Allocating a Sales Force

Consider an office equipment company that leases copiers, computers, various peripherals and
office furniture to large and small firms. Because of the nature of the business, equipment leases
rarely are more than one year in duration. Thus, the firm's extensive sales force is continually
occupied with finding new customers, reenlisting current customers, and attempting to capture
competitor's customers. A key question faces the company's sales and marketing director: Of the
firm's current sales force (24 strong), how many "reps" should specialize in the larger accounts,
which currently lease equipment (either the firm's own or a competitor's), and how many should
devote themselves to the new, smaller accounts, which have no current lease commitments? The
following table provides the best estimates by senior sales managers of the profits associated
with various allocations of the sales force to the two types of accounts.

Established (Large) Accounts

# of sales reps.

Profits (1000)

New (Small) Accounts

# of sales reps.

Profits (1000)

200

500

400

800

610

950

10

690

13

1100

16

930

16

1160

20

1070

20

1240

(Notice that large accounts are on balance more profitable than small accounts.) Using marginal
analysis and only these data, what is the most profitable allocation of the 24 person sales force
to the two types of account? Show why.

See Mini-Case chapter 5 SM