Parkin Laboratories: Sales target dilemma

Case study
Advanced Marketing Management

01/10/2013
Prepared by: Jayapriya Jv; Kinimo K. Olivier; Abdel Fanny; Ahouty Fabrice

Introduction

At the end of the year’s third quarter, the sales team at a generic-pharmaceutical company has achieved
just 91 per cent of its sales target, and growth is less than what was anticipated. The general manager of
sales Manoj Kumar needs to decide whether he can revise the sales targets for the last quarter of the year
without compromising growth. He also needs to address the impact of launching a new product when the
sales team is striving to achieve its budgets and devise strategies the sales team can use to achieve their
sales targets during a selling downturn.
Case study review

1-sales performance

The performance of team from an overall perspective is pretty good since the net revenue keeps
increasing from 2007 to 2011 (133%). The growth in their revenue was supposed to reach
US $500 million. On the other hand, when we look at performance in the various regions, we have
another appreciation of the performance. According to exhibit 1 the target established for each region for
the first third quarter of 2012 cannot be achieved compared to the year 2011 (101%).
In 2011, it seems that the south zone has been more productive than the others. In the first three quarter
of 2012, the south team did not achieve its target for this period but has been productive than the other
zones (97%, followed by central 92.6% and east 90.1%). According to the growth, the Central team is the
most efficient, since they have been able to achieve more than the targeted growth over 2011(102.7% of
the targeted growth). The north and west have striving more than the other zone to achieve both target
(US$ million and Growth).

2-Factors to be considered to set targets

The factors to be considered by the CEO when forecasting his targets are the demand for the product in
the various territories. He should know what his market potential is and make the projections based on it.
In other words, the target should be realistic, because the sales to be achievable should be realistic.
Another important factor is the sales projection based trends in sales over the previous year. There are
some zones in which the sales are not very efficient compared to another zones (North and West).
The trends in the performance of sales people have to be considered when forecasting the annual target.
The advantage here is that if we already know which zone perform better we can expect more sales from
the productive zones (South and East), and less from less productive zones (North and West). In addition,
if the performance of each zone is taking into consideration, we can prepare appropriate training.

3-Revision of sales target

The revision of the sales target in the last quarter may have advantages and disadvantages for the firm.
Since the target for the next year is prepared at the end of the current year (November), the sales target
may be revised as experimental sales. If the sales period is revised during this period, we may estimate
through frequent control whether the performance is better or not. By trying a new approach during the
last quarter and following the performance they will estimate for the next year whether there is a need to
change the current sales strategies.

Since most of the companies increase their purchases at the end of the year, revising the sales target may
be an opportunity to increase and achieve the sales target. For this to be effective the target should as
mentioned above, take into consideration the performance of the sales people, to be aware of how much
they can achieve. Another part which neglected is that the sales people have to understand not only the
customer need but the way they purchase. Then, a well-designed training has to be delivered to sales
people

4-Strategies to help sales people to achieve their target

Parkin Laboratories should revise its sales process and requirements. The Pharmaceutical industry is a
highly competitive market (India), which means the potential customer are aware of most of the product
or medicine available, then the personal selling type has to be changed. The firm uses a Missionary
selling (persuasion), which cannot be so effective in a very competitive environment. Then a solution to
make the sales more effective will be to adopt a negotiation style in their sales process.
As per the case the sales people are demotivated since the incentive plan is linked to the achievement of
the target. Hence the firm should find way to motivate their employee.
The firm also has to revise the target given to the various zones. The growth rate expected from the North
and the West may be revised or allocated to another zone. In fact, we have noticed that the main
contribution to the target growth was supposed to come from the North and the West (exhibit 1), even
though their productivity is less compared to the other zone. Because one assumption to explain why the
sales people cannot achieve there is that maybe the targets are overestimated.
The personal efficiency and effectiveness is an important factor affecting the performance of sales. Does
the sales person understand what actions are required to close the sale? Can they juggle their many
conflicting tasks and focus on what really matters to achieve their targets? What changes are required to
increase their personal motivation to achieve their targets? Are they getting appropriate feedback on what
they are doing well? All of this feeds into a programme that is tailored for each individual which may
include attendance of relevant elements of a company sales training course, and participation in ongoing
coaching or mentoring as appropriate which will enhance the individual’s development to achieve sales
targets. In addition to traditional sales training, courses should be tailored to a company’s own strategy,
specific products, customers and competitive environment. The exact nature of the sales training required
will depend on the business, for example account management courses will differ from courses for new
business development sales people.

5-Launch of a new product at the end of the year

Parkin Laboratories is operating in a very competitive market, and even though they are doing well in the
market according to Exhibit 2, they are not even among the top ten pharmaceutical companies in India.
Therefore one of the great actions a company can do to gain more market share is innovation. Innovation
will be a good solution, but the question will be: is it the right time to innovate. The firm has some issue
with its sales people (sales performance, motivation, growth). Will the sales people be able to handle the
innovation process? A product launch generates attention for your company. This attention can lead to a
larger customer base and more sales for both the new product and other of your company's products.

Most companies and individuals increase their purchases during the end of the year. In other words, the
opportunities available during the last quarter increase also. The company may use this period to achieve
their annual target. Newness makes the job interesting. A new product launch encompasses new goals,
new ways of doing things and new lines of cooperation and communication among employees. When you
convey to employees that yours is a growing, dynamic company that launches new products, you are
more likely to motivate employees. Therefore, the company may use an innovative idea to motivate sales
people then boost the sales.

In the current situation, the wise decisions will not be the launch of the product. The Parkin Laboratories
may think about launching a new product when achieving their target will not be a burden for the sales
people. If the company persists to launch a new product in the market at the end of the year, where they
have difficulties to manage actual products, the results will be: decrease in sales performance (not able to
manage actual and new product) and loss of market share.

Conclusion
This case showed how it is difficult to manage sales people and forecast and achieve the target sales
where actual target cannot be achieved.
Since, the pharmaceutical is a highly competitive industry, and forecast will never be 100 per cent
accurate, the parkin laboratories have to be more flexible. Here, we recommend the managers to be more
in touch with their subordinates, in order to adjust or re-design their sales techniques as soon as there is a
change in the market or in the customer product life process. Another suggestion is the use of proper
training programme and even revised their incentive policies or adjust it since it was a great factor of
demotivation.
This suggestion may lead to both increase in the sales performance (quantity and quality) and facing
competition more effectively.