Dbk Direct Sales

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Position Statement The DBK headquarter sat down and review the sales numbers. A big driver of the years of success was the growth in the number of sales representatives. But Creevey the CEO of DBK was faced with the situation that representatives would not climb the sales ladder up. The rate at which new representatives were transitioning to leader and starting to build their own sales team is slowdown. But the willingness to build up a team is central for the business model of DBK. The reason therefore is already mentioned in the text; because leaders tend to stay longer in the company and are also more productive than sales people. Furthermore, the company can only grow its sales if the number of sales representatives increases The executive board provides two specific solution approaches: • • Increase Leadership Dollars 4 full-time trainers to encourage the representatives

The author suggests to hire 4 trainers to encourage the representatives. Because transporting the message to become a leader , manager or director is cheaper than increase the Leadership Dollars. 2. Argument The main problem of DBK is the fact that sales representatives fear about recruiting new sales representatives. They complain that their own sales volume would decrease when they add friends or colleagues to DBK and for that reason they stopped recruiting new members. The management board has found out, the representatives have a decrease of 15% of their sales volume, when they recruit the first member to DBK and another 10% of decrease for each additional sales representative. So why should representatives bring more members to the company, when this has a negative effect on their own earning? Is the current growth sustainable: DBK generated revenue maximization over the business periods 2006-2009. The reason for this was the volume-based sale by increasing the number of sale representatives at virtually constant prices. High productivity and a strong recruitment had also increased the sales per representative. It is also stated that with each year a representatives works for DBK the revenue increased by 20%. It seems as if the demand is not saturated. But it is questionable whether increasing sales representatives and volume-based sales not opposed to working. Anytime, when the new representatives start their DBK parties there will be an amount of overlap at the customers. The representatives cannibalize themselves. The reason why is straightforward, because established representatives recruit people on their daily basis. The overlap in the guest lists involves decline sales per rep and decline productivity. Furthermore the number of DBK parties would increase and 1

one can not estimate how to respond to customer. Therefore a saturation pressure cannot be excluded. What is driving sales growth: The sale is a structure distribution by permanent recruiting representatives. Essentially it could said that this structure is divided in two chunks. First the operating representatives which organize home parties for selling DBK to the customers. And second the administration representatives which coordinate and teach the operating representatives, but also sell yourself. This task allocations combined with permanent recruitment makes DBK sales growth. From the sale representatives perspective does it pay to build a team: To find out whether it is worthwhile to build a team the author makes the following assumptions: It should be compared the sales from a non leader representative over 3 years. On the other hand a leader with 3 representatives (level 1) with impacts on the sales of the leader (15%, 10%, 10%). Both have the same turnover (1000$) with 20% yield increase each year. Therefore a representative ears: Year Sales Commision (1000=32%) Profit Total Turnover * 12 month 1 1000 250 250 13137,6 12000 2 1200 384 384 14400 3 1440 460,8 460,8 17280

With a turnover of 1000$, 1200$, 1440$ and the appropriate commission the representative ears...
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