Scenario 1—Marketing Our client, Preferred Pet Products, or PPP for short, has provided us with…
Our client, Preferred Pet Products, or PPP for short, has provided us with information on its sales and marketing department. It has three marketing managers, and each one is responsible for a region in the United States. Dan handles the western region, Diaz handles the middle, and Sherika handles the eastern region. The regions are divided with straight lines running from north to south. Some states are cut into more than one region. PPP sells pet supplies to pet stores across the country, and all orders are sent from the warehouse located in Vista, California. Delivery is by ground transportation directly to each store. Each store is charged for delivery. Therefore, the delivery charge to stores on the east coast is higher than it is for the middle region, which is higher than delivery to the western region. Some of the customers are upset with the delivery charges and are considering looking for a new supplier.
PPP provided us with the following data:
• The selling price for the average order is $6,000.
• Delivery charges are $100 to the western region, $300 to the middle, and $500 to the eastern region.
• Each salesperson is paid a salary of $40,000.
• Commissions are 5% of each order.
Don, Diaz, and Sherika, are constantly arguing. Don says he does not have enough stores in his region to earn a decent commission. There are 200 stores in his region. Diaz says that he has even more of a problem as there are only 150 stores in his region since there is so much farmland. Sherika is happy as she has 350 stores since the eastern region is more populous.
• The average reorder in Don’s region is six times a year, four times a year in Diaz’s, and five times a year in the eastern region
• Marketing is handled by the salespeople. They show new products to the customers, but sometimes they just leave samples as the managers are not there when they stop by.
• Fixed costs are about $20,000 per year.
PPP has some questions.
o Is it making money or losing money with the structure as it is?
o Should PPP divide the regions by states?
o Should it cut the salaries and tell the salespeople that they will get a bonus of $1,000 for each new store they recruit?
o Should PPP hire another salesperson and split the areas into four regions?
o It wants to contribute some of its profits, if there are any, to local humane societies to provide children with better information on how to care for pets with the hope there will be fewer pets taken to the humane society. Perhaps free training classes for all people who adopt a pet would also be good. How much can PPP contribute?
o Should PPP do some advertising instead of relying on the sales personnel? If so, how much should it spend?
o It would like a budget for the next year that it could show to the salespeople.
o Any other suggestions?