Newman Salespeople Assignment | Top Universities

Newman Furniture In April 2008, Newman Furniture, Inc. merged with Lea-Meadows, Inc., a manufacturer of upholstered furniture for living and family rooms. The merger was not planned in a conventional sense. Charles Yates’ Cather-in-law died suddenly in early February 2008, leaving his daughter (Charles’s wife) with controlling interest in Lea-Meadows. The merger proceeded smoothly since the two firms were located on adjacent properties and the general consensus was that the two firms would maintain as much autonomy as was economically justified. Moreover, the upholstery line filled a gap in the Newman product mix, even though it would retain its own identity and brand names. The only real issue that continued to plague Yates was merging the selling effort. Newman had its own sales force, but Lea-Meadows relied on sales agents to represent it.
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The question was straightforward, in his opinion: “Do we give the upholstery line of chairs and sofas to our salesforce, or do we continue using the sales agents?” John Bennett, Newman’s vice- president of sales, said the line should be given to his sales group: Martin Moorman, national sales manager at Lea-Meadows, said the upholstery line should remain with sales agents. Lea-Meadows, Inc. Lea-Meadows, Inc. is a small, privately owned manufacturer of upholstered furniture for use in living and family rooms. The firm is more than 75 years old. The company uses some of the finest fabrics and frame construction in the industry, according to trade sources. Net sales in 2007 were $5 million. Total industry sales of upholstered furniture manufacturers in 2007 were $15.5 billion. Forecasted 2008 industry sales for upholstered furniture were $16.1 billion. Company sales had increased 3 percent annually over the past five years, and company executives believed this growth rate would continue for the foreseeable future. Lea-Meadows employed 15 sales agents to represent its products. These sales agents also represented several manufacturers of noncompeting furniture and home furnishings. Often, a sales agent found it necessary to deal with several buyers in a store in order to represent all the lines carried. On a typical sales call, a sales agent first visited buyers to discuss new lines, in addition to any promotions being offered by manufacturers. New orders were sought where and when appropriate. The sales agent then visited the selling floor to check displays, inspect furniture, and inform salespeople about furniture styles and construction. Lea-Meadows paid an agent commission of 5 percent of net company sales for these services. Moorman thought sales agents spent 10 to 15 percent of their in-store time on Lea-Meadows products. The company did not attempt to influence the type of retailers that agent contacted. although it was implicit in the agency agreement that agents would not sell to discount houses. Sales records indicated that agents were calling on specialty furniture and department stores. An estimated 1,000 retail accounts were called on in 2006 and 2007. All agents had established relationships with their retail accounts and worked closely with them. Newman Furniture, Inc. Newman Furniture, Inc. is a manufacturer of medium- to high-priced wood bed-room, living room, and dining room furniture. Net sales in 2007 were 75 million; before-tax profit was $3.7 million Industry sales of wood furniture in 2007 were $12.4 billion at manufacturers prices. Projected wood furniture industry sales for 2008 were $12.9 billion. The company employed 10 full-time sales representatives, who called on 1,000 retail accounts. These individuals performed the same function as sales agents but were paid a salary plus a small commission. In 2007, the average sales representative received an annual salary of $70,000 (plus expenses) and a commission of 0.5 percent on net company sales. Total sales administration costs were $130,000. Newman Furniture’s salespeople were highly regarded in the industry. They were known particularly for their knowledge of wood furniture and willingness to work with buyers and retail sales personnel. Despite these advantages, Yates knew that all retail accounts did not carry the complete Newman furniture line. He had therefore instructed Bennett to “push the group a little harder.” Al present, sales representatives were making 10 sales calls per week, with the average sales call running three hours. Salesperson remaining time was accounted for by administrative activities and travel. Yates recommended that the call frequency be increased to seven calls per account per year, which was consistent with what he thought was the industry norm. Merging the Sales Efforts Through separate meetings with Bennett and Moorman. Yates was able to piece together a variety of data and perspectives on the question of merging the sales ellorts. These meetings also made it clear that Bennett and Moorman differed dramatically in their views. John Bennett had no doubts about assigning the line to the Newman sales force. Among the reasons he gave for this view were the following. First, Newman had developed one of the most well respected, professional sales forces in the industry. The representatives could casily learn the fabric jargon, and they already knew personally many of the buyers who were responsible for upholstered furniture. Second, selling the Lea-Meadows line would require only about 15 percent of present sales call time. Thus, he thought that the new line would not be a major burden. Third, more control over sales efforts was possible. Bounctt noted that Charlton Yales’ father had created the sales group 30 years earlier because of the commitment it engendered and the service “only our own people are able and willing to give.” Moreover, the company salespeople have the Newman “look” and presentation style, which is instilled in cvery one of them. Tourth, Bennett said that it wouldn’t look right if both representatives and agents called on the same stores and buyers. He noted that Newman and I.ea-Meadows overlapped on all their accounts. He said, “We’d be paying a commission on sales to these accounts when we would have gotten them anyway. The difference in commission percentages would not be good for morale.” Martin Moorman advocated keeping sales agents for the Lea-Meadows line. His arguments were as follows. First, all sales agents had established contacts and were highly regarded by store buyers, and most had represented the line in a professional manner for many years. Ile, too, had a good working relationship with all 15 agents. Second, sales agents represented little, if any, cost beyond commissions.
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Moorman noted, “Agents get paid when we get paid.” Third, sales agents were committed to the Lea-Meadows line: “The agents carn a part of their living representing us. They have to service retail accounts to get the repeat business.” Fourth, sales agents were calling on buyers not contacted by the Newman sales force. Moorman noted, “If we let Newman people handle the line, we might lose these accounts, have to hire more sales personnel, or take away 25 percent of the present time given to Newman product lines.” Finally, Moorman took issue with Bennett’s view that Newman salespeople could casily learn about upholstered furniture. He said, “Lea-Meadows has some 1,000 different frames for sofas and upholstered chairs. If all combinations of fabric, skirts, pillows, springs, and fringes are considered, a Newman sales rep would need to be conversant in no fewer than 1 billion possibilities. I tremble just thinking about teaching Newman’s salespeople the finer points of our prints, velvets, jacquards, and textures, such as chenille, and that’s just our upholstery fabrics!” As Yates reflected on the meetings, he felt that a broader perspective was necessary beyond the views expressed by Bennett and Moorman. Onc factor was profitability. Existing Newman furniture lines typically had gross margins that were 5 percent higher than those for lea-Meadows upholstered lines. Another factor was the “uis and then references apparent in the meetings with Bennett and Moorman. Would merging the sales effort overcome this, or would it cause more problems? The idea of increasing the sales force to incorporate the Lea-Meadows line did not sit well with him. Adding new salespeople would require restructuring of sales territories, involve potential loss of commissions by existing salespeople, and he “a big headache.” Still, it had been Newman’s policy for many years to have its own sales force and not usc sales agents. In addition, there was the subtle issue of Moorman’s future. Moorman, who was 58 years old, had worked for Lea-Meadows for 30 years and was a family friend and godfather to Yates’s youngest child. If the Lea-Meadows line was represented by the Newman sales force, Moorman’s position would be eliminated. Given these circumstances, Yates also thought his wife’s views had to be considered. IIc could bring up the topic on their way to the Iligh Point, North Carolina, furniture exposition early next week. After Yates talked with his wife, he felt that he had some specific areas to focus on in trying to make the decision about whether to give the Lea-Meadows line to the Newman sales force. First, how would it affect the selling efforts of the Newman sales force? Yates was already trying to get them to make more sales calls, how much time would that leave for selling the Lea-Meadows line and how does that compare with the time the sales agents spend selling Lea-Meadows? Second, what are the potential costs of adding new salespeople to help sell both lines if the salespeople are spending the same amount of time selling the Newman line as they are currently, both at the current number of sales calls per week and the new higher seven sales calls per week? After all, would it make sense to shorten the salespeople’s time spent selling the higher-margin Newman line? Third, would having the Newman sales force sell the Lea-Meadows line have a negative impact on the sales of Newman furniture? On the sales of the Lea-Meadows line? On the good trade relations that both brands have built with their respective retailers?Get Accounting Homework Help Today

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