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Lahore School of Economics

Hanover Bates

Faryal Najam
Hammd Salahud Din
Mahnoor Quddous
Yilmaz Dar

Submitted to
Prof. F.A Fareedy
Section C, MBA II
Sales Force Management
24-03-2015

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HANOVER BATES
IMPORTANT FACTS

The Hanover-Bates Chemical Corporation is a leading distributor of processing

chemicals for the chemical plating industry.


It has four plants in Los Angeles, Houston, Chicago, and Newark.
It has 7 districts to operate with 40 sales people.
Salary structures of sales rep (per year) are as follows:
NEW
33000
4950
37950

Salary
Benefits
Total

EXPERIENCED
45000
6750
51750

A commission of 0.5 percent is paid, based on dollar sales, on all sales up to established

sales quotas. Commission on sales in excess of quota is one percent.


No such difference between the products of Hanover bates and its competitors.

Active Accounts by Sales District


350
300
250
200District
N.E.
# Active Accounts

N.C. District

150
100
50
0
A

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SCENARIO
James Sprague has been appointed Northeast district sales manager.
Northeast sales district ranked third in dollar sales but it was the worst district in terms of
profit performance or we can say that it has fewer profit margins.
James Sprague analyzing the gross profit quota
Poor results in this area reflected misallocated sales efforts either in terms of customer
focus or the mix of product line items sold
The appointment of Sprague was considered as a good investment. Because Craver
(senior sales rep) is retiring in 3 years.

PROFILE

JAMES SPRAGUE

North East district sales manager

HANK CARVER

Senior Sales Rep

District North Central Frame of reference


James meets with Carver to reallocate the sales efforts but Carver took it negatively and
thought that its insulting to him because he has all the experience behind.

KEY ISSUE
Reallocate district sales effort to improve district performance meanwhile retaining its most
experience sales representative.
PROBLEM ANALYSIS

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Han Carver is taking it personally and threatening to leave the Job as he is the most
senior and experience Sales Rep in the district. And losing him means losing great bit of

experience as well as relationships with existing accounts.


Sales quota of D3 is highest which tells us that Sales people are forced to meet quota at
any cost which leads to Lack of gross profit performance for the company (5475000
quotas VS 5109000 actual). Since sales rep are awarded on the basis of sales volume and
there are no incentives for larger margins to improve gross profit. So this could be the

reason why they have lower gross profit margin.


Secondly there is a problem in the way they cover their accounts. They do a great deal of
selling to C accounts though C accounts are greater in number but they have lower
returns.
A account

$20000 or more

B account

$11000 - $19999

C account

Less than $11000

But if we compare to the benchmark (D7) the account coverage for account C is much
greater. i.e. 2118 call VS 1299 calls.

Selling expenses of district 3 are way much higher than the benchmark which is district 7.
We have calculated expense ratio of both D3 and D7
o Sales expense ratio of D3 = 552541/5109000 = 0.10
o Sales expense ratio of D7 = 452187/4657500 = 0.097
This clearly indicates that selling expenses in D3 are much higher than in D7.

POSSILE SOLUTIONS
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First Possible Solution could be to fire Carver and hire a new sales person. That will save
us some money. As he is costing us $51750 and new will cost us $37950 (Calculations
are above). So we can save up to $13800. But it has certain negatives to it which is that
the company will lose it most experience man and firing him will create a negative

impression in the company in regards of job security for the employees.


Secondly we could do this in reverse. We could promote Carver to district Sales manager
which can create a positive impact in terms of rich experience and employee motivation
about getting promotion. But we have seen his resistance to change on reallocating sales
effort (Focus more on A and B accounts) which is in the best interest of the company to

increase its profit margins.


Less focus on C accounts and more focus on A and B accounts which have higher profit
margins. By doing this profit margin can increase but there is a possibility that if they
stop concentrating on smaller accounts and along with it no big accounts can be attained

so there could be a huge loss.


Another option is that they should patch up with Carter. Make him feel special and try to

take advantage of his experience by training other employees through him,


Other Solution in order to increase motivation of employees could be to show Sales reps
their performance index and show them the comparison from D7 so that they should
know how much they are lacking behind and also the company will get to know the

potential of the market and set quotas according to that market insight.
Spending more time on certain products would help immensely. Instead of going through
the entire line of products with the customer, they should pick which ones fit the

customers needs, and then go back to the others if there is time.


Making extra sales calls to customers who are new, or are thinking of buying from
somewhere else, would be beneficial as well. It would keep Hanover-Bates Chemical
Corporation in the back of their mind that is extremely important given the fact that
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customers perceive minimal quality difference between Hanover-Bates and its

competition.
If there happens to be an opening, they should try to fill the spot with someone who has
had a college education. That does not necessarily mean that they will be a better
salesperson, but we feel like they will be able to learn faster and adapt to fit customer

needs.
They should also begin implementing a CRM system. It would be a lot easier for their
salespeople to keep track of every single aspect of the customers. Having knowledge
about who they are selling to should help in the battle to keep a good relationship.

EXHIBIT ANALYSIS
Performance Index
District

Sales

Quota

Performance Index
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1
5859000
2
5610000
3
5109000
4
4977000
5
4815000
6
4807500
7
4657500
Exhibit 2
Active Accounts
Account

North East

Percent

53
210
313
576

Total
Active Accounts
9%
36%
54%
100%

Category
A
B
C
Total
Exhibit 6

5820000
5625000
5475000
5055000
4950000
4695000
4080000

of North Central

100.67
99.73
93.31
98.45
97.27
102.39
114.2

Percent

of

Total
42
182
218
442

10%
41%
49%
100%

Sales Calls
Account

North East

Percent

1297
3051
2118
6466

Total
Sales Calls
20%
47%
33%
100%

Category
A
B
C
Total
Exhibit 6

of North Central

Percent

of

Total
1030
2618
1299
4947

21%
53%
26%
100%

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Total Sales

North East
North Central

43%
57%

Sales Calls By Account


1299

2118
North East

2618

North Central
3051

1030

1297
0

500

1000

1500

2000

2500

3000

3500

Gross Profit

Account

North East

Percent

of North Central

Category

Total

A
B
C
Total

Gross Profit
29%
$
50%
$
21%
$
100%
$

$
$
$
$

534,000
934,500
390,000
1,858,500

Percent

of

Total
495,000
1,087,500
382,500
1,965,000

25%
55%
19%
100%
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Exhibit 5

Gross Profit per active Account


Account

North East

Category
A
B
C
Total
Exhibit 5,6

$10,075
$4,450
$1,246
$15,771

Percent

of North Central

Percent

of

Total

Total

Gross Profit
63.88%
$11,786
28.22%
$5,975
7.90%
$1,755
100.00%
$19,516

60.39%
30.62%
8.99%
100.00%

Gross Profit per Active account


14,000
12,000
10,000

8,000

6,000
4,000

$5,975

$4,450

2,000

$1,246

$11,786

$10,075

North East

$1,755
North Central

Average Gross Profit per sales Call


Account Category
A
B
C
Exhibit 5,6

North East
$412
$306
$184

North Central
$481
$415
$294

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Direct Selling Expenses

Direct Selling Expenses


Exhibit 3

North East
$
552,541

North Central
$
452,187

Direct Selling Expenses

North Central; 45%


North East; 55%

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