ATHENIAN PRESS, INC

Redesigning Sales Territories

Steve Womble, the sales manager for the Athenian Press newspaper, was reviewing the quarterly summary for the papers advertising sales and was concerned by the results, which showed a slight decrease from the previous quarter. More importantly, ad revenues for the past two years were showing a disturbing trend. Not only had the company not made its targeted growth of 2 percent, but sales were down over the past two years by 7 percent. While Womble felt that part of this trend might reflect more intense online advertising in recent years, he felt that most of the decrease in sales was due to the need for change in the sales organization. The market had been changing in terms of both rapid growth and increased customer expectations. Womble, who had recently been promoted to his current position, felt that Athenian Press had not responded to these changes.

Athenian Press, Inc., founded in 1945, publishes a daily newspaper and a Sunday paper that serves the community of Athens, Tennessee, home of the company's main office. The target market contains the central Tennessee counties of McMinn and Meigs plus major portions of Monroe and Hamilton counties. The counties comprise a market of more than 320,000 people.

The Athenian Daily has a circulation of 59,582 subscribers. On an average day, more than 60 percent of the adults in the area read this paper. The Athenian Sunday Journal has a circulation of 85,621 and is read by approximately 89 percent of the market adults at least once a month.

As with most newspaper publishers, a major source of Athenian revenue is the amount of advertising sold. Generally, advertisements comprise more than 60 percent of any newspaper, and the size of the paper is determined by the number of advertisements it includes. Most of these advertisements are purchased by retail store merchants to increase customer awareness and to advertise special promotions. Despite growth in online advertising, local newspaper advertising continues to be a mainstay for local and regional retail businesses. The Athenian Press has 800 active accounts and employs eight outside salespeople to call on these accounts. Each salesperson has charge of a territory of approximately 100 active accounts. Athenian also employs three inside salespeople who are responsible for serving customers who place ads in the classified section. These inside salespeople also report to the sales manager.

Competition for retail advertisements is strong in this area. The Athenian papers compete with several other papers for advertisements. The Knoxville Journal currently holds about 8 percent of the market, while the Chattanooga Free Press has 4 percent, and the Tennessean, published in Nashville, has 2 percent. The paper also competes against local radio and television stations for the ads of retail stores. However, its greatest competitor is ADCO Mailing. ADCO is a company that produces advertising fliers distributed by mail. To compete with these fliers, the Athenian Daily prints a weekly newspaper insert that contains deals from local merchants.

A salesperson for the Athenian Press has three main responsibilities. The first and most important is to meet with the customers regularly to solicit their advertising. In terms of workload, it is felt that each salesperson should be able to make 10 to 15 calls a day and spend 30 to 60 minutes per call. Steve wonders if this is reasonable or realistic. Each salesperson is responsible for approximately 100 accounts. For the very active accounts (approximately 50 percent of the salespersons accounts), the salespeople are supposed to schedule regular weekly meetings to discuss the weekly order. For the less active accounts (the remaining 50%), the salespeople are expected to stay in regular contact by making appointments twice per month. The sales reps' second responsibility is to make all of their customers aware of upcoming promotions. If the newspaper is running a special section on dining out, the sales force is responsible for contacting all local restaurant owners to suggest that they may want to be included. The reps' third responsibility is to look for new accounts in their territories. The salespeople must meet with the owners and/or managers of any new stores as soon as they are under construction to inform them of Athenian's services and encourage them to advertise. They should also call on existing businesses that have never been advertised in the paper or that have not been advertised in a long time.

Once an order has been taken by a salesperson, the salesperson is in charge of making preliminary sketches of the ad according to the specifications of the customer. These sketches are then sent to the art department back at the paper, which develops the final version of the advertisement. The business department is responsible for all billing and accounting; but if a problem arises with bill collection, the salesperson contacts the customer to try to resolve the issue.

The compensation for the salespeople consists of salary and commission plus a yearly bonus based on performance. Salary makes up 60 percent of their total income, and commissions account for the remaining 40 percent; the bonuses are added to this base. The average compensation of $36,000 is considered competitive for this size newspaper, and the salespeople are relatively satisfied with their compensation levels. Sales trainees are paid a straight salary. New reps are given a brief indoctrination to the company before being assigned to "shadow" an experienced sales rep for two weeks. After this period of observing an experienced rep, they are assigned to a territory.

Steve Womble meets with each salesperson at least once a month to discuss his or her progress. Recently, Womble had completed a careful analysis of the sales force's current activities. He concluded that the sales force was not spending enough time with its customers. First of all, each salesperson can spend only about 60 percent of his or her time actually or directly in the field because of the reps' responsibility of creating the preliminary sketches of the ads. Second, because of the number of accounts salespeople must service, they are not spending as much time as they should with each customer. Additionally, the 15 or 20 minutes it takes to travel between each account also limits the amount of time they can spend with each customer. As a result, most customer calls are brief and less frequent than they should be, and very little time is devoted to calling on new accounts.

Convinced of the need for change, Womble came up with several options that he discussed with his boss, Linda Gruhn, and with his salespeople:

Option One: One alternative was to assign the task of creating preliminary sketches to someone other than the salesperson, preferably an online customer service associate with graphic art skills, thus freeing up a significant amount of the salesperson's time. However, the salespeople felt strongly that the sketches were often needed to demonstrate the power of local advertising and thus close the sale, and they wanted to keep that part of the sale under their control. They also worried about the necessity for increased coordination between themselves and the service rep. Finally, as one sales rep said to Womble, "I enjoy that part of my job because it requires creativity and imagination. Take that away and it won't be as much fun."

Option Two: Another possibility was to hire additional salespeople and realign the territories so that each salesperson would be responsible for fewer accounts. The salespeople's reaction to this option was not surprising: They all felt that this was a threat to their sales volumes and thus to their commissions as well. Additionally, Linda Gruhn told Steve Womble that he must be able to justify hiring any additional salespeople before she would approve it.

Option Three: A final possibility was for Steve Womble to take over selling to several of the largest accounts, thus giving the salespeople more time with the remaining accounts. This would decrease the time Womble could spend on his managerial duties, but he felt he could handle 8 to 10 of these accounts and still provide the salespeople with an adequate amount of supervision. Needless to say, the reps were not in favor of this option, which they saw as a threat to their commissions.

Assignment Develop a strong argument as to why Option 2 is the preferable solution over Options 1 or 3 by comparing the advantages and disadvantages of each option and completing a numerical calculation to illustrate how many new sales reps are needed. To do the calculation: assume the average rep works 50 weeks per year, 5 days per week, 8 hours per day. Further, assume that the ideal call length per account is 45 minutes and that it takes 15 minutes to travel between accounts. Given the existing number of active accounts and call frequency desired for different types of accounts (very active versus less active), determine the needed salesforce size. Use the calculation as a basis and recommend/discuss what Steve should do in making his case to Linda Gruhn to implement Option 2