Outdoor Sporting Products Inc.
Outdoor Sporting Products Inc.
Outdoor Sporting Products Inc. has a number of issues regarding its product management, marketing channels, marketing campaigns, pricing, sales force, technology, and its customer service lately. Profits are down and sales have declined over the last year. Mr. Hudson McDonald is the owner and Chief Financial Officer of the Outdoor Products and sees the need for change.
Mr. McDonald is in control of the sales force and believes that sales are a weakness for the company. Mr. McDonald is curious to know how he can increase sales and profits for the company without completely changing the organization. There are many changes that can occur to improve the position of the company.
Rectifying many of the departments weaknesses are key ways to help turn things around for Mr. McDonald and Outdoor Sporting Products Inc. Some changes are minor and others will take more time to incorporate. The business has a great sales base already but needs to explore new markets and find ways to penetrate those markets. Outdoor will need to shift resources around in production and marketing to make things possible. Finally customer service and technology will help improve the standing among the customers that are already loyal and help with successfully satisfying customer needs.
I. Product Management
Mr. Hudson McDonald being the President and chief operating officer of Outdoor Sporting Products Inc. has a few issues that may need to be addressed when dealing with Product Management. While a product manager should actually be in charge of this area. Mr. McDonald would undoubtedly be informed of some of these issues and decisions involved. Product management should never lose sight of 4 distinct areas: the target market, the intricacies of the product, what the business needs in order to succeed, and how to measure that success (van der Merwe). Mr. McDonald claimed that “with a few exceptions, Outdoor’s customers had little or no brand preference.” This is a terrible assumption to make when dealing with someone’s products. Mr. McDonald and the product manager should be looking into ways that can make the brand and products have more loyal customers. Apparently customers don’t view the products as setting themselves apart from the others to start exclusively buying from Outdoor Sporting Products Inc.
This would also deal with marketing. However, the products themselves need to actually be a quality product that the customers will appreciate and want to re-buy. The manufacturing of products looked like an area that could use a little work. While there is no numbers in the case indicating the costs of manufacturing; the percentages of where the products are coming from could be fixed a bit. 50% of the company’s volume came from imported products. This is an area where Outdoor could perhaps increase its self-manufactured products to perhaps increase revenues or gain more control over the process. Increasing self-manufactured products could mean growth in manufacturing factories. There could be future growth within the company if things start to turn around a bit. This could result in space being an issue.
These areas of issues can be easily fixed actually and can even help each other. A higher quality product will most likely be self-manufactured rather than imported. This can increase brand and customer loyalty. This also increases revenues in the end. Importing 50% of the volume and only have 35% self made can be a bit different. The company should perhaps 50% self made and 35% imported. This could help Outdoor control the process of manufacturing which increases the quality of the product.
Even if this did end up costing a bit more, starting secure a preference from the customers could be a significant boost to the company. Growing the production process will be necessary at some point if the company starts getting issues figured out. Looking at the future, there will most likely need to be more space to manufacture Outdoor products. There will most likely be a need to build and increase production. Buying space will be a real idea that will need to be addressed. Perhaps doing so in the Midwest area in order to extend the reach of the company and increase the presence in an area that has a large amount of hunters and fishers.
II. Marketing Channels
There are a few very real problems with Outdoor Sporting’s marketing channels. “The route that the product takes on its way from production to the consumer is important because a marketer must decide which route or channel is best for his particular product” (Blunt). The first issue is that they have very little presence in large metropolitan areas. The reasoning behind it was poor customer coverage. While poor customer coverage could be a real issue within the large metropolitan areas; that doesn’t mean that the market is impenetrable. There are some real customers that are perhaps being overlooked by Outdoor by not attempting as hard in this market. Outdoor’s share of the market is only 2% to 3%. This is an area that has a definite need for improvement. There are customers out there that simply aren’t having the chance to purchase Outdoor’s products.
Discount Stores are also being untouched. Mr. McDonald claims that there has been a growth over the last 10 years in discount stores yet Outdoor Sporting Products has not developed a presence in these stores. It has been blamed on the pricing policy and the amount of pressure that customers put on the salespeople. While these issues also need to be addressed; it is still a poor business strategy to not follow the trend of the market. The market shifting to more discount store oriented means that Outdoor needs to find a way to put its products in these stores.
People won’t even see your product in a discount store resulting in less brand awareness. One final issue in marketing channels is how distribution is set up. Every item is shipped from the factory and warehouse in Albany, New York. This could limit the organization in distributing their product. Every sale and every product has to be routed through the same place. While it might not be an issue at this time; it could become one if the company grows. Outdoor products will need to stay ahead of its growth from a manufacturing standpoint.
There are some very realistic solutions to these problems. When it comes to dealing in large metropolitan areas. I would advise trying to start having a presence there. This can be done by allowing time for your salespeople to develop a presence there. Perhaps hit large retail chains within large metropolitan areas. It can be beneficial in that it helps with brand awareness and also opens up to a market that is not being utilized. Another solution is to start developing a presence at discount stores. If these stores are where the market is moving, then the company needs to shift with the market as well. Standing still will result in lost profits.
Salespeople will need more time for these areas. Decreasing sales in stores of small to medium size from the already 6,000 could free up time. Reducing the amount to 4,000 stores and then putting yourself in 500 major retail locations could be beneficial. Then add another 500-1000 discount related locations and develop these areas. After time re-evaluate and see how things are going and what will need to be done. Also, pricing options will need to be addressed as well but will be explained a bit more in the pricing section. Distribution could be addressed with another warehouse. Another distribution warehouse could also perhaps help in customer satisfaction by decreasing shipping times and perhaps putting less stress on the existing shipping and manufacturing employees. It could payoff in the future but will need to be done at the right time. It is always good to think about the future but perhaps increasing right away may not need to be done until business starts to pick up a bit as well.
III. Marketing Campaigns
Outdoor Sporting Products Inc. and Mr. McDonald are making a very huge mistake in marketing. The organization is not utilizing marketing to full way that it should be. Outdoor did not use magazine, newspaper, or radio advertising to reach either the retail trade or the consumer. This puts a strain on the sales force to be the marketers. While it might save some money; Outdoor is not attracting customers by having the salespeople be the major role in marketing. Magazine, newspaper, and radio advertisings do not reach near the audience as some other mediums but they are much cheaper and can still play a major role. Newspaper ads and magazine ads especially can be a difference maker in hunting and fishing.
There are numerous hunting magazines and they play a major role in outdoor product purchases. Hunters and fishers will likely be more likely to buy gear that is supported in their favorite hunting magazine than something that is not in the magazine. The merchandising catalogue that Outdoor Sporting Products puts out every year can be useful today but also needs to be evaluated. Customers today tend to much of their purchases outside of catalogues. Catalogues are not what they used to be, especially with the internet being around. While it might be useful to some customers, there needs to be an evaluation of what that catalogue is costing to what it is bringing in.
Improving marketing should be a must. “Marketing programs, though widely varied, are all aimed at convincing people to try out or keep using particular products or services” (Marketing 101). Start advertising in fish and game magazines to improve the marketing of the products. “By concentrating your efforts on one or a few key market segments, you’ll reap the most from small investments” (Marketing 101). Targeting fish and game magazines are a perfect strategy. It will definitely not hurt the company and should be relatively cheap compared to other means of marketing. Newspaper ads and radio ads can be secondary to the magazine ads but should still be utilized.
This is a good way for people to have brand recognition. Even the name being said in the background of someone’s radio can make all the difference in reputation. Marketing cannot be pushed to the back. Get marketing out of the salespeople’s hands. The product catalogue can be useful for re-buys it says but is not a good marketing tool if it is only successful in re-buys. The catalogue can still be produced but only make it available to the customers who actually use them, or at least want to use them. There’s no use in sending out 10,000 magazines for example if only 1,000 customers use them. Utilizing the internet can be very useful in this area to eliminate wasted magazine catalogues. Product catalogues are an outdated way of doing business and should eventually be scrapped all together as a way of doing business at Outdoor Sporting Products Inc.
The pricing of the products is having a direct negative result on Outdoors sale of products. “Deciding on the price is difficult because, in addition to the physical factors of cost and profit, price is subject to psychological factors, some of which are out of your company’s control” (Kalb). Outdoor Sporting Product Inc. gets its products from self manufacturing, importing, and domestic companies. Outdoor naturally has a markup of their products in order to make a profit and also pay for the products and employees. The problem though is the amount of markup that is being used on the products being sold. The markup is too high, especially for the trends of the market.
Mr. McDonald reported that there was a markup of 50% to 100% on Outdoor’s cost for the item. The average markup across all products averages out to 70%. This markup has worked for Outdoor products but will need to be adjusted. Mr. McDonald himself has claimed that the customers are shifting more towards a discount store customer. Maintaining a 70% markup average could make things difficult when trying to spread into discount stores. The markup might be a result of a few different issues including shipping, manufacturing, and distribution issues as well. It is not put at 70% strictly because of profits. There has to be better ways to be able to lower the markup pricing though.
Outdoor Sporting Products Inc. needs to find ways to develop business into discount stores. Having a 70% markup simply won’t be very sensible. Outdoor will need to lower markup at these stores in order to develop a relationship with these customers. Outdoor needs to find a way to become profitable with around a 50% to 60% markup average across all products. This would lower prices which were a problem with developing markets in discount stores. “When you are pricing your products, what gives you control over the price is the uniqueness built into your positioning, or branding, strategy” (Kalb). Also, the development of another warehouse or manufacturing center in another location would lower shipping costs in general also. These could help lower the prices of Outdoor products. Each area can help another part of the company by fixing the issues.
V. Sales and Sales Force Management
The sales force is one of the biggest problems within Outdoor Sporting Products Inc. The case appears to be a straight compensation structure, but analysis of the information in the case quickly leads to the conclusion that a number of other issues are also involved, including training salespeople, evaluating sales performance, determining sales potential and territories, and the relationship between the sales function and overall marketing strategy. The salesmen with a guaranteed salary have a significantly higher than average earnings to sales ratio.
The incentive plans currently in existence have several weaknesses. Some of the plans require that the salesman be in the territory the previous year to be eligible for payment of a bonus. This provides zero incentive for a first-year person and makes it possible to so the next year can provide a large bonus. The compensation is not working currently and needs to be addressed.
Compensation could be changed by having a lower guaranteed salary. Eliminating some of the sales incentives such as the yearly improvement incentive could be productive. Start giving the salespeople a chance to really excel at selling products and help with money in the area of commission.
The first four parts of the selling formula are routinely found in the catalog carried by the salespeople. It is questionable that knowing these four pieces of information on all 700 items is worthwhile. Perhaps more knowledge of customer needs and benefits that the customer could derive from the products sold by the company would result in increased pride in the job and sales. It can be seen that the entire sales group needs additional training, and plans should be made to provide for training on an ongoing basis. Perhaps Mr. McDonald could use his best salesperson in the role of sales training. It is apparent that he is doing a much better sales job than any of his colleagues.
The improved training for salespeople can only lead to more a efficient and motivated sales force. With the results of recent sales, it would be a good idea to take a close look at the practice of having the salespeople plan their own itineraries and the time to be spent on each sale. Although having each salesperson handle some parts of the job is normally usually a good idea, the results show that the salespeople may need some help in this area. The reporting system used now can provide a helpful data base to make these salespeople more effective in this area.
Mr. McDonald leading the sales team could be a potential problem from some salespeople’s perspective. Mr. McDonald can lead the sales team but will need to perhaps make a few changes to his approach. His sales formula can still be utilized if he wants it to be but the amount of time and effort put in with Monday sales calls and daily reports could be counterproductive. There will need to be a better way of checking in with salespeople and dealing with daily reports. Perhaps have another sales team director who can deal with day to day operations while Mr. McDonald can deal with marketing and sales strategy.
VI. Implementation of Technology
Technology is underutilized within Outdoor Sporting Inc. There is no real mention of internet sales or how technology is utilized to make the organization successful. This leads to believe that technology is not an area of focus by this organization. The technology used by consumers today is indicative of how a company like Outdoor should be doing business. Using internet sales might affect sales of the sales force but can be seen as an upgrade in customer service in dealing with customer wants and needs. “The Internet allows communication in two ways: static communication through Web pages, and dynamic communication through information being exchanged” (Golden).
The company seems to deal with sales today strictly through catalogues and salespeople. Customer satisfaction would seem to increase if they could use the internet to help deal with their needs. Technology alone can improve the shipping process as well. Salespeople calling and handing in reports of sales could take time that could be used in manufacturing or shipping products. Even eliminating a day off of processing sales can make all the difference in the world to a store. Just looking to the future alone should indicate that technology will need to be utilized more than it is now.
With technology advancing and new generations of customers who utilize technology, it would be wise to start using technology as a company as well. Develop an online catalogue or ways to process sales online. Online sales today are a major market and Outdoor is missing out on these customers by focusing on how to deal with salespeople. Even having salespeople utilize the online site with their customers could be beneficial to both sides.
It could speed up processing and perhaps allow more time for salespeople to travel to other customers. There will always be technology that can speed up manufacturing and processing and it should never be overlooked. In this instance though, the shortcomings in utilizing the internet and network systems seems to be a mistake. “Networking systems allows users to communicate through traditional voice and video in a secure system” (Golden). Technology could really help streamline the buying process for customers.
VII. Customer Service and Support
Customer Service and Support should be staples of the organization especially within the sales force. Sales are regarded as some of the tougher jobs in dealing with people. Having great customer service skills can make the difference between making sales and looking for a different job. The lack of training and uniformity in this area for the salespeople is a cause for concern. There are potential sales that could be missed but the company doesn’t know how the salespeople are dealing with customers. The case doesn’t mention a customer service department but there is most likely some customer support somewhere in the organization. If Outdoor Sporting Products Inc. starts to grow, customer service will be depended upon to maintain happy and loyal customers along the way.
Training of the sales staff will be vital for increasing customer service and support among the salespeople. Sales depend on customer service and support. Commission based salaries depend on employees being good with people. The best salesperson is doing something right at Outdoor and needs to be utilized in order to train other employees. Perhaps his customer skills are something that should be used by everyone. “Customer service is that personal encounter, whether it be via email, telephone or in person. How you conduct that personal experience determines whether you create a customer that has loyalty towards your place of business” (Lake).
There will need to be a customer service department for complaints from customers. The distribution channels will often times complain to the sales team but customers of the products will most likely want to deal with people in the company. This is where a customer service department needs to be key. Saving customers can help save and maintain loyal customers. This is where there will be employees that need to dealing with customers needs and relaying the ideas to other departments. Customer service is about improving the company by satisfying a customer’s wants and needs.
Outdoor Sporting Products Inc. have done a great job at setting up a great company with a potential to be profitable. While the case wants to deal a lot with compensation of the sales force, there are many areas that need to be improved. Mr. Hudson needs to realize that it is time for the company to develop along with the market and take the company to the next stage. Outdoor has become a bit stagnant and will have to change each of the areas listed above to an extent to return to profitability. There will undoubtedly be growth. Outdoor Sporting Products Inc. has a great company that is ready to take the next step to become a major sporting product company. Mr. Hudson just needs to help develop the company to help it reach its potential.
Blunt, L. (n.d.). Types of Marketing Channels. Retrieved December 12, 2014, from http://smallbusiness.chron.com/types-marketing-channels-21627.html
Golden, R. (n.d.). How Today’s Technology Is Used in Business to Communicate. Retrieved December 12, 2014, from http://smallbusiness.chron.com/todays-technology-used-business-communicate-27351.html
Kalb, I. (2013, October 2). Three Ways Companies Decide The Price Of A Product. Retrieved December 12, 2014, from http://www.businessinsider.com/3-powerful-pricing-strategies-businesses-should-always-consider-2013-10
Lake, L. (n.d.). What Role Does Customer Service Play in Marketing? Retrieved December 12, 2014, from http://marketing.about.com/od/relationshipmarketing/qt/What-Role-Does-Customer-Service-Play-In-Marketing.htm
Marketing 101. (n.d.). Retrieved December 12, 2014, from https://www.sba.gov/content/marketing-101-basics
Van der Merwe, R. (2014, September 17). Why Companies Need Full-Time Product Managers – Smashing Magazine. Retrieved December 12, 2014, from http://www.smashingmagazine.com/2014/09/17/why-companies-need-full-time-product-managers/