MARKETING 400 LEVEL CASE STUDY

· Lea-Meadows: 

· Small privately owned manufacturer 

· Uses finest fabric and material

· Net sales in 2007:   $5 Million {growth rate to continue in the future}

· Total industry sale:

2007:                   $15.5 Billion 

2008:                   $ 16.1 Billion 

· They have 15 sales agents:

· These agents represent several other manufacturers of noncompeting furniture 

· Typical sales call: 

· An agent first visits buyers to discuss new line 

· In addition to any promotions being offered by manufacturers 

· New orders were sorted when it was appropriate 

· Sales agent then visited the selling floor to check display and inspect furniture 

· Moorman (National sales manager at Lea-Meadows) 

· He thought sales agents spent 10-15% of time on lea products 

· Lea-Meadows paid agent 5% commission of net company sales 

· Written is agreement that agents would not sell to discounted houses 

· Sales records indicated that agents were calling on specialty furniture and department stores 

· Estimated 1,000 retail accounts were called on in ’06-‘07

· Haverwood Inc.

· Manufacturers medium to high-priced wood household furniture 

2007

· Net sales:                                     $75Million 

· Profit before tax:                      $3.7Million 

· Industry sales:                           $12.4Billion (2007)

· Industry Sales:                           $12.9Billion (2008) 

· Total sales Admin cost:           $130,000

· Average sales rep received:    $70,000 (plus expenses& commission of 5%) 

· Company employed 10 full-time sales representatives

· Called on 1,000 accounts 

· Performed same function as sales agents but worked on salary plus a small commission 

· Known for their knowledge of wood furniture and willingness to work with buyers and retail sales personnel 

· Present sales representative making 10 sales calls per week 

· Average sales call running 3 hours 

· Bates suggested that call frequency be increased to 7 calls per account per year. 

· Merging the sales efforts

· Bates pieced together a variety of data and perspectives on the sales efforts 

· Bott and Moorman differed in their views

·  Haverwood developed one of the most well respected sales force in the industry 

· The reps could easily learn the fabric jargon

· Personally already knew buyers responsible for upholstered furniture 

· Selling the Lea line would require only 15% of present sales call time 

· Though he thought that the new line would not be a major burden 

· Wouldn’t look right if both reps and agents called on the same stores and buyers. 

· Both the companies overlapped accounts 

· “would be paying commission on these accounts when we would have them anyway”

· Martin Moorman

· Advocated keeping sales agents for the Lea line 

· 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 

· He has good working rep with all 15 agents 

· agents have to service retail accounts to get repeat business 

· He said to take away 25% of the present time given to Haverwood product lines 

· Martin finally went with Bott’s view that Haverwood salespeople could easily learn about the upholstered furniture. 

· Lea has 1,000 different frames for sofas and upholstered chairs. 

· If all combinations of fabric, skirts, pillows etc. are considered a Haverwood sales rep would need to be conversant in over 1 billion possibilities 

· tremble thinking about teaching Haverwood’s salespeople the finer points of our prints, velvets etc. 

· Bates felt that a much boarder perspective was necessary beyond the view expressed by Bott and Moorman 

· Factor: 

· Profitability 

· Existing Haverwood furniture lines typically had gross margins that were 5% higher than Lea 

· “Us and them” references apparent in the meetings with Bott 

· Would merging sales efforts overcome this problem of higher gross margins 

· The idea of increasing sales force to incorporate the Lea line did not sit well with them 

· Adding new salespeople would require restructuring of sales territories

· involved potential loss of commissions by existing sales people  

· Haverwood policy for many years to have its own sales force and no sales agents.

· Moorman worked for Lea for 30 years 

· If Haverwood took up rapping the Lea line this would eliminate Moorman 

· Bates also thought his wife’s views had to be considered