foods etc. As Musgraves deal with such a limited customer base they may
struggle to compete with the likes of Tesco who operate on such a global scale. This can lead
to significant problems for the Musgraves group, “intense competition also puts pressure on
the group to reduce prices to attract consumers and meet the competitors' levels. Thus,
intense competition could impact customer retention ability and profitability for Musgrave
adversely”. (Musgraves Group, 2013. P7)
Market analysis for Musgrave’s:
Musgrave’s competition includes the following distributors: Brakes Group, BWG and Pallas
Foods.
Brake’s group can be a competitor for Musgrave’s for the following reasons:
The Brakes Group company “supplies food to Michelin-starred restaurants, schools, the
NHS, catering companies and others”. (Euroweek, 2013).
High revenue was obtained in 2013. “In the year to September 2013, Brakes made
£2.98bn of revenue.” (Euroweek, 2013).
“M&J Seafood, part of Brakes Group, claims to be the first fish and seafood provider
to offer customers 'catch of the day' messages via MMS, email and Twitter.”
(Wholesale News, 2011).
Achieved an award in the Chef’s Choice Awards. “Brakes took top place in the
foodservice category of the Chef's Choice Awards 2011.” (Wholesale News, 2011).
This award “asked hundreds of chefs from independent, fine dining and chain
restaurants to name their favourite brands, products and suppliers from the thousands
on the market.” (Wholesale News, 2011).
BWG can be a competitor for Musgrave’s for the following reasons:
39
“Economies of scale for BWG are massive.” (Checkout, 2008)
“BWC Foods has revealed plans to invest €7 million in its Value Centre cash & carry
network across the country. The announcement was made at the official reopening of
Value Centre Castlebar last month, at which An Taoiseach, Enda Kenny, was guest of
honour” (Checkout, 2013).
Pallas Foods can be a competitor for Musgrave’s for the following reasons:
“Limerick-based Pallas foods has signed a deal worth €24 million to supply 100
Topaz fuel stations with a selection of fresh food produce. The three-year deal will
see Pallas stocking Topaz, delis with breads, meats, salads, pastries, sandwich fillings
and smoothies.” (Checkout, 2009).
“United Coffee and Pallas Foods have announced an exciting partnership that will see the
foodservice distributor become the only one in Ireland to offer a premium total coffee
solution, from award-winning equipment and coffee right through.” (Vending International.,
2010).
Pallas Foods have been “established for over 25 years.” (Vending International., 2010). A
long time distributor.
“Offers nationwide delivery on all food supplies from meat and dairy to gourmet fine foods as
well an non food items such as packaging and cleaning products.” (Vending International.,
2010).
Major Challenges
The main challenge facing not only Musgraves but any wholesaler is the effect the recession
is having on consumer spending and where they choose to spend their income. A Mintel
report from 2009 came upon some interesting facts: “Since the onset of the recession, the
overall food market has seen a decline in value as consumers spend less on groceries. Due in
40
part to less demand, and lowering of prices, the convenience sector saw a 10% decline in
market value between 2009 and 2010 in Ireland. Traditionally seen as being more expensive,
consumers are spending less in convenience stores, going elsewhere for better value for
money. Discounters have become more popular with Irish consumers seeking value for
money, with half of NI and RoI consumers claiming that when shopping, they look for the
lowest possible price” (O’Connor, B. 2010) However, it is clear from the information above
that many wholesalers are taking on board the fact that consumers are weary of shopping in
convenience stores in these current economic times, as mentioned above Musgraves have
worked with SuperValu and Centra to produce own branded products.
Objectives and Strategy
The strategy for a key account is developed in the context of an overall focus on the key
account relationship comprising a vision and a mission. Musgrave’s mission statement states
that “we aim to lead the way supporting independent business that helps drive vibrant local
economies”.
The key account strategy comprises several interrelated elements including performance
objectives, strategic focus, action programs, agreements on resource commitments and
positioning etc. (Capon, N. 2001 P221)
Opportunities and threats are the basis for formulating key account strategy. “Strategy is
designed to exploit opportunities and repel threats”. (Capon, N. 2001 P214)
The full set of opportunities and threats is projected on a grid matrix structure that maps
products, appliances and organisation units as either new or existing
A core part of Musgrave’s strategy is commitment to investing in local communities and
local SME’s (Board Bia, 2014). Musgrave being a key account for local and convenience
retailers creates very good opportunities for them. Some of the opportunities identified and
prioritised with the key account are as follows. Musgrave’s are able to develop more brands
and push them onto the shelves of these convenience stores such as Centra or Supervalu. It is
important that the brands Musgrave develop must reflect the companies’ culture and values.
“The rise of digital channels, such as social media and viral marketing has put a step to the
standard practice of managing brands with a command and control style” (Subrammanian, R.
2013)
41
When Musgrave’s are creating a brand the marketers need to look at the essence of a “local”.
This means they need to think global and act global to approach today’s digitally active
audience.
The placement of products is very important for generating high Sales. Musgrave’s being a
key account for local retailers will be able to push brands as they have the authority to market
their brands in local convenience stores that use Musgrave’s as a key account. A very
important part of cross category management strategy is display placement strategy. “The
location and proximity of displays of one category with respect to another category can have
significant effect on the sales of both categories” (Bezawada, R. 2009). The opportunities that
Musgrave’s have from being a key account for these local convenience stores is that they
have control of the placement of these products, therefore enabling them, to push the brands
as they like.
Another opportunity that being a key account offers Musgrave is that they can move high
levels of stock to their customers. The more key accounts they have with customers the more
stock they are able to move therefore generating higher sales levels.
Customer portfolio matrix
The customer portfolio matrix defines the attractiveness of a company to become a key
account and the perception of the supplier’s business strength. The customer portfolio matrix
can help Musgrave decide on what potential key accounts it should take on. Factors for
attractiveness may be the volume of stock that it can push, there potential for growth, their
profitability and their ability to work as a partner. “Woodburn and McDonald (2001) found
that in best practice companies there were three types of attractiveness factors: those that
involve reward to the supplier (e.g., profitability), those that involve opportunity for
differentiation (e.g., customer willingness to partner) and those that involve risk reduction
(e.g., volume in process manufacturing)”. (Rogers, B.2007). Key account planning became
very important when the portfolio matrix was implemented to business. Musgrave will have
to plan throughout the business year what key accounts they are going to have and what level
of relationship they are going to have with them. “The customer portfolio matrix (CPM)
originally described by Fiocca (1982) was identified as an important sales management tool
for the selection of key accounts”. (Rogers.B, 2007). “Research to date finds best practice
companies developing long-term plans ‘for, and together with, their individual key accounts”
(Woodburn and McDonald, 2001). The planning process will need to involve the customers
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to make sure that they get the best plans put in place. Musgrave’s can make sure that they
pick effective key accounts by using the customer portfolio matrix and seeing the
attractiveness of the company, if it has a high or low attractive level and by also looking at
the suppliers strength with the customers and see if that too is high or low. This information
can put Musgrave in a strong position when deciding what suppliers to work with as it will
tell them who works well and what potential the supplier will have for growth and profits.
The planning process will also help for Musgrave to get a better understanding of the
customer’s wants and needs and then be able to prepare a decisive plan to meet these wants
and needs. “Most companies in the study were working hard to raise planning standards, so
that the focus shifted towards identifying how business with key accounts would be
expanded”. (Rogers.B, 2007)
The customer portfolio matrix. Sources:
Woodburn and McDonald (2001), adapted from Fiocca (1982).
Customer Alignment
Customer’s critical success factors and supplier relative performance:
As a definition, critical success factors refer to “the limited number of areas in which
satisfactory results will ensure successful competitive performance for the individual,
department, or organization” (Bullen & Rockart, 1981). Critical success factors are the
essential areas that must be performed well if you are to achieve a mission, objectives or
goals for your business. Critical success factors are elements that are vital for a strategy to be
to be successful. A critical success factor that drives that drives the strategy forward; it makes
or breaks the success of the strategy (Raravi, et al., 2013).
43
According to Bullen and Rockart, there are a number of heading in which critical success
factors follow. In relation to Musgraves and Lindt we can identify the critical success factors
that need to be addressed in order to make the project a success.
Musgraves and Lindt:
Term Brief Description Brief examples
Strategy Basic decision of “what
business we are in”
Musgraves- Regional and
international wholesaler/
distributor.
Lindt- High quality premium
chocolate producers.
Objectives General directional
statements
Musgraves- increase sales of
Lindt products in
convenience stores
Lindt- Increase brand
awareness and increase sales
in convenience stores.
Goals Specific targets Musgraves-
Lindt- increase sales by 21%
CSF’s Key areas where things must
go right in order to
successfully achieve
objectives and goals
Ensure that there are enough
Lindt reps to promote
products in stores
Measures Calibration of performance Musgraves- buy product in at
a low price
Lindt- look for best
promotion offers within
Musgraves
Problems Tasks resulting from
unsatisfactory performance
or the environment
Increase of prices/inflation/
Future completion from other
companies.
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The importance of critical success factors:
Critical success factors are the relatively small number of truly important matters on which
managers should focus their attention on as Rockart 1981 mentions in his report. Critical
success factors represent the few “factors” which are “critical” to the success of the manager
concerned. (Bullen & Rockart, 1981)
Relationship management
Firstly the document will begin with a definition of relationship management, next discuss
decision making unit, the process involved and alas conclude on contact mapping structure of
Musgrave’s. Relationship management can be defined by the “process between buyers and
sellers” (Lancaster, 2009) and the key components “that drive the development of an
effective customer relationship are interdependence, cooperation and mutual trust” (Earl D.
Honeycutt, 2003). Interdependence is greatly important as it gives both Lindt and Musgrave’s
the “motivation to reciprocate the necessary trust and commitment to build a successful
relationship” (Earl D. Honeycutt, 2003).
Business relationship begins at the initial level with “commitment very limited and short term
in nature”. As the relationship progresses “level of commitment becomes more complex”
(Earl D. Honeycutt, 2003) as it grows from short term to long term. Customer relationship
management normally involves a team effort. Research has “indicated that an effective team
in terms of composition, group processes and organizational context significantly enhances
the maximization of the potential of a customer relationship” (Lancaster, 2009). This is main
concern facing Lindts key account management.
With Lindt and Musgrave’s relationship established, it is important to understand within
Musgrave the “buyer or purchasing office is often not the only person who influences the
decision or the authority to make the ultimate decision” (Lancaster, 2009). The choice is left
in the hands of Decision Making Unit (DMU). The “people in the DMU may change as the
decision making process continues” (Lancaster, 2009). Musgrave managing director Martin
Keller will is one such example of a senior management who plays an important role in the
decision made in relation to Lindt. The graph below illustrates the decision making process
for confectionary products such as Lindt.
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1. Recognition of a problem
2. Determination of characteristics, specification and quantity of need items
3. Search for and qualification of potential sources
4. Acquisition and analysis of proposals
5. Evaluation of proposals and selection of suppliers
6. Selection of an order routine
7. Performance feedback and evaluation
(Lancaster, 2009)
The nature of the process will influenced on the buying situation. For important decisions that
are acknowledged to have a higher value, usually the most complex to pass through the
process and will take the most time. The first process is the need/problem of recognition
which is determining the needs or problem due to internal or external factors. An example of
an internal factor “would be the realisation of under capacity leading to the decision to
purchase new equipment” (Lancaster, 2009).
Determination of characteristics is the next process. The DMU at this stage would have
drawn up a description of what is needed. An example might be “deciding that five lathes are
required to meet certain specifications, while the salesperson was able to influence the
specifications and can give the company an advantage” (Lancaster, 2009).
Search for and qualification of potential sources is when a major search takes place in
organisational buying. Usually “the cheaper and less important the item, the more
information the buyer possesses, the less search takes place” (Lancaster, 2009)
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Acquisition and analysis of proposals with a growing number of companies with “technical
expertise and general reputation are considered to be qualified to supply the product,
proposals will be called for analysis” (Lancaster, 2009). Next is the evaluation of proposals
and selection of suppliers. Each “proposal is evaluated in the light of criteria deemed to be
important to each DMU member” (Lancaster, 2009). Different members will use various
criteria when evaluating proposals.
Selection of an order routine involves details of payment and delivery, this is conducted by
the purchasing officer. And finally performance feedback and evaluation is the last process is
where a “purchasing department draws up an evaluation form for user departments to
complete or informal through everyday conversation” (Lancaster, 2009).
Cheif Executive
officer
Chris Martin
Centra Sales Director
Micheal Hogan
Regional sales
manager
Sales reps
Trading Director
Eamon Howell
Marketing
Director
Ray Kelly
Marketing team
Finance Director
Tim Hoban
Logistics Director
Neal Austerberry
Managing Director for Musgraves
Martin Keller
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The above graph indicates the different senior management that will play a vital role in the
partnership of Musgrave’s and Lindts key accounts plan. The organisation structure of
Musgrave’s begins with the highest level hierarchy CEO Chris Martin, who would have the
greatest influence and power to agree to the partnership of Musgrave’s and Lindt. The next
level is Martin Keller who has authority over the number of directors within Musgrave’s as
discussed above Martin Keller the managing director would be involved in the decision
making unit such as whether Musgrave should purchase stock from Lindt. On the next level
is Centra’s sales director Michael Hogan. Michael is an important contact of Musgrave’s top
management. With our main objective of the key account plan is to distribute through Centra
stores, the decision lies entirely on the sales director Michael. His main concern for deciding
whether Lindts products should be stocked in Centra’s across the country depends on how
profitable the Lindt products will sell.
Under Michaels control would be the regional sales managers for Centra. The regional sales
manager’s role will be critical in the success of the partnership as regional sales managers
have to establish a sales plan to determine how many quantities of Lindt products will be
distributed to Centra’s across each region.
Under regional sales manager is sales reps they deal directly with the individual Centra stores
and answer any queries the store manager might have in relation to the Lindt products. It is
important sales reps are kept well informed of new developments in regards Lindt
merchandise and sales promotions. Sales reps play an important role of the partnership as one
of their duties is prepare product service report and analysis how well Lindt products are
performing. The next contact is trading director Eamon Howell. Eamon would play a vital
role in key account negotiation. Eamon trading director would be in direct contact with Lindt
as his duties would involve building and maintaining a working relationship between Lindt
and Musgraves
The next contact of importance is the marketing director Ray Kelly. The marketing director
and team would be directly involved with the implementation of a brand and marketing
strategy for Lindt products in Centra stores. And finally both the finance director Tim Hoban
and logistic director Neal Austerberry are considered as critical contact in the success of the
Lindts venture with Musgrave’s. With Tim mainly focused on the financial aspect such
analysing sales and preparing budgets. Neal Austerberry expertise would lie solely on
ensuring all supply chain processes are efficient and maintain cost performance measures.
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Implementation Plan
Tactics for Implementation plan:
A sales rep could be used to promote Lindt in local convenience stores. This is a way in
which smaller retailers that has very little knowledge of the Lindt products and what they
offer can be targeted directly. This is an easy way to reach your smaller local convenience
stores. However the factor that needs to be taken into account here is expense, is it feasibly
possible to attend theses stores on a permanent basis or is it too expensive to do so
Musgrave’s could provide a Lindt pick and mix in some of their busier shops e.g. Centre
Dame Street- The pick and mix would offer a wide variety of Lindt products. The most
important factors for this to be successful would be display and placement. This is where
cross category management strategy can come to the fore and a very important part of this is
display placement strategy. “The location and proximity of displays of one category with
respect to another category can have significant effect on the sales of both categories”
(Bezawada, R. 2009). It is very important that the pick and mix would catch the customer’s
eye as soon as they enter the store.
Independent retailers- Implementing regional sales reps to visit independent retailers on a
regular basis promoting the Lindt products would be the easiest method but not necessarily
the most feasible solution due to high expense. If it isn’t possible for reps to travel then the
next best solution would be for the information to be sent to retailers. This could be done in
various different ways such as sending trade magazines or fact sheets. Another method which
can also be quite effective is telesales which is where the salesperson makes their initial
approach by telephone. It is cost effective allowing for the salesperson to contact the retailer
on a regular basis.
Convenience garages- Convenience garages such as Topaz, Esso and Applegreen provide a
significant opportunity for Lindt to move their products and in turn increase their sales
dramatically. Lindt could focus on a hot chocolate to go. This has the potential to be very
successful as these stores are based along main roads and motorways and could be targeted at
people constantly on the go.
Sales Rep Budget:
Through our research, a sales representative will be on an annual salary of € 32,000. On top
of the salary there will be emotional costs such as bonuses, car, mobiles phones and other
expenses. Lindt is such a well-known brand that the sales rep doesn’t need more than 4-5
years’ experience because the majority of people will recognise the brand. We have decided
49
that we will divide our sales rep geographically and the Dublin region as it is a larger area of
the country with more Centra Stores. For example a sales rep in Munster could manage
around 50-60 accounts.
Estimated Budget for Sales Rep:
Average Sales Rep € 32,000
Turn Over 150% € 48,000
Total sales rep for Lindt 17
Turnover in a year € 816,000
There are 465 Centra stores in Republic Of Ireland. If each sales representative covers 27
stores this means that Lindt will need 17 sales reps in total to cover Ireland.
With the introduction of the mix n pick and the hot chocolate to go as well as the product
being in convenience stores we hope that Lindt sales figures will increase by 21%. With so
many people relying on convenience stores for their hot beverages on the go and the
availability of picking up products easily displayed and available.
Risks and Contingencies
“In Ireland, the main distribution channels for the confectionery market are convenience
stores, which account for 35.9%”. (MarketLine Industry, 2012).
1. Sales may not increase in the convenience stores:
Convenience stores are there for customers who want to purchase a product quickly but if this
sector does not provide in store services, sales may not increase. “Busy shoppers want a one-
stop shop on their corner where they can pay bills, top up their phone and get photo prints all
in one go.” (Murphy, O, 2008).
2. Relationship between sales rep, convenience store and Musgraves:
2.1 Sales rep and convenience store:
Sales representatives have a job to insure that their product is in customers eye view. If the
sales rep wants their product to be move but the retailer do not, this may cause a
disagreement between the two.
2.2 Convenience store and Musgraves:
Retailers and wholesalers may have problems working together. When a retailer wants to
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order a product from the wholesaler but may not have the product they want, the retailer then
gets frustrated because they need to respond to customer demand. Also, logistically there
may be problems that can lead to difficulties between the convenience store such as late
deliveries, products missing, wrong delivery day.
“Confectionery includes a wide range of product categories, and within each segment,
manufacturers have many opportunities to create goods that stand out from the rest (for
example, manufacturers may offer sugar free cereal bars especially for individuals with
diabetes). An increasing number of products have been developed to create healthier
alternatives to the existing lines, with substitute versions offering no artificial colours, low
sugar, as well as the inclusion of additives such as vitamins. Along with the inherent
differences (e.g. taste, ingredients, etc.) between products, manufacturers invest in advertising
to build brand identities. Retailers therefore need to respond to consumer demand and the
presence of strong differentiation and brand loyalty among consumers’ leads to a weakening
of buyer power. However, most retailers in this market offer a wide variety of foods. As
confectionery is only a small part of the retailer's total product range, buyer power is
increased. Manufacturers and retailers generally exist in very different businesses, with little
likelihood of vertical integration. Overall, buyer power is assessed as moderate”. (MarketLine
Industry,2012).
“For retail buyers, the substitutive goods have some disadvantages in terms of storage:
snacks, such as potato chips, require more shelf space per item than, for example, chocolate
bars; fruit is perishable and may need expensive chilled display cabinets, if wastage is to be
avoided”. (MarketLine Industry, 2012).
3. Lindt/Centra = more risk, more profit:
“Despite a slowing economy, convenience brand Centra added 47 new stores to its network
in 2007, with a further 44 new stores planned for the coming year, representing an investment
of over €130 million by its retail partners in just two years.” (Checkout.com. 2008).
Therefore, the convenience store, Centra added more stores around Ireland, is an increase in
profits from Lindt.
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4. Musgraves = less risk, less profit:
Musgraves help convenience sectors like Centra deliver their products so it is less of a risk
associated with them. The retailer will get the bigger profit.
Theories of Motivation
Motivation can be defined as “the management process influencing behaviour of knowledge
on what make people think. It contributes to the process of stimulating people to act and
achieve specific goals. As motivation concern, reward system is an important tool for
management use as the channel of employees’ motivation” (Luthans, 1998, as cited by
Rahim, S & Daud, W, 2013, P265). (Wright, J &Wiediger, R, 2007, P5) state that
“behavioural scientists view motivated behaviours as arising from physiological and/or
psychological need or desire. This need or desire activates and directs the individual towards
appropriate goals that will hopefully satisfy the arousal”.
Maslow’s Hierarchy of needs was established by Abraham Maslow in 1943. The hierarchy is
broken down in 5 basic needs in the form of a pyramid and once one need is met the need
above that one gains more significance. The 5 needs consist of: Physiological, Safety and
Security, Belongingness, Self-Esteem and Self Actualisation. (Berl, R, Williamson, N &
Powell, T, 1984, P33) depict that “historically, members of the sales management community
have used Maslow’s Hierarchy of Need to explain each employee’s need structure and
motivational state” the authors continue by stating that “three basic assumptions have been
presumed to underline this theory. First, unsatisfied needs stimulate behaviour, while satisfied
needs are not motivators. Second, people’s needs range from most basic (physiological)
upward to more complex levels (e.g. self-esteem). Third, individuals, must, at least
minimally, satisfy a lower level of need before moving upward and activating a new area of
need”.
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(www.changingminds.org)
Maslow’s theory is quite a dated motivation theory and would not be recommended for Lindt
to pursue in the case of their Sales Representative. “Maslow…did not suggest which need
should be the most of least satisfied since it depends on the environment. According, studies
that attempt to test Maslow’s theory by measuring the least or most satisfied needs are in no
way accurate of his theory” (Wahba, M & Birdwell, L, 1976, P227).
The Two-Factor theory (sometimes mentioned as Dual Factor theory) suggests that there are
particular elements in a work organisation that lead to job satisfaction, while a completely
separate set of elements lead to job dissatisfaction. The theorist behind this theory is
Frederick Herzberg and he declares that job satisfaction and dissatisfaction act impartially to
each other. According to (Shipley, D & Kiely, J, 1968, P9), “the model propounds that job
performance is determined by workers motivation which, in turn, is a function of workers
satisfaction and dissatisfaction arising from factors associated with the job”, on the same page
the authors define job satisfaction as “an emotional response accompanying thoughts or
actions related to work”. Herzberg believed that in order for an employee to be satisfied they
must be driven by motivating factors and these, in turn, will generate job satisfaction and,
thus, an improved performance in the workplace, “job attitudes were usually associated with
variables that were intrinsic to job content. These were called motivator factors and they
included achievement, recognition, the work itself, responsibility, advancement and growth”,
hygiene factors were the elements that caused dissatisfaction “they consisted of company
53
policy, administration, supervision, relationships with supervisors, work conditions, salary,
relationships with peers, personal factors, relationships with subordinates, status and
security” (Shipley, D & Kiely, J, 1968, P10).
(www.wikispaces.psu.edu)
It is clear from this research that with the Two-Factory theory it is important for both
employee and employer to work together in order to create job satisfaction. It is important
that the employee feels a sense of self achievement and to be given recognition when
necessary. It is also vital that employees try to avoid bringing personal issues into the work
environment as this can lead to conflict with peers, supervisors and subordinates and,
ultimately, cause job dissatisfaction.
The ERG Theory was developed by Clayton Alderfer, this theory is an expansion upon
Maslow’s theory of motivation through a hierarchy of needs. Alderfer categorised the
hierarchy into three different groups: Existence, Relatedness, and Growth. The existence
group relates to Maslow’s physiological and safety needs, Relatedness aligns with Maslow’s
social and esteem needs and, finally, Growth corresponds to Maslow’s self-actualisation.
Alderfer also suggested that there is a regression parallel to the ERG theory, he stated that if
an employee does not reach the needs in a higher category the reinvest their efforts into a
lower category. (Arnolds, C & Boshoff, C, 2002, P698) declare that “According to Alderfer,
man is motivated by three groups of core needs, namely Existence, Relatedness and Growth
needs, hence the name ERG theory. The existence needs include the human basic needs
54
necessary for existence, which are the physiological and safety needs. The relatedness needs
refer to man's desire to maintain important interpersonal relationships. These are man's social,
acceptance, belongingness and status desires. The last group of needs is the growth needs,
which represent man's desire for personal development, self-fulfilment and self-
actualization”. Alderfer’s theory has been praised for its strengths and how it further
developed the hierarchy and motivates those in the work place “The ERG theory is however
regarded as a more valid version of the need hierarchy and has elicited more support from
contemporary researchers as far as motivation in the work situation is concerned. One of the
main strengths of the Alderfer theory is the job-specific nature of its focus” (Robbins, 1998 &
Luthans, 1998 as cited by Arnolds, C & Boshoff, C, 2002, P698). Similar to this theory is Mc
Clellend’s Need theory based on the need for achievement (achievement-motivated people),
affiliation (those who prefer to create and maintain social relationships) and power (those
who desire to encourage and influence others). This theory was developed by David Mc
Clellend who suggests that the need for achievement, affiliation and power all effect people
within a managerial context and that, typically, people will have a combination of the various
needs which will motivate those in different aspects. According to (Ankil, R & Palliam, R,
2012, P8) “Needs viewed as energizers trigger certain behaviours or attitudes. When need
deficiencies are prevalent, the individual is more susceptible to motivational efforts.
However, in determining the needs of others, managers may be mistaken. It may be short-
sighted to think that one can adequately determine the needs of others”.
The above information depicts various motivation theories used to motivate those in the
workplace. In the case of Lindt’s Sales representatives we would recommend they implement
the Herzberg theory, but to also take into consideration the important aspect from the other
theories and implement them into motivating their sales representatives in order to increase
sales.
Rewards and Appraisal Systems:
According to Jack N. Kondrasuk, the term “Performance Appraisal” has been synonymous
with performance evaluation, performance review and other similar terms. (J. N. Kondrasuk,
2012).
The first step in developing an effective performance evaluation system is to determine the
organisation’s objectives (Boice & Kleiner, 1997). These objectives are divided up into
55
departmental and individual position objectives- working with employees to agree on their
personal performance targets. Once the performance standards are set, corporations need to
decide which performance appraisal system is optimal to meet its objectives and motivate
employees (Shillip & Klimberg, 2009). Additionally a performance appraisal system should
help managers groom their employees to accomplish objectives that will help the corporation
gain competitive advantage (Cascio, 1991). To be a successful business you need to
customize performance appraisal for every environment. Traditionally, performance appraisal
systems usually only take place once a year, however according to (Campbell 1970)
employers face difficulty remembering what employees did over the previous 6-12 months.
Corporations with monthly or quarterly performance appraisal assessments outperformed
competitors in financial and productivity measurements and got positive feedback from
employees about fairness of the performance appraisal systems (Juran, 2004).
Types of appraisal systems
Self-appraisals
Self-appraisal gives employees an opportunity to evaluate their own performance. This type
of appraisal works especially well with highly motivated, self-directed, and career-focused
workers. Employees usually like self-appraisal because they can express their interests and
goals and explain how they think they have performed, without being weighed down by their
supervisor's judgments or conclusions.
Peer reviews
The peer review method rests on the concept that individuals who perform similar work are
in the best position to judge an employee's performance. Peers understand the nature of the
job; are familiar with the worker's activities; share common concerns; and are relatively
unburdened by issues of power, dominance, and control. Peer review often is used by
employers that support self-directed work teams, but it can be adapted to almost any work
setting. One advantage of peer appraisal is that it can generate regular, reliable, and valid
feedback from a consistent number of sources.
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Graphic Rating Scales
Graphic rating scales, also known as continuous score scales, are the most widely used
technique to evaluate performance. Rating scales provide a list of traits or characteristics for
example, quality of work, quantity of work, appearance, dependability, cooperation,
initiative, judgment, leadership, responsibility, decision-making ability, and creativity—and
the rather is required to evaluate the employee on each trait. The scoring system typically
offers a continuum of three to five possible ratings, with descriptors ranging from
unsatisfactory to outstanding.
360 Degree Performance Appraisal
The style of 360 degree performance appraisal is a method that employees will give
employers confidential and anonymous assessments on themselves and colleagues. The 360
degree performance appraisal generally works best with the appropriate training and the right
resources; a 360-degree appraisal is a powerful and positive addition to any performance-
management system (Newbold, 2008).
A well-managed and well integrated 360-degree appraisal provides good quality feedback
from colleagues and supervisors. Systems of 360-degree feedback provide one of the best
methods for understanding personal and organisational developmental needs. Additionally,
many employees feel that this type of feedback is more accurate, more reflective of their
performance and more validating than feedback from the supervisor alone. When feedback
comes from a number of individuals in various jobs, discrimination can be reduced.
S.T.A.R performance appraisal system
The aim of S.T.A.R system is to reward standout employees for doing the best they can do
within the organisation. This system works through a point’s scheme. “Points can be picked
up by employees for integrity, respect and regard for others, teamwork, environmental
awareness, reliability, outstanding work, courage of conviction and initiative. Practical and
useful suggestions that are beneficial to the company can also earn an employee points”
(Noronha, C, 2001).
The S.T.A.R system indicates that “Level 1 is the silver stage and it requires an employee to
earn 120 points in three months. Level 2 is the gold grade and can be achieved by gathering
130 points within three months of reaching the silver level. Level 3 is the platinum standard.
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To reach this level an employee has to accumulate 250 points within six months of reaching
the gold level. At 510 points and beyond an employee can be part of the chief operating
officer’s club. Total 760 points or more and he or she can breathe the rarefied air of high
achievers and move into the supreme grade at the corporate level, the managing director’s
club” (Noronha, C, 2001).
This system encourages employees to make suggestions to the management with regard to
the workplace and in return, leads to customer satisfaction, “the S.T.A.R program is linked to
customer delight; it is based on the premise that happy employees lead to happy customers.
Employee recognition is, hence, directly linked to customer satisfaction. It is recognition for
the people, of the people and by the people.” (Noronha, C, 2001).
Type of rewards
To understand what type of rewards to set in a business, managers should review extrinsic
and intrinsic rewards. To further develop rewards, monetary and non-monetary rewards need
to be understood also.
Extrinsic
These rewards are external and “tied to employee’s behaviour, skills, times and roles in an
organisation.” (Hurd, A and Barcelona, R and Meldrum, T 2008). How an employee
perceives these rewards are determined on their performance. A manager needs to evaluate an
employee’s extrinsic reward on an individual basis.
Intrinsic
Employees that feel good for the job they have done, the effort they have put in or the part
they played in a team project are all intrinsic rewards. The manager needs to make sure job
enrichment is high for their employees. This involves a manager insuring work process and
the surrounding environment is highly satisfying for their employees. (Hurd, A and
Barcelona, R and Meldrum, T 2008).
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Monetary and non-monetary rewards
These rewards include “bonus, pay increase and increase in benefits, such as health
insurance.” (Hurd, A and Barcelona, R and Meldrum, T 2008). Managers should review both
indirect and direct monetary rewards.
Direct monetary rewards
Direct monetary rewards are based on an increase in hourly rate of pay, increase in salary,
merit pay based on performance and bonus. (Hurd, A and Barcelona, R and Meldrum, T
2008).
Indirect monetary rewards
Indirect monetary rewards offer a range of services. These include an increase in “benefits
such as dental health, days off for training, caring for a child or elderly parent and leave for
illness”. Some organisations offer services as part of their non-monetary program such as
“on-site cafeteria, a games room and counselling services.” (Hurd, A and Barcelona, R and
Meldrum, T 2008).
How Lindt should reward and appraise their sale representatives:
From the above research, our recommendation for a rewards and appraisal system that Lindt
should use is, the STAR performance appraisal system and both extrinsic and intrinsic
rewards, as well as monetary and non-monetary rewards. For the extrinsic rewards, Lindt
should review what each employee enjoys doing. For example, Lindt may provide one of
their sales representative tickets to a football game for the good work they have done but
another employee may receive an increase in their salary. Intrinsic rewards will be used to on
a regular basis, as it is important to motivate employees. Direct monetary rewards will
provide Lindt sales representatives an increase in their bonus at the end of the year if set
targets are achieved. Travel incentives such as a company car will make travel for a sale
representative easier. Indirect monetary rewards will also be used for sales representatives
such as dental health. Both the STAR performance appraisal system and rewards mentioned
in this report, will benefit Lindt’s sale representatives, as it will improve employee
59
performance and communication on business goals. The individual is therefore more
motivated and has a better understanding of strategic aims, which would lead to an increase
in job satisfaction. (Martin and Jackson, 2005, p153).
Recruitment and selection The sales reps are seen as one of the key individuals within an organisation. With industry
experts supporting the claim “that salespeople should be considered the most important group
of employees, as the sales staff” (Lawlor, 1995). But “turnover in sales staff has typically
been higher than many other employee groups” (Mathews, 2001). “Much of the problem has
been attributed to recruiting inappropriate individuals, people who cannot sell” (Clopton,
1992). “High turnover rates can be both costly for an organisation and can be disruptive to
the organization, in terms of disturbance to work routines” (Mathews, 2001). Firstly “there
are recruitment and training costs, which is often calculated at half a year's salary” (Mathews,
2001). Recruitment and training can cost “in the region of £8,000–£9,000 in the United
Kingdom” (Mathews, 2001). Another hidden cost to employing an inappropriate employee is
the negative impact they can have on the business by upsetting “customers, lost sales and
disharmony among the more reliable staff” (Mathews, 2001). Cost of employing the wrong
person can be very hard to measure among larger companies, but with smaller more
vulnerable this can have detrimental impact on the company resulting in the closure of the
firm.
“The recruitment of high quality staff can make a major impact on an organisation's overall
performance” (Mathews, 2001). Research carried out by Mathews and Redmond suggest that
best employee outperform the worst employs by a by a 2:1 ratio. As by hiring the correct
employee it can have a positive impact of the performance of the company.
“Texts on recruitment vary on different recommendation on what systems to follow”
(Marilyn Carroll, 1999). To help prevent the employment of incorrect employees to the
position the following four procedures need to be adhere to by the HR manger, such as
“assessing whether the vacancy needs to be filled, a job analysis, the production of a job
description and a person specification” (Marilyn Carroll, 1999). The first step is to assess
whether the vacancy is needed to be filled, if so can they be recruited within the internally
environment by determining the staff level at presence and in the future or recruited
externally. Internal selection involves recruiting existing staff in the firm by transferring them
to a different section. The first step is to forecast labour demand. This is the most important
60
and most difficult aspect for the HR manger to determine. Internally supply focus firstly on
age profile. Age profile can be conducted by the company to predict if the company has a
young workforce or an aging workforce. The following are two examples of companies
conducting an age profile.
(Prendergast, 2014)
Another aspect of determining the internal supply is absenteeism within the company. HR
mangers need to look at in more detail the two factors resulting in absenteeism being the
employee’s ability to attend or motivation to attend work. These deciding factors will indicate
to the company whether they should recruit within the company
And last step in evaluating the internal supply is labour turnover, which is co related to
absenteeism. The HR manager must take into account geography aspect when deciding if
there is an oversupply (loose) of high skilled workers or an undersupply (tight) of workers.
The next procedure is job analysis which involves identifying human behaviour necessary to
carry out the job. “Choosing a staff member doesn't simply come down to who has the right
qualification” (Druggist., 2014). It is “finding someone who will complement the existing
team which is key” (Druggist., 2014). An example would be “all successful businesses are a
team effort, even if they are under the leadership of one person” (Druggist., 2014), therefore
the potential applicants would have to possess team building skills. The next procedure is the
“production of a job description” (Marilyn Carroll, 1999). Jobs description can be determine
by the following methods:
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1. Questionnaire
2. Check-list
3. Individual interviews
4. Observation interviews
5. Group interviews
6. Expert analysis
7. Diary method
8. Work participation method
9. Critical incident method
(Prendergast, 2014)
Once the company has “decided what kind of person it wants in terms of qualifications and
personal qualities” (Druggist., 2014), the company can begin to draw up an advertisement.
“There are plenty of options available when it comes to publicising vacancies, from
advertising online to using recruitment agencies” (Druggist., 2014). Depending on quick the
company needs the vacancy filled online would be the best option. The online formats and
platforms are fast to “reach a wide audience, including people that might be relocating to
your area” (Druggist., 2014). “"However, some candidates may prefer more traditional
adverts in local papers or specialist journals. The key is to consider the options every time
you recruit. The best option for one vacancy may not always be the best for another"
(Druggist., 2014). The advert must be attractive to entice potential employees from their
current employer to become part of another company’s team. It has been advised by industry
experts to "keep adverts simple and focus on the key attributes and requirements, such as the
level of qualification required" (Druggist., 2014). Elements to be include on a job advert are
as following:
Job title Department Location Reports to Purpose Main tasks Liaison & main contacts Staff responsibilities Special feature Rewards & conditions
62
The company’s also “need to consider what you can offer to make the package more
attractive” (Druggist., 2014). The final step is preparing a personal specification.
Personal specification describes the ideal person for the job & provides a detailed
description of the criteria necessary to do the job effectively. The following are a
number of important factors that influence personal specification.
1. A description of who you are looking
2. Has to relate to a particular job
3. Needs to be very specific
4. Needs to be able to differentiate between people
5. Must be able to assess whether a person meets all the requirements or not
(Prendergast, 2014)
The next step is selection. Selection can be defined as the “process of gathering information
for the purposes of evaluating and deciding who should be hired, under legal guidelines, for
the short and long term interests of the individual and the organization” (Schuler, Dowling, &
Smart, 1992).
To help support personal specification there are a number of selections methods such as:
Description
Grading
Points
Weighting
The following are example of selection methods used to determine whether the person is fit
for the job by evaluating his or hers skills under the following heading.
Irish Selection Criteria
Personal characteristics 4.6
Ambition/potential 4.5
Sales experience 3.9
Knowledge/experience 3.8
Personal mobility 3.8
Educational level 3.7
Age 3.4
(Lambkin and DeBurca, 1993)
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Important indicators of success
Enthusiasm
Good organisation skills
Ambition
Persuasiveness
Sociability
Ability to follow instructions
(Gilbert A. Churchill, 1979)
The first option for Lindt is to recruit internally by selecting existing staff in the firm by
transferring them to a different section. The disadvantage for Lindt employing staff within the
company is that they may lack the skill sets need for the position compared to other potential
employees outside the firm. Thus recruiting outside the company would be a good option for
Lindt. There are many “different procedures of recruit” (Roussoudan Bourtchouladze Ted
Abel, 1998). Companies such as Lindt will depend on the “sources used that will be
influenced by type of selling required” (Avlonitis, 1986). Example of recruitment Lindt could
use is referrals by existing employees, customers, personal contacts. As suggestion for Lindt
would be to head hunt sales reps to leave their existing company. Lucrative package deals
could be offered to entice them to switch. The downside of Lindt poaching other employees
can be deemed as bad business ethics.
Another form of recruitment Lindt such perform is advertising. Advertisements are the best
form of recruitment, as there are so many different media platforms companies can place
their adverts on i.e. radio, newspapers, twitter, LinkedIn and jobs sites. Advertisements may
allow Lindt the opportunity for corporate branding. The advert such be a true representation
of the Lindt. Well written adverts with an attractive payment package can entice applicant
who were not actively seeking a job before to apply. Another option is that Lindt could
recruit sales reps through an agency. The advantage of employing an agency is they can offer
unbiased opinions, have expertise in the area of selection and can help reduce the time it
takes to recruit by improving the job description and personnel specification. The only
downside of an agency is that they are expensive cost for the company. And finally the last
source of recruitment is through Educational Institution. By recruiting through the IT and
University this allows Lindt to develop strong links between the college. By Lindt recruiting
graduates within the college the company will be ensured to receive applications from young
64
and highly skilled graduates. The only downside to recruiting within a college is the potential
employees will lack experience, therefore require more training. Overall through a
combination of recruiting through Colleges, head hunting and advertisements are the most
beneficial forms to recruit sales reps for Lindt.
Sales process
A document set of repeatable, interrelated activities from market awareness, lead generation,
selling and qualification activities which are followed by everyone in the company. It is “the
activities carried out by the salespeople and the personal characteristic’s necessary for a
successful sales career” (Ingram N. T., LaForge W. R., Avila A. R., Schwepker H. C.,
Williams R. M., 2012).
Every activity can be measured for throughout and efficiency has a standard deliverable that
is checked for quality and consistency, and can be assessed so that improvements can be
made to the people performing the activities, or to the process itself.
The Select Selling process
-Understand the buyer needs (requirements)
Qualify the Opportunity
Plan and manage the pipeline
Target customer selection
Negotiate and close (Daly and O’ Dea, 2004)
Understanding the buyer needs
The sales job is vital to effective selling. First of all it’s very important to understand the
buyer’s needs. It’s important that a Salesperson recognises the hierarchy of needs a customer
possesses. According to recent research retailers have seen many changes in customer
behaviour over the recent years. The key changes include buying more items on “special
offer” and shopping around more between the different stores. If Lindt are to increase their
sales in convenience stores such as Centra and Spar, they would need to appeal to the
customers by doing special offers to attract their attention.
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Qualify the Opportunity
Generally salesperson creates sales from existing customers, but it also entails gaining new
customers. “The first step in achieving this is identifying suitable prospects” (Donaldson, B.
2007). Leads can be developed from response enquiries such as telemarketing or advertising.
Salespeople can also generate their own leads through personal contacting or lists/ directories
for example. “However a lead is a suspect which has to be qualified to become a prospect”
(Donaldson, B. 2007). This basically means for a lead to qualify the customer in question
must need that product. A possible approach for Lindt could be to use telemarketing.
Telesales is where the salesperson makes their initial approach by telephone. “Using the
telephone as a means of customer contact to perform some or all of the activities required to
develop and maintain account relationships”.( Ingram N. T., LaForge W. R., Avila A. R.,
Schwepker H. C., Williams R. M 2012) It is cost effective allowing for the salesperson to
contact the retailer on a regular basis.
Plan and manage the pipeline-Precall planning
Preparation is key to success. “Precall Planning involves setting objectives, gathering
information about the buyer and their company and deciding what questions to ask and what
you intend to say” (Donaldson, B. 2007).It is important not to ask questions that should
previously be known. Lindt aim to target the convenience sector, Musgrave’s will be their
buyer and they will distribute the product to the convenience sector to shops like centra and
spar. For the precall preparation information about buyers, competitors along with sales
history should be included. This information can all be seen in our key account on
Musgrave’s.
The approach- Target customer selection
This involves getting an audience with a prospect. “There is a skill in getting to see the right
people so that your message can be communicated and understood” (Donaldson, B., 2007).
Lindt’s target market is the Irish confectionary market. There was a growth of 3.7 per cent in
2012 according to Kevin O Shea, regional sales director of Musgrave’s. Lindt can be
competitive in this market and with Ireland having “the highest per capita consumption of
chocolate in the world” (2008). Through Musgrave’s Lindt’s aim is to carefully exploit a
niche in the convenience sector and exploit this.
Negotiation and close
“Effective closing means agreeing on the objectives that both parties are trying to meet and
which take the relationship forward to further integrated activities”(2008). In order for both
parties to agree there will generally be a process of negotiation. “It is clear that in personal
66
selling, the interpersonal nature of the exchange means that a process of negotiation takes
place”. Negotiating is said very much to be a part of selling. Lindt have effective closing on
their sales process because everything has been successfully negotiated with Musgrave’s and
both parties have agreed on a contract.
Soft Side of Selling and Sales
The soft side to selling and sales is a “more qualitative measures of performance - rather than
just assessing sales representatives of their targets but also measuring them on softer
approaches such as 'team work' and collaborating” (Lesley M., 2014).
“By customising and personalising your promise to your client you are creating uniqueness.
There is even more scope in the soft side to differentiate you from any competition. Your
goal becomes to let your client trust, respect and enjoy working with you“( Dave Pavitt,
2014). It is important to assess sales representatives on a team work basis, “Team-based
selling can be exceptionally effective”. (Rutigliano, T and Brim, B. 2011).
However, it “depends on how the teams are formed”. (Rutigliano, T and Brim, B. 2011).
This needs to be an important decision for a company. They must ensure to put sale
representatives together that can work well together, as “individual sales people cannot
possibly be a fit with all the buyers they encounter.” (Rutigliano, T and Brim, B. 2011).
According to Christian Schmitz (2012) team based selling also encourages internal
coordination, cross-selling and customer solutions (Moorman and Albrecht, 2008).
67
(Levy, P. 2011).
Many companies structure their sales forces in groups or teams according to set criteria, such
as geographic districts, products, customer segments, selected major accounts, or some
combinations (Schmitz C., 2012)
We would recommend Lindt to compose a team of sales representatives that will always
work hard towards goals, work well together and to keep in mind of the “leaders they admire,
leaders who have the positions they want to hold, leaders who have the skills they need,
leaders who have achieved what they seek. Meet with these people one by one to ask
questions, seek their guidance, and learn from their experience, a dream team is a collection
of advisors who help you get where you want to be.” (Jay, J. 2011). Having the right “dream
team” will encourage motivation and each sales representative will always want to achieve
more, without even focusing on their target. Having the right team will also bring success for
Lindt in achieving the set sales and will eliminate competition as far as it can possibly can.
Creating trust for both parties, the company and the customers is essential, as progress can
then be made and credibility in the brand will increase. ( Pavitt D.,2014)
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Targets and Incentives for Sale Representatives
Once the sales reps have been recruited and selected the next step for Lindt is to decide the
incentives and target plan for the new employees. When deciding on the objectives of a sales
target plan its main goal is to enhance a salesperson’s performance by granting them a bonus
when they have reached a specified performance level (Darmon, 1997). Even though “quota-
bonus plan” (QBP) or sale bonus plans are short term plans, they do have long term profit
impacts through their effects on sales force morale (Darmon, 1997). Lindt need to put in
place targets for their sale representatives on a monthly or quarterly basis. This tends to work
best as it will keep sale reps more motivated if they are reminded of what there is to be
offered when target are met. “Customer orientated selling” is defined by as the
implementation of the marketing concept of the salesperson where he or she focuses on
identifying the customer needs. This approach requires that the sales person enlists
behaviours that increase long term satisfaction (Dunlap, et al., 1988). In order for sale
representatives to keep customer orientated selling in mind they must be motivated by their
employees.
There is a large importance attached to the various types of motivators for sale
representatives. Using approaches designed to enhance sale representative’s performance a
number of factors show the perceived importance for pay rises, promotions opportunities,
recognition, incentive rewards and fringe benefits (Chonko, et al., 1992). In addition to
determining that pay rises receive the greatest importance there can also be other incentives
in order to motivate sale representatives. Some companies overlook commission as part of
their reward structures. Studies have shown that many sale representatives preference
commissions versus other rewards (Burnthrone, et al., 2006). The report suggested that the
importance of commission as a reward for salespeople across different industries and
different demographic profiles. It showed that higher commission rates were preferred then
followed by pay rises. However, for Lindt’s representatives they would benefit greatly from
rewards for their performances such as pay increases this would be the main objective for
Lindt when offering a reward. This pay increase would occur for example when a sales
representative met their target of the number of convenience stores installing the new “Hot
Chocolate to-go” system.
According to (Hastings, et al., 1988) a sample of 1,083 sales representatives reported that
travel is a strong motivator and valued more highly than several other types of incentives.
69
This would prove to be very important to Lindt. Sale representatives for Lindt would be
travelling a lot around the country promoting the product. This field of incentive would prove
to be strong for Lindt. The incentive for Lindt reps would to the offer of a company car if the
representative met their targets set out by Lindt and Musgraves. Lindt’s goal is to increase
sales in smaller independent stores as well as larger convenience stores. In order for Lindt to
increase their sales in this area their best strategy is to target shop owners with a direct
approach from Lindt sale representatives. In order for sale representatives to be motivated
travel expenses would be offered and if targets were met a company car would be offered as a
reward. Positive reinforcement’s makes reps strive to gain another deal of that magnitude.
Promotions opportunities are another option available as incentives for sale representatives.
However this option is seen as less of a motivator and so is the option of recognition
(Chonko, et al., 1992). Sale representatives want to see more physical rewards especially in
this economic climate. Sale representatives feel that the option of just recognition or
promotion opportunities is just not suffice in terms of reward potential.
Deployment
According to (Pinals, D, 2012) “Effective sales force deployment is composed of three key
components:
Optimal sizing of a sales force
Optimal workload allocation
Optimal alignment of sales territories to balance workload and minimize travel
With major costs of a sales organization reflected in the time and energy of its sales people,
effective allocation of the sales forces becomes a critical factor in controlling cost of sales
and increasing revenue”. It is clear from this that the three components of Deployment are
vital for the successful implementation of Sales Representatives for Lindt. (LaForge, R,
Cravens, D & Young, C, 1985, P50) declare that “an exciting opportunity to increase sales
force productivity is to change the way the sales force is deployed. Even modest
improvements in the coverage the sales force gives to accounts can translate into large profit
increases”. With the correct deployment of Sales Representatives for Lindt Chocolate this
should increase sales hugely for the organisation. In Deployment it is vital that all tasks are
allocated correctly. Lindt must ensure they have the correct amount of Sales Representatives
doing their jobs and have enough time to meet sales targets. “Deployment decisions are
70
essential resource allocation decisions. Management must decide how limited resources
(sales calls, selling time, and so forth) should be allocated to competing units (accounts,
trading areas, and so forth). The challenge is to determine the specific allocation of sales
resources necessary to achieve sales and profit goals” (LaForge, R, Cravens, D & Young, C,
1985, P51&52). In relation to Deployment there are many questions that need to be addressed
in order to increase sales. Firstly is how many Sales Representatives will need to be hired,
(LaForge, R, Cravens, D & Young, C, 1985, P52) imposed this question as “how many
salespeople should be employed to provide proper coverage to the firm’s total market?”
Efficient allocation of Sales Representatives is vital for Lindt to increase sales and generate a
significant profit. We, next, need to analysis what territories the Sales Representative will be
divided into. For example, in the greater Dublin, a lot more representatives will be needed
compared to those who will be required in more rural areas of the country. “Once salesforce
size is established, management can divide the total market into sales territories and assign a
specific territory to each salesperson” (LaForge, R, Cravens, D &Young, C, 1985, P52). It is
important that Lindt understand that this is a changing environment and increases and
decreases of Sales Representatives will be required throughout. “Most important, effective
salesforce deployment is achieved through ongoing process… rather than a one-time single
event” (Pinals, D, 2012).
Sales Territories
Sales territories will be developed when the amount of selling effort and size of sales force
has been determined. When the number of sales territories has been decided, the manager can
then come up with the territory design. The sales manager will try making all territory’s equal
with regard to how much selling effort and sales potential they have. Ideally the manager
wants the sales people to be able to cover the territories as efficiently as possible. “When
territories are basically equal in potential, it is easier to evaluate each representatives
performance and to compare salespeople” (Johnston, M, Marshall,G.2013). When the
workload is distributed equally they eliminate disputes between the sales force and
management.
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Stages in Territory design
The stages in territory design consist of a six step process. Above is a diagram of a six step
method of a territory design. The method that I recommend Lindt to use is from (Johnston,
M, Marshall,G.2013).
Step 1, Select basic control unit. “The basic control unit is the most elemental geographic
area used to form sales territories” (Johnston, M, Marshall,G. 2013). These can consist of
counties or cities. In general small geographical units are preferred to large ones; this is
because large units might hide the actual potential of that area with areas of no benefit in
sales. Small sales territories are much easier to control and assign new accounts and change
sales people to different accounts.
A trading area is made up of a city and the area that surrounds it. These trade areas are an
economic unit which has no interest in anything that is noneconomic. These trading areas
would be a lot more common in America with the likes of New York, New Jersey falling into
the category of a trading unit.
Counties would be the most wide spread method of control units in Ireland. Lindt should
consider setting up control units in each county. These counties can have small trading
districts within them; these can consist of the likes of Aungier Street, Grafton Street,
O’Connell Street. Lindt can benefit from using small trading areas in counties by having
maximum control over these areas and having the ability to cover these areas and accounts
effectively due to the small size of them.
Step 2, Estimate market potential, this step involves looking at the market potential in each of
the control units. Data must be collected and available for these small areas. The best place
that Lindt will find out about the areas and what the potential for selling is in these control
units is by looking at CSO stats. “Sometimes the potential within each basic control unit is
72
estimated by considering the likely demand from each customer and prospect in the control
unit” (Johnston, M, Marshall,G.2013).
Step 3, Form tentative territories, in this step of the design process it involves joining basic
control units into larger geo graphical areas. These units are joint together so that sales people
do not cross paths while covering their areas. At this stage of the development, it is not so
important that the control units are equal in selling potential but are equal in the ability to
access all of the accounts in an efficient and effective way. All of these efforts are put in
place to be able to align the territory.
Step 4, Perform workload analysis, once the boundaries are set in place it is time see what the
determined sales effort will be in the territories. The workload analysis will look at areas such
as account analysis, Criteria for classifying accounts and determining account call rates. .
“Salesforce size = Forecasted sales / Average sales per person” (Ingram, La Forge. 2012).
“Number of salespeople = Total selling effort needed /Average selling effort per” (Ingram,
La Forge. 2012).
Step 5, Adjust tentative territories, the boundaries which were established in step 3 are to be
changed due to the extensive work overload that has occurred in step 4. For example Grafton
street, henry street and O’Connell street might have the same sales potential as the IFSC, the
docklands and donnybrook but it will take less time to cover the territory of Grafton street,
hennery street and O’Connell street. “Clearly, reciprocal causation exists between account
attractiveness and account effort” (Johnston, M, Marshall,G.2013).
Step 6, Assigning salespeople to territories, after the final boundaries have been established
the managers can now assign salespeople to territories. The most effective salespeople will be
assigned to the most potential territories and the least and most unexperienced will be
assigned to not so high potential areas to learn and be trained. However since we live in a
constantly changing environment, the match will never be spot on as what the analyst thought
was not such a potential sales market can change in 1-6 months or a year.
Lindt and sales territories
The implementation of sales territories for lindt means that they can control a much wider
market and find much more potential for sales growth. It also means that their products are
getting the most attention possible from the sales force that is covering these territories.
However costs will be incurred due to the offering of a company car and mobile, these costs
73
will be attainable and well beneficial due to the amount of driving and kilometres covered by
the sales people. These company cars can be put down for benefit in kind which is tax
deductible for the company. The sales territories means that the selling effort will be
increased and giving Lindt a much more vast opportunity to increase revenue as well as
increase the amount of products that they produce.
Conclusion
Concluding our findings about sales and the sales strategy’s that we have implemented, we
think that these will be effective for Lorraine as the new sales and marketing director. The
purpose of these strategic processes was to generate more sales for Lindt in the convenience
sector.
We have made a lot of research before starting this report and informed ourselves about the
different options Lindt may have in doing so and also about the background of selling and
sales that could have helped us to make the best decision. Some of the things we looked up
before we even started were Corporate Strategy, Marketing Strategy, Selling Strategy etc.
This helped us get a better understanding of where the organisation is positioned, the
competitors they are facing and about their products and sales. As a group we decided that
Lindt should go with a wholesaler to increase sales in the convenience stores.
We found that Musgrave’s current performance is great and that is doing better and better in
the market and by using Musgrave as a third party it would help Lindt to distribute a higher
amount of products to these local stores. We then looked at selecting the right Key Account
Plan for Musgrave and again researched in great detail before the actual plan is set. Setting
objectives and strategies was crucial and really helpful for the development of the Key
Account Plan.
The implementation of sales reps was to help promote the Lindt Brand in these stores and
also increase sales. However we also looked on the Selling Processes, the Soft side of selling
and sales, and targets and incentives of sales representatives that made us understand how
important is to have a great team that is not target driven but sales are still achieved. We hope
that by all our findings and investigation in the area, Lindt’s aim will be achieved.
74
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