The Banner Company—which had annual sales in excess of $800 million— processes and distributes lines of dairy products, foodstuffs, and specialties such as glues and animal food supplements. These lines were marketed throughout the United States and Canada by five separate sales organizations departmentalized by products. Each of these sales organizations was further divided geographically by districts and branches. The Spokane branch of the Northwest District of the Ice Cream and Fluid Milk Division manufactured and distributed bulk and packaged ice cream, ice cream novelties, and fruit sherbets. Because sales depended to a large extent upon the number of outlets selling Banner ice cream, Mr. Shaw, sales manager of the Spokane branch, was considering ways to aid sales representatives in the solicitation of new accounts.
Banner ice cream was sold to three types of accounts. More than 60 percent of all ice cream sales were made to retail dealers, including soda fountains, drugstores, variety stores, independent grocers, chain supermarkets, and ice cream drive-ins. In the Spokane branch’s territory, approximately 500 dealers handled all or part of the Banner line. Depending on the size of the account, deliveries to retailers were made once or twice a week. Approximately 20 percent of the sales of ice cream were made to restaurants, which were serviced two or three times per week. The remaining 20 percent were sold to industrial and institutional accounts, including manufacturing plants and schools, which used the ice cream in connection with the operation of cafeterias. Deliveries to industrial and institutional accounts were usually at the rate of four times per week.
In the Spokane branch there were two sales representatives and four route salespeople, all of whom worked under Shaw’s direction. The job of the sales representatives consisted of the solicitation of all types of new accounts, the performance of “missionary” duties, and the changing of point-of-sale displays in retail stores. Each week, sales representatives devoted the first three days to calling on prospective accounts. Normally, a sales representative could make six to twelve calls during the three days allotted for this purpose. On Thursdays and Fridays, the sales representatives visited established accounts and changed displays. Each established account was visited at least once every four to six weeks, but some that demanded special attention were contacted weekly. All point-of-sale displays were changed six times a year. Sales representatives were required to submit daily written reports on their activities and to discuss their plans with Shaw each morning prior to making their first call.
The four route salespersons were primarily deliverymen. As dealers ordered ice cream directly from the trucks, the route salespeople had to be skilled in the anticipation of dealer wants when they filled out their truckload orders. Although route salespeople did not solicit new accounts, frequently they turned over the names of prospects to sales representatives. With the objective of obtaining an even pattern of retail distribution, each sales representative regularly made an informal survey of the assigned district. These surveys were conducted monthly during the summer and fall seasons, and bimonthly during the winter and spring. For these surveys, in areas with little or no distribution, the sales representative listed all stores selling ice cream. Each store was then rated as to location, cleanliness, and the like, with the purpose of detecting desirable new distributors for Banner ice cream.
The next step was for the sales representative to attempt the conversion of the best store in the area to a Banner dealership; sometimes, however, the company was satisfied to secure the second- or third-best store as its area outlet. After a sales representative had made the initial call, the new prospect was entered on a rating chart. After subsequent calls, sales representatives entered percentages on the chart, indicating the extent to which it was estimated that the prospects were now sold on the Banner line. All percentage estimates of this type were arrived at solely on the basis of each sales representative’s experience in the solicitation of new accounts. For example, when a prospect expressed a real interest in such matters as pricing and terms of sales, the prospect was rated about 75 percent. But when a prospect allowed the sales representative only a few minutes of his time, the prospect was rated approximately 25 percent.
Although chart percentages were used mainly to answer the questions of route salespersons who had turned in the names of prospects, they also served as a general guide for the determination of the frequency of calls by sales representatives. Sales representatives made their second calls on prospects approximately thirty clays after the first contacts. Thereafter, the following schedule was used:
The conversion of a prospect into a Banner account took from one month to a year. The experience had been the same whether the outlet was selling a competitive brand or was not selling ice cream at all.
The Spokane branch distributed ice cream north to the Canadian border, east to the Montana-Idaho border, west to Wenatchee, and south to Carkson, Washington, and Lewiston, Idaho. One sales representative was responsible for the northern and eastern segments of the branch’s territory; the other worked the southern and western parts. Sales representatives were paid on a salary-plus-commission plan. Sales quotas were established on the basis of the previous year’s sales, plus 10 percent. The arbitrary 10 percent annual increase in quotas was justified by the company on the basis that population in the Spokane branch territory was growing rapidly. Shaw was of the opinion that the size of the Spokane market area and its expanding population would soon mean that the addition of a third sales representative would be desirable and feasible.
Because sales representatives were burdened with a large amount of missionary and sales work, and because their operating territories were very large, they were unable to spend sufficient time in the effective solicitation of new accounts. Some means of making additional time available for this purpose needed to be found. However, Shaw was undecided about a specific approach to this problem.
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.