BLUE EXPRESS LOGISTICS

GM MUSTAFA

National Head –franchisee Management

Chennai

Subject: Sales & Marketing

1 – How would you handle the channel conflicts depicted in the following situations?

Situation 1

Blue Express Courier Company has its offices in major cities and appoints franchisees in smaller towns
and localities. The duty of the franchise is to collect outgoing packets from their allotted area and
deliver packets coming to that area for a commission. However, certain areas are always inconvenient
to service because of distance, low volumes, or low traffic. So the franchisee collects packets of these
areas and delivers them once a week. As a result, deliveries are often delayed resulting in customer
complaints. The company, which advertises ‘on time’ delivery services, faces a peculiar situation
because its role is to deliver on time while the dealer sees his/her role as making deliveries so that
they are economical. There is incongruity here because the company wants to provide fast service,
but the channel partner is more concerned about his /her costs. As Operations Manager at Blue
Express Courier Company, what would you do?

1. The tussle here is between strategy (On time delivery) and economy.
2. Having same measure of time- for delivering couriers in all places in the country can be a trap.
3. Innovative solutions like Hub and Spoke, arrangement can work in such situations.
4. The franchise can collaborate with locals- like Kirana Shops or fancy stores etc,and make them
the etc Booking partners.
5. The franchise can deliver the couriers at the Spoke ends.
6. The last mile delivery can be done by assigned locals (trusted).
7. Blue Express Courier company should collaborate with the franchise to build this model.
Situation 2

An automobile company appoints dealers in areas based on population and buying capacity. The
dealer has to set up a sales outlet and also service station for the vehicles sold. When the number of
customers and cars increase, the existing dealer is not able to service the entire population. The
company then wants to appoint additional dealers in that city. This is resisted by existing dealers as
they see business being lost because of additional dealerships. One dealer, who has been serving the
company for several years, threatens to file a legal suit preventing the company from opening new
dealerships in that city. As a manager of the automobile company, what would you do?

1. Channel Partners must be tuned with the strategy of the company.

2. Parameters: Total Service time for a customer, Availability of service slots for the customer,
Availability of sales force to attend customers.
3. If these parameters are not met by the dealer. Company must sit with the dealer and look for
solutions.
4. Solutions can be expanding capacity, or same dealer opens another dealership in the area, or
deciding on adding another dealer.
5. For long term channel relationship, the manager must objectively take the dealers along so
that business is not lost and everyone is happy.

Situation 3
Educational franchising is big business. While preparation for competitive exams was once spread over
local teachers, big brands entered and set up their coaching centres in cities and towns. As a result,
some businessmen who had no background in education started coaching centres hoping that they
would be run by inputs provided by the parent company just like a slimming centre or a fast food
outlet. However, an important element in coaching is the skill of the teacher, and coaching centres
were unable to hire skilled teachers locally. The franchises thought that teachers would be provided
by the parent company as part of its ‘support’ but were told by the company that hiring of local staff
was their headache. As a result, franchisee started asking for the money back. Many closed down.
Assuming you were the manager in such a company, what would you do?

1. Teaching Skill is the heart of any coaching centre.

2. Company should have maximum control over the selection of teachers.
3. Exclusivity of teachers will grow the brand.
4. Parent company should take part in recruitment of teachers by franchise.
5. If local pool is not available – other mediums like live video classes can be an option.

Situation 1.4
A multinational fast food company advertised for dealers in a city and received several applications.
The dealers were required to have retail space and the ability to invest Rs.40 lakhs. At the time of
signing the contract, based on certain level of business, the dealer was promised a minimum return
of 35 percent. However, that level of business was never achieved. First, the food did not appeal to
local tastes and therefore footfalls were less and only few customers visited the fast food outlets. The
company then changed its menu to include items more suited to Indian tastes. By then, the economic
slowdown of 2008 started and business slowed down even further. After 5 years, the company was
flooded with frequent complaints of the dealers who wanted compensation. They said that they could
have earned more money by just keeping their money in the bank. How can the company tackle this
situation? (6M)

1. As the economic slow down is over, and product is mature as per local taste, Company must
ensure dealers stay.
2. The company should provide long 1 year, 3 year, 5 year based incentives- margins.
3. That means dealer margins will increase if they stay for longer.

Situation 1.5
Magazine publishers usually offer discounts and gifts to people who subscribe to their magazines. In
this way, they are able to garner readers. However, the problem is of delivery of the copies. Courier
services being too expensive to be viable for magazines - Rs.10 for a cover price of Rs.30 - the
publishers appoint agents in different cities who then hire local delivery boys to deliver subscribers
their copy. A magazine publisher found that its subscriptions were getting cancelled in a city because
of delayed deliveries and lost copies. The agent said that given the low volumes and earnings, it was
not viable to keep permanent staff and he or she had to rely on less paid delivery boys. A typical reason
was, ‘so what if the magazine was delayed by a few days?’. Assuming you are the publisher, why
would you do to improve deliveries without compromising on the budget? (6M)

1. India-Post can be a more trusted delivery option here.

2. The Magazine can have tie-ups with Newspapers with established channel. So that If customer
subscribes newspaper as well as magazine, customer gets benefit.
3. Company can leverage the established newspaper channel to sell its magazines more
effectively.
4. New policy to send replacement copies when complaint is received.
5. Repeated complaints can be an area specific issue, which could be handled separately.

Case 2 – Adjusting Compensation Plan to Motivate Your Sales Representatives

Pelican Pharmaceutical Company is having difficulty retaining quality, experienced salespeople. The
problem started three years ago when the patent for the firm’s most popular drug expired, and other
low-cost drug producers began manufacturing and selling drugs under generic names. Pelican has a
board of directors that is fiscally conservative and only believes in rewarding sales performance based
on profitability. So, as the firm’s sales slumped, so did the income of Pelican’s sales representatives
and sales managers. Frank Kelley was hired last year as the new director of sales at Pelican. Frank has
been struggling with motivation and reward issues for a sales force that is again failing to make its
yearly sales quota.

Pelican still has numerous viable drugs to sell but does not have a “blockbuster” drug in its research
pipeline. Last week, one of Frank’s senior sales managers came into his office and resigned, telling
Frank that he planned to take early retirement because the industry is changing, and he had enough.

Pelican provides both its sales representatives and sales managers with modest salaries, company
cars, and full benefits, which are some of the best in the industry. The company pays commissions
based on sales people surpassing their previous year’s sales totals. An escalating reward system kicks
in once a sales representative achieves 80% of his or her sales quota. There are also special sales
contests related to selling the company’s most profitable drugs. The reward for these contests usually
consists of trips or merchandise. However, the average sales person at Pelican is only achieving 75%
of his or her sales quota, which means the person earns no commission. Those who do earn bonuses
are usually only a few percentage points over quota, so their commission checks are marginal. The
sales quotas were set by Pelican board of directors and are based on the company’s overall operations
overhead and the return the company’s shareholders expect.

Frank is very concerned about the downward spiral he is seeing in his sales force. He thinks changing
the commission structure would solve the problem. His goal is to kick of Pelican’s upcoming annual
sales meeting with a presentation outlining the company’s new and improved commission structure.
To implement the new commission plan, he will have to make a proposal to the board of directors to
lower the quotas reps must achieve by 10 percent. That way, at least 50% of the sales representatives
would have an opportunity to achieve and exceed their quotas. He also plans to highlight the
company’s existing total rewards package, including Pelican’s generous company – car usage policy
and value benefits package.

Questions

2.1 What problems do you anticipate Frank will run into when he presents his revised commission
structure plan to Pelican’s board of directors? (5M)

1. Frank will have questions from board regarding the profitability.

Stakeholder’s Profit = Revenue (Sales) – Cost of Sales

2. He will be asked what will be the projected Revenue in case of new quotas. Will the Revenue
increase more than the cost of sales?

3. If most of the sales force achieve its target would not it make them complacent, and reduce their
efforts to sell more.

4. How will you check the Cost of Sales.

2.2 If Pelican were a low-cost, generic pharmaceutical company, how would you as a sales manager
reward and motivate sales representatives? (5M)
Idea- Reduce your Cost (other benefits), have achievable targets as per market situation, reward the
over achievers.

1. As a sales manager, it is important to have sales target which are achievable and motivational at
the same time.

2. Setting sales target just so that everyone can achieve, will affect the morals of over achievers and
promote free riding.

3. Sales target must be tuned with respect to the current situation in market, even if it means to reduce
the targets.

3. As a sales manager, it is important to give benefits (Car benefits, Value Benefits) to the achievers
not to everyone. This increases the cost of sales.

2.3 Identify other areas within the company that will be affected if Frank’s plan is approved by the
board of directors. (5M)

Stakeholder’s Profit = Revenue (Sales) – Cost of Sales

1. Reducing the quota by 10% means 50% sales person can exceed their quotas. This means rewards
will go up, so will be the Cost of sales.
2. This will put dent on profitability, if Revenue from sales do not increase in same proportion (or
multi folds).
3. The reduced profitability will affect the stakeholder’s Profit, as well as bonuses and salaries of
employees.

2.4 Do you feel the company should have adjusted its commission structure before the patent for
best-selling drug expired? Is it fair to penalize the sales force with lower commission for an outside
competitive factor they cannot control? (5M)

Yes the Commission Structure should have been proactively adjusted.

It is not fair to fair to penalize the sales force with lower commission for an outside competitive factor
they cannot control.

It would demotivate the sales force.

PART B – ESSAY QUESTIONS Marks: 50

Answer any five questions. Each question carries 10 marks.

1. The selling process is a constant cycle of prospecting, presenting, and closing. Evaluate the
difference in selling process for the following products.
a) Large specialty computers, such as active data warehouses, that cost millions of dollars
Consultive Selling:
 Develop an understanding of the customer’s business, industry, and needs, and then craft
a solution to help the customer achieve their objectives. This is usually service or solution-
based.
It is a key account selling.
Long-term business is important.
Maintaining relations is important here.
Maintaining and servicing accounts.
Relation building is the key.

b) Photo copiers that cost $6000

Long-term business is important. To provide technical sales expertise, that can help in
assure clients of service.

c) Campbell’s Soup sales to a grocery chain.

Negotiations for margin. Sales representative must have good negotiation skills.
Presentation of supplier power must be there.

d) PVC pipe fittings sold to plumbing distributor

It is transactional based selling, With this approach, the sales representative is not
necessarily concerned with the long-term relationship with the customer.
Closing is very important here.

2. Personal selling is especially critical for companies that sell to other businesses. Does this
mean that personal selling is unimportant to retailers and others who sell directly to ultimate
consumers?

Personal Selling is important to retailers as well. At the end one human is selling to other human.
Personal selling involves –

1. Approach. The idea is to show the customer that the salesperson is there to help and
that they are friendly and knowledgeable.
In malls with lots of products, customers get confused and want someone to guide
them.
2. Ask questions. Also the salesperson needs to discover what the customer wants.
Understanding customer needs will help sales people at malls to suggest better
product, which customers on their own will take lot of time to find.
3. Inform Customers: Show customers how the products you have meet their needs.
Clearly defining benefits will help in better conversion to actual sales, and less returns.
4. Answer questions that help them choose the products that are right for them.
5. Close sale.Using a trial close like "Will you be paying for that with your store credit
card?" is important.

All these aspects clearly shows the importance of personal selling when customers gets
easily lost in plethora of products and a helping hand is becomes a customer’s
expectation.
3. Assume that you are the national sales manager for Replica Inc., a manufacturer and marketer
of photocopy equipment and supplies. The firm’s products are sold both nationally and
internationally by a sales force of 5,000. Replica sells to accounts of various sizes across several
industries. Recommend an appropriate sales organization structure for Replica Inc.

1. Photocopy business is a B2B, business.

2. It follows an account based structure.
3. Accounts are divided as per the total business.

Sales VP = 3
Zonal Sales Manager = 4 Per Vp = 12
Account manager per Zone = 3 Total = 108
Account Executives = 1000
Sales Ground = 3500

4. Sid Cox has been a steady contributor as an automotive parts representative with Premier
Auto Parts for the past five years. Customers and co-workers find that his cheerful and
pleasant demeanour make him a joy to be around. Over the past month, his sales manager,
Randy Ross, has noticed a significant change in Sid’s behaviour. Sid appears to be worn down,
less than enthusiastic, and reluctant to make as many sales calls as he has in the past. His
positive, upbeat demeanour seems to have been replaced with a more pessimistic attitude
about things. His generally steady sales results have been on the decline. If you were Randy
Ross, what would you do?

5. Should advertising agencies and financial institutions be considered channel members? Why?
Why not? Is it more useful from a managerial perspective to think consumers as members of
the channel or as end-users consuming the services of the channel?
6. An industrial supply house carries only a single brand of grease-cutting compound used to
clean the concrete floors of factories. That brand is prominent and is well viewed by the
clientele. Analyze all possible reasons why the distributor would carry only one brand? Is this
normal behaviour? Assess the distributor’s relationship with the manufacturer of this brand.

1. If distributor margins are too low, the distributor’s incentive to promote a particular
manufacturer’s product is reduced.
2. To improve distributor’s efforts- manufacturer choose distributor that do not offer
directly competitive products.
3. Manufacturer wants to have full control over how the product is sold.
4. So manufacturer has tied up with distributor- a contract, that allows him to sell only a
single brand. Distributor in return will be getting better margin.
5. It also depends on the extent to which a product should be available to a selected set of
customers. Exclusivity or selectivity is important for manufacturer.

7. Compare and contrast the reasons why some retailers choose to acquire overseas retailers
(Walmart acquiring Flipkart) and others partner with local retailers (Benetton chooses to
license its retailers) for their global expansion.

8. Wholesaling is often thought of as a less glamorous intermediary venture when compared

with other channel intermediary operations, such as retailing. In your opinion, which of these
two would be more difficult to manage-a wholesaling or a retailing operation? Which would
seem to have the best chance, on the average, of achieving a high ROI (return on investment)
today?

1. Wholesalers purchases and sells in bulk, thus benefits from discounts. This drastically
reduces the COGS (Cost of Good Sold).
2. Expenses are low for wholesalers as compared to retailing. As retailer has to invest in
stores, lighting, ambience its cost is higher.
3. Managing retail is a more dynamic and involves more efforts in interaction with
consumers and feedbacks from consumers must be implemented as early as possible.
4. Wholesalers has to put one time efforts in setting up the logistics, inventory management
is the most important issue. Wholesalers encounters more stability as compared to
retailers.
5. Wholesalers being into B2B encounters a more professional setup.
6. In terms of ROI wholesalers have better chances.