Mr. Robert Burns, President of Janmar Coatings, Inc. has devised the following 2 alternatives for sales and profit growth.

EITHER

• Hire 3 salespersons ($125,000 per year in salary and expenses). Each salesperson is expected to recruit 2 additional Single Brand stores and 1 additional Multiple Brand store in DFW per year.

OR

• Hire 2 salespersons ($125,000 per year in salary and expenses). Each salesperson is expected to convert 4 Multiple Brand stores in DFW to Single Brand stores in DFW.

Use the procedure (and assumptions) of WS#4 to compute the Present Value (LV in the WS) of each of these 2 alternatives at the end of 1 year.

Which option would you recommend to Mr. Burns? Briefly explain!

MAR 4804 Janmar Worksheet #4: Market and Retail Account Analysis (COMPLETE) WS#4: this worksheet provides an example of determining the present value of an activity, either account acquisition or account conversion. For example, given a mean level of performance, the present value of a single brand store (given a plausible set of assumptions) is $318k. In marketing terminology this provides a framework for estimating brand equity or customer equity. Retail account analysis (Ex. 2, 3, text) Market No. of retail accounts: 1000 (450/550) (p. 24) J.C. No. of retail accounts: 200 (80/120) (p. 26) Market ($Mkt./ #stores = $ /store) J.B. ($Mkt./ #stores = $ /store) Total: $80M/#1,000 = $80K Total : $12M/# 200 =$60K D: $48M/#450 = $106.7K DFW : $6M /# 80 =$75K ND: $32M/#550 = $58.2K N-D : $6M /# 120 =$50K J.C. retail account analysis (Ex.3) Store type # stores $ sales $/Store D - single brand 14 $3.36M $240k D - multiple brand 66 $2.64M $40k(2 or 3) ND - single brand 20 $3.36M $168k ND - multiple brand 100 $2.64M $26k (*2 or 3) Using the above $/Store computations and - assuming a 5-year lifetime - assuming a 10% discount rate - using the contribution margin of 35% (p. 28) Calculate the lifetime values of i) each of the 4 types of Retail Store; ii) the lifetime value of converting a Multiple Brand Store to a singlebrand store. Store type $S/Store $C/Store 5Year PV Factor 3.79 (10%) LV($) D - single brand $240k $84k $318k D - multiple brand $40k $14k $53k ND - single brand $168k $59k $223k ND - multiple brand $26k $9k $36k $ Sales increase/store D: MBSB $200k $70k $265k ND: MBSB $142k $50k $186k Glossary: DV $PV GM CM NPM DFW N(on)DFW :dollar value :Dollar Present Value :gross margin :contribution margin :net profit margin :Dallas/Ft. Worth metro area :external to DFW metro area D (= DFW) :Dallas/Ft. Worth metro area ND :N (on) DFW DHh :metro area households DPp :metro area professional painters NDHh :non-metro area householders NDPp :non-metro area professional painters Hh :household Pp :professional painter