Homer Castleberry had held the job of vice-president of sales at Diamond Pump for five years. Lately he had had the feeling he was running on an endless treadmill, never getting anywhere. Returning from an extended trip visiting seven sales agents in the western states, a postponement of an eighth visit found him with two uncommitted days in Kansas City. For the first time in many months, he had the time to sit back and evaluate his job, his performance and his future. Diamond Pump Company, a subsidiary of Greyson Industries, Inc., manufactured positive displacement pumps for use in the chemical, petroleum, and other industries.
Diamond gear pumps, screw pumps, and progressive cavity pumps were sold through several hundred distributors. Distribution covered the entire United States, Canada, and most of the free world. In addition, Diamond sold specially designed pumps direct to original equipment manufacturers. Throughout its 118-year history, Diamond had been a strong competitor in the industrial market and enjoyed a fine reputation as a maker of quality pumps. The company had achieved a sales increase each year for twenty consecutive years. In spite of this success, management felt that the company could find better ways of handling certain nagging distribution problems.
INDUSTRY STRUCTURE AND PRICING
standardized line that included both types. These standard pumps were purchased by a wide variety of users, primarily for process applications.
Original equipment manufacturers (OEMs) comprised the other major customer group, a group that had become an increasingly important market segment. OEMs included petroleum tank truck manufacturers, for example, who required specially designed pumps not offered in Diamond’s standard product line.
Prices tended to be uniform among competing pump manufacturers. The customer’s decision to buy was based mainly on the quality of service. The pump’s performance characteristics were also important, and price played a limited role in the buying decision. While Castleberry tried to limit price increases to one a year, this objective recently had fallen victim to the escalating prices of raw materials, which comprised the major portion of costs, as well as to rising overhead costs.
National advertising in trade journals comprised the bulk of the promotional effort. Castleberry and the advertising agency aimed at two important targets: the first consisted of petroleum tank truck manufacturers, petroleum storage operations, and the like. Diamond appealed to these potential buyers through Fuel Oil News, Chemical Engineering, and National Petroleum News. Inquiries resulting from these advertisements were turned over to the sales agent and distributor in the area from which the inquiry originated.
The second equally important target was comprised of engineers and product designers who determined what brands of equipment would be included in product specification sheets for new products. The jobs of sales personnel at the company and distributor level were made more difficult if the Diamond pump was not specified initially. Therefore, advertisements in trade journals such as Design News were placed to influence the design specifications.
Diamond also advertised in the Yellow Pages section of telephone directories in major metropolitan areas. These ads listed all Diamond sales agents and distributors in the metropolitan area.
2. Sales Agents—Distribution
Homer Castleberry achieved distribution through twenty-one commissioned sales agents who were responsible for marketing pumps in their respective geographic areas. While these sales agents personally called on OEMs in their territories, OEM accounts were serviced by distributors under the supervision of the sales agents. There were 425 Diamond distributors employing 2,000 sales personnel.
The sales agent was responsible for selecting Diamond distributors. Distributors were approved by Homer Castleberry, approvals being based on credit worthiness and ability to promote Diamond products. Castleberry insisted that distributors not sell competing lines. Additionally, the distributor was required to have a quality image, that is, sell high-quality complementary products and provide excellent service and technical advice.
Because customers for Diamond pumps required good fast service and competent technical help, the sales agent tried to ensure that distributor salespeople were well informed. This was done through periodic training. In addition, the agents often accompanied distributor personnel on sales calls. Installation of a Diamond WATS line enabled sales agents to get fast answers to technical questions raised by customers.
Sales agents were required to establish and maintain personal contact with current and potential OEM customers. This was difficult at times because individuals involved in deciding specifications for new products were often hard to identify. Agents, however, agreed that the results could be worth the effort. Recently, diligence led one sales agent to a contract under which Diamond supplied the pumps used to filter hot oil in Kentucky Fried Chicken’s pressure cookers.
3. Distribution Problems
Despite success in increasing sales revenue and maintaining profitability, Castleberry felt that the company could be more efficient in-handling certain nagging distribution problems. Attracting high-quality distributors was becoming increasingly difficult. Sales agents testified that distributors were reluctant to “change partners” even though the Diamond Company offered a broader line than did present pump suppliers. Agents also pointed out that sales personnel from the distributor’s end were often unwilling or unable to seek individuals who had significant input to buying decisions; for example, engineers, and production people. “If the purchasing agent says, ‘no,’ they just give up,” said a Diamond sales agent. Another agent said there weren’t enough hours in the day to supervise distributors and also work with OEM customers. Castleberry summed it up, “The numbers look good every month, but I get the feeling that we could do better. We need greater effectiveness in distribution.”
In evaluating his performance as a sales executive, Castleberry decided that he had been spending all his time on operating responsibilities. He had been so busy putting out fires and handling day-to-day problems that he had neglected planning almost entirely. He wasn’t even sure that he had done a very efficient job of handling operations.
- Describe Castleberry’s major operations responsibilities. How well is he carrying out each of these responsibilities?
- What kind of planning activities should Castleberry be carrying out regularly? What planning areas need immediate attention?
- How do you suppose Casrleberry’s time should be divided between operations and planning?
Source: Richard R. Still, Edward W. Cundliff, Normal A. P Govoni, Sandeep Puri (2017), Sales and Distribution Management: Decisions, Strategies, and Cases, Pearson; Sixth edition.