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To Sell in Combo or Not

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    It was hot–hotter than usual for the first week in September,

    and Ed Jefferson was not eager to go out in the heat and sit in his

    car while the air conditioning cooled it off. He put his feet up,

    stared out over the tree tops from his cool office and tried to think

    of all of the alternatives he had for solving his problem.

    Ed had been general sales manager of KRQZ-FM and KRQO-AM for

    twelve years and he had never faced a more difficult, perplexing

    decision: should he sell the two stations in combo or should he keep

    the two separate sales staffs structured the way they were now? It

    was budget time, and Ed had to make a decision within the next few

    days so he could finalize next year’s budget. It was his budget, as

    the new general manager, Tyler Saunders, had told him. Ed liked

    working for Tyler, who was an ex-program director, and like the

    freedom and autonomy Tyler had given him for the six months Tyler had

    Ed Jefferson picked up the KRQZ/KRQO Weekly Sales Report,

    Monthly Forecast Report and Miller-Kaplan Report (these reports

    appear after page five, at the end of this case). He began examining

    the reports carefully, for what seemed to him to be the thirtieth

    time, trying to find the right questions to ask and some hints of

    KRQZ-FM’s revenue was running five percent ahead of last year’s

    and was thirteen percent over budget, year-to-date. This situation

    was quite gratifying to everyone (including corporate) because the

    station had experienced some ratings declines in the past year. For

    the last seven years KRQZ-FM, known by everyone as The Z, had

    featured the same programming–a bright, personality-oriented Adult

    Contemporary (AC) format with a highly recognizable, very funny

    morning team. At one time the station had been a strong number-two

    to the perennial market leader, KNNN-AM, an old-line news/talk

    station with a huge but older-skewing audience. However, The Z’s

    audience had fallen off in the last year as several other AC stations

    began to compete for its 25-54 core audience. One station, known as

    The Cloud, had virtually tied The Z in the last three books in the

    all-important 25-54 demo. For the last four Arbitron rating books,

    The Z had ranked fourth 25-54, and in two books it was behind The

    Cloud. The Z had a 4.4 12+ share in the latest Arbitron, in contrast

    However, The Z’s sales staff had very little turnover, was the

    highest paid in town and its salespeople were extremely well liked

    among the agencies and clients in the top-ten market in which they

    were located. So in spite of the rating declines, the salespeople

    had consistently made the station the number-two biller in town,

    according to the Miller-Kaplan reports. The staff reported to the

    KRQZ-FM local sales manager, Olivia Mitovsky, who had been in the job

    for five years and had the full support, respect and admiration of

    everyone in the department. The six-person sales staff and Olivia

    were considered to be miracle workers–the local staff’s share of

    revenue continually outperformed the station’s 12+ rating share by

    This outstanding sales performance also made Ed Jefferson, the

    general sales manager, a hero, too. His boss, Tyler Saunders, and

    everyone at corporate headquarters knew he and Olivia were doing an

    excellent job–that’s one of the reasons everyone trusted him to come

    up with a solution to the problem: KRQO-AM’s billing problem.

    KRQO’s format was unique in the market–an oldies, Music-Of-

    Your-Life-type format that featured Frank Sinatra, Patti Page, big

    bands and songs from the late ’40s and early ’50s. KRQO’s audience

    was primarily 44+ and 55+. But because it had no competition in the

    format, it pulled good 12+ numbers. In the latest Arbitron it had a

    5.8 12+ share, but ranked tenth 25-54.

    KRQO had a six-person sales staff that reported to a local sales

    manager, Oscar Smithers. As well liked and respected as Olivia

    Mitovsky was by The Z’s staff, Oscar Smithers was disliked by the

    KRQO staff, with one exception–a young, attractive, vivacious,

    aggressive, female salesperson who was perceived by the other five to

    be Oscar’s favorite. The perception of favoritism (in account

    assignments and new leads) had gotten to such a point that virtually

    everyone on both staffs assumed that Oscar was having an affair with

    the salesperson. The other five salespeople on KRQO also complained

    bitterly about the paperwork that Oscar made them do: daily call

    reports, detailed weekly planners, weekly projections and complete

    The Z salespeople only had to do daily call reports that merely

    consisted of check marks on their account lists. These checks were

    entered onto account-list forms by the sales assistants and a report

    was given to the salespeople and the sales managers to help them keep

    track of who they were calling on and who they were missing, if

    anyone. Ed or Olivia rarely mentioned these reports to the

    salespeople, and never in a negative or critical way.

    On the other hand, Oscar used his reports to beat up on people:

    “Why didn’t you call on this person?” “Why couldn’t you close this

    prospect?” He’d look at the weekly planners and then demand that

    salespeople take him out on calls, which he’d invariably take over

    the presentation and push hard, very hard, to close. There were no

    strokes (except for praise for his favorite). The salespeople had

    the feeling that no matter what they did, it was wrong. Four out of

    the six KRQO salespeople were actively looking for other jobs (and

    spending more time doing so than making sales calls). Three

    salespeople had even gone to Ed and Tyler to complain about the way

    they were being treated, which took a certain amount of courage,

    because Oscar had recently fired a popular salesperson and threatened

    to fire more people if they didn’t learn “to do things his way.”

    Oscar continually told his sales staff they were behind budget.

    He posted numbers weekly that showed how much business each

    salesperson wrote that week and compared that amount to their budgets

    that he had set and to the station’s budget. Everyone was behind his

    or her budget and the station was falling further and further behind

    its budget every week. Even though Oscar yelled at the salespeople

    at twice-a-week meetings (which often lasted an hour-and-a-half)

    about missing budgets, at the same time he would complain bitterly

    about how unfair the budgets were. The KRQO salespeople were griping

    about the unrealistic budgets, too, because they got paid a bonus

    based on making their monthly budgets. They weren’t making any bonus

    money, and The Z people were getting substantial bonus checks every

    month (a one-percent retroactive commission bonus based on each

    salesperson’s previous months’s billing). Furthermore, the KRQO

    salespeople complained that the commission system was unfair. They

    were paid eight percent on agency business and a sixteen percent

    commission on new, direct business (had to be both); The Z

    salespeople were paid six percent on agency business and sixteen

    percent on new, direct business. However, The Z billed three times

    what KRQO billed and The Z’s rates were two-and-a-half times greater

    than KRQO’s, so the KRQO people were making less than The Z people,

    and often had to work harder because of the station’s difficult-to-

    About the budgets and commission differential, Oscar and the

    salespeople were right. They were unfair, and Ed Jefferson knew it.

    This fact was a major part of his dilemma.

    The reason the budgets were unfair was because until the

    previous year, The Z and KRQO had been sold in combination. Until

    two years ago, KRQO had small ratings and couldn’t support a separate

    sales effort. The eight-person sales staff would sell a schedule on

    The Z and then throw in KRQO for an additional ten percent. Thus, if

    a salesperson got a $4,000 order for The Z, he or she would say,

    “Give me another $400 and I’ll match the schedule on KRQO.” Billing

    on the two stations was divided accordingly, ninety percent for The Z

    and ten percent for KRQO. However, when KRQO got a new program

    director who changed the music and the promotion for the station, the

    station’s numbers began to grow–from a 1.8 to a 2.6 to a 4.5 Ed

    Jefferson and the previous general manager began to realize that they

    could get more for KRQO than an additional ten percent on top of The

    Z’s rates. They knew that they were underselling KRQO substantially.

    The reason the commissions were out of balance was because the

    commission rates had been based on the stations’ budgets, which had

    Ed and the previous general manager decided the solution to the

    problem was to hire a local sales manager for KRQO who had some

    expertise in direct, retail selling and to split the staff. They

    felt that pursuing direct, retail business was the best strategy,

    because the KRQO couldn’t compete effectively at the agencies for 25-

    54 business, and with most of KRQO’s numbers being 44+, the

    salespeople couldn’t sell very much on a combo with The Z. They also

    decided to have one salesperson from each staff call on agencies and

    clients, and when a buy was up, to have the two salespeople work

    together and make a joint sales presentation to get both stations on

    the buy. They offered a twenty-percent discount on both station’s

    rates if a buyer would by an equal schedule on both stations.

    Ed hired Oscar, who had a good track record of increasing

    direct, retail business at a station in another top-ten market, and

    Ed split the sales staff. Ed actually hired Oscar the week after

    Tyler Saunders joined the station as general manager. Ed gave Oscar

    three of his better, more experienced salespeople–the ones that he

    felt were more adept at direct selling.

    When Ed made out the budgets for the two stations, he worked

    painfully through a number of scenarios. He looked at billing

    figures going back several years for the combo. He looked at rates

    for each station and the number of combo buys that they had gotten.

    He looked at the current ratings for the two stations. Finally, he

    came up with a sixty-forty revenue split, based on his estimate of

    what the two stations could bill–about sixty percent of the total

    would come from The Z, and about forty percent would come from KRQO.

    When he and Tyler, who had just been on the job for two weeks, made

    their budget presentation to corporate, the top brass agreed that the

    budget projections for the two stations were reasonable, and the

    numbers were locked in. Now, nine months later, Ed knew the numbers

    were out of whack. The Z was sailing along way ahead of budget and

    ahead of last year. KRQO was impossibly behind budget and

    expectations. The system of making cooperative presentations was not

    working well. Oscar was so highly competitive with Olivia that he’d

    insist that the KRQO people go after an unrealistically high share of

    the budget. In fact, there was virtual warfare between the two

    staffs, much to Ed’s dismay. But was it Oscar’s fault or the fault

    In either case, “What do I do now?” Ed thought as he looked out

    “Do I admit I made a mistake and fire Oscar?”

    “If I fire Oscar, do I hire another local sales manager and keep

    the staffs split, or do I go back to one staff selling combo.”

    “Oscar is a good closer; do I keep him and let him and a couple

    of retail people report to me and have them sell only KRQO, and have

    the rest of the staff sell a combo with realistic, appropriate rates

    “Do I fire Oscar and several salespeople, and then have a nine-

    or ten-person staff sell only a realistically priced combo

    (understanding that most of the remaining salespeople used to give

    away KRQO for ten percent extra and don’t know how to sell its

    “How do I establish a budget for next year for each station or

    “What is the best compensation system, and is the one I’m using

    “What comes first, structuring the sales department(s)

    realistically or backing into the budgets I know I’ll be facing

    (corporate always wants ten percent more, regardless)?” Ed hated

    backing into budgets. He remembered several years ago when the

    company was under severe pressure from bankers, that he had to back

    into some pretty ridiculous budgets.

    As Ed looked out of the window over the setting September sun,

    he decided to hire a consultant from the Marketing Communication

    Group, a consulting and sales training organization he had dealt with

    in the past. Ed had formed an outline in his mind of what he thought

    was the optimum solution, but he felt he needed an objective,

    knowledgeable outside opinion. He picked up the phone and left word

    AUTHOR’S NOTE

    While the incidents in this case are not factual, they do

    represent a composite of real situations and common industry

    practices. The case was prepared to use as a teaching tool.

    As we discussed, Oscar is a real problem. Morale on the KRQO

    staff appears to be quite low. There is a perception among both

    staffs that he is unfair and shows decided favoritism to one

    person–for no apparent reason (there is rampant speculation, of

    course, but it is only speculation). Oscar is not an effective

    manager; his people skills are poor. He is very competitive with

    Olivia and The Z staff, which causes counterproductive attitudes

    The poor morale and apparent poor performance of KRQO is in stark

    contrast to the excellent morale and performance at The Z. The Z

    salespeople love Tyler, love you and love Olivia–for all the

    right reasons. You help them, coach them, encourage them and make

    them feel like winners. I’m afraid that Oscar spends a great deal

    of time making his people feel like losers–thus it’s little

    wonder they are losing. It’s sort of a self-fulfilling prophesy.

    I feel that you have waited too long to address the Oscar

    problem. The fall buying season is coming up and you must get the

    KRQO staff organized and cracking immediately in order to

    maximize fourth quarter business. Of course, your motives for

    waiting to move on Oscar are beneficent, which is typical of your

    company’s culture; however, I would move immediately on Oscar.

    Talk to him right away and tell him it isn’t working and it’s

    time for a change. Give him until the end of the year to find a

    job, if you can, but get him out of the station now (perhaps your

    rep will give him a desk and a phone to use in New York). When

    you terminate him, you and Tyler do it together and do not argue

    or give him any specifics–just be general and say it’s a style

    problem and be as generous as you feel you can. He will try to

    argue, want to go over your heads to corporate, will demand exact

    reasons, etc. Let him vent his anger, but do not be specific.

    Also, tell him he can resign if he wants to (which is a nice

    technicality and lets him say that he quit). On the other hand,

    if he quits, he can’t get unemployment compensation. So give him

    a choice. You can fire him so he’ll be eligible for unemployment,

    but then you and he can tell everyone he quit. In any case, get

    him out of the station at once; he can do nothing but harm.

    I think your idea of taking over the KRQO sales effort is an

    excellent one. Let Olivia handle The Z, she can certainly do it,

    and you can organize and evaluate the KRQO staff. I think you

    ought to make one or two KRQO changes right away–certainly Mary

    Ann (if she doesn’t leave when Oscar does, she will be nothing

    but trouble if she stays; she has a terrible, negative attitude).

    Unfortunately, Harry probably needs to go too, as we all seem to

    agree that he isn’t going to make it (how about putting him in

    production and creative for a while to shore up direct selling–

    let him do it 25 hours a week and look for work the rest of the

    time. His programming and production experience will be of value,

    particularly with your emphasis on new, direct business).

    After letting two KRQO salespeople go, raise the KRQO commission

    several percentage points (more about this later, but for now the

    commission rates are inequitable–the rates on The Z are more

    than twice KRQO’s but the commission rates are very close).

    Divide the lists up realistically and equitably. Make some

    interim decisions about account assignments. Do not have two

    people go into agencies yet. Tell The Z people to pitch both

    stations and give them the higher KRQO commission for KRQO

    business. In this manner, everyone will be pumped to get more

    KRQO business and it won’t cost the station much more money

    because you’ll be saving the overhead costs on two salespeople.

    Next year, split the staffs completely and put two people into

    agencies competing for business, but not yet. The Z people will

    love this system for the rest of the year and will really hustle

    to get business for both KRQO and The Z and to make some more

    money this year–they like selling both stations and the

    To Sell in Combo or Not. (2018, Jun 05). Retrieved from https://graduateway.com/to-sell-in-combo-or-not-essay/

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