Case 1 Pilgrim Drug Company Case Presentation

1. Case 1 Pilgrim Drug CompanyCase Presentation Marketing 458 – Sales Management: Kellen Blomquist Chase Hughes Elizabeth Martin Hilson Merrill Brad Ruleman Eustace Winn

2. Outline • Case Background • Business Case Issues • Analysis • Business Problem(s) • Solution

3. Case Background • 74 wholesale drug divisions in the U.S. • 18,000 products. All in store except periodicals. • Each division an autonomous unit: maintaining warehouse, sales, purchasing, and accounting departments.

4. Case Background- business model • Sales reps visit current and potential accounts • Sales calendar for each division • Compensation- commission based. Determined by the margins of the products sold. • Market analysis records • Sales territories divided geographically

5. Competition • Only two main competitors. • One carries roughly the same line as Pilgrim • The other carries a more limited line than Pilgrim

6. Business Case Issues • Performing less than adequate • Senior reps less educated than young MBAs • Schultz did not adhere to regulations set forth by New York office. • Nelson wanting Brooks’ accounts

7. Analysis of Current Situation • Compensation- • Commissions paid to the sales reps varied depending on the product mix being sold. • Rolling commission rate. Paid on the basis of margins. • Certain products are pushed with higher commissions • The share of the Syracuse market for wholesale purchases of retail drugstores held by Pilgrim Drug was 20%, compared with a 48% share for some of the other divisions.

8. Analysis • Plans were implemented that would focus sales reps’ efforts to minimize the handling cost of their sales and to maximize profits • The company promoted a three step sales plan for increased profitability • Sales of larger quantities of an item or of high value items were encouraged because the cost of processing and filling each line of an order was practically constant. • Sales of larger total values were encouraged because the profit made on sales to individual account is related closely to delivery expense. The larger the total proportion of the account’s business that went to Pilgrim, the greater the profits as delivery expense remains more or less constant. • Because some manufacturers offered margins considerably larger than others, sales of higher-margin items were encouraged.

9. Questions • Any questions so far?

10. Business Problems • Diverse Sales Force • Strategy and Policy enforcement • Territory Issues

11. Business Problems- Diverse Sales Force • Veteran Sales Reps • Seniority Issues • Focused on Relationships • Newer Sales Reps • Educated and Driven • Vets vs. Newbies

12. Strategy and Policy Enforcement • Strategy: • Sell High Volume or Sell High Margin • Policy: • Sales Calendar coordinating activities and accounts. • Neither was adopted heavily by Veteran Sales Reps.

13. Territory Issues • Supposed to be divided using Sales and Market Analysis Record System. • Actually Divided by Seniority and Geography • This heavily favored the Vets and left the Newbies with less than perfect accounts • All territories were picked through and not worked to its full potential.

14. Solution • A mix of old and new -sharing of accounts between old and new reps. • Certain product quotas -make quotas for high margin products • Mix of salary and commission

15. Solution • Sales rep retreat for division • Train and reiterate sales policies and strategy • Build bond between old and new reps • Compensate based on total sales and not per product profit margin basis • Behavioral monitoring • Call records • Account checksheets

16. Questions and Class Discussion • Are there any questions?