Carrington Furniture Inc.
(1) Carrington Furniture, Inc. (CFI) is employing a “push” strategy. CFI uses its sales force to persuade intermediaries to carry, endorse and sell its products to consumers. Most decisions to buy furniture is made spontaneously, in the store, and brand loyalty is hardly ever present in the decision making process. Furniture is a product that is well understood by all, therefore, there is less need for the sales force to explain or describe the benefits of using a particular piece of furniture.
(2) The pros and cons of giving Lea-meadows to Carrington Sales force are:
Pros Cons
Sales reps already knew the buyers. Less manpower is available to sales reps since there are 10 reps compared to 15 agents.
Additional line would only require 15 % of present sales call time. Sales reps cost the company more because they are paid a salary as well as a commission.
This would allow management to have better control over sales effort. Sales reps are not known for attracting new businesses.
CFI usually generate 5% higher profit margin. 5% additional profits may not be enough to cover additional expenses.
CFI sales force has developed a reputable standing in the industry. 25% of selling time dedicated to Carrington may have to be re-assigned to Lea-Meadows line.
(3) My advice to CFI on how to deal with the sales force issue is to consider merging the sales reps and the sales agents based on the following factors:
a) Under the present arrangement, the sales agents do not earn a salary; only a commission on sales. However, with the merger, the additional 5% profits earned by CFI could be used to pay the agents a salary bringing them in line with the sales reps. Although the sales agents would see their commission reduce to 0.005% (same as the sales reps) the reduction would not be alarming since they would be compensated with a salary. This would eliminate the issue of “them and us” since the entire sales force would now be equal.
b) The decision to merge would
(2) The pros and cons of giving Lea-meadows to Carrington Sales force are:
Pros Cons
Sales reps already knew the buyers. Less manpower is available to sales reps since there are 10 reps compared to 15 agents.
Additional line would only require 15 % of present sales call time. Sales reps cost the company more because they are paid a salary as well as a commission.
This would allow management to have better control over sales effort. Sales reps are not known for attracting new businesses.
CFI usually generate 5% higher profit margin. 5% additional profits may not be enough to cover additional expenses.
CFI sales force has developed a reputable standing in the industry. 25% of selling time dedicated to Carrington may have to be re-assigned to Lea-Meadows line.
(3) My advice to CFI on how to deal with the sales force issue is to consider merging the sales reps and the sales agents based on the following factors:
a) Under the present arrangement, the sales agents do not earn a salary; only a commission on sales. However, with the merger, the additional 5% profits earned by CFI could be used to pay the agents a salary bringing them in line with the sales reps. Although the sales agents would see their commission reduce to 0.005% (same as the sales reps) the reduction would not be alarming since they would be compensated with a salary. This would eliminate the issue of “them and us” since the entire sales force would now be equal.
b) The decision to merge would