what is the initial investment that the SMA would require? What is the anticipated B/E point?

40 Cases Businesstand Computers, Inc. What If We Automated Our Salesforce? usinessland's orders for the last year increased only So as compared to a 19% increase five years earlier. In similar pattern, current year revenues increased only 3.8% compared to a revenue growth of 21.15 the revious year and 42.7% two years earlier. Earnings owever, decreased to a negative of $23 million in he last year as compared to a decreasing growth rate 91.5% in the previous year and 37% two years ear er. Parallel to this, Bill noted that the category of xpenses identified as selling, general, and adminis ative increased nearly 19% during the past year com ared to only 9.6% the previous year. It was immedi- ely apparent that revenues were still increasing but at decreasing rate but that actual orders had almost be me stagnet during the past year. By contrast, opera- - expenses were running wild and if Businesland ere to remain competitive, these would have to brought back under control. Will began to focus pon alternatives. Revenues and earnings are shown in gure 1. Sales and Marketing Automation At a recent seminar entitled "Marketing Technolog Bill had been exposed to the concept of Sales and Marketing Automation (SMA) which is a wstem de signed to add efficiency to sales operations. In the words of Steve Humet, a sales rep for Nation's Carri ers, "The laptop allows one to follow through with a customer rather than having to get back to them at later time. I permits a rep to hook right up to mainframe via a modem and get ansvers to any ques tion the customer may have night on the spot. SMA alto improves alesforce productivity and increases el fectiveness by reducing the amount of time a salesperson devotes to administrative tasks such as the preparation of all reports tracking sales leads FIGURE 1 Business and Computers, Inc. Five Year Selected Financial Date Year (last final prie Year 2 3 Your $1,567,170 $1,200,028 S900119 $501.053 156.475 267.550 319,645 198956 298,076 250,762 208.673 199.444 fins the mind) Net Sales Grous Profit Selling, General, Administrative Exp Rearucturing Exp Income (los) from Operations Income (los) for IRS 25,685 (24.161) 62,854 57,195 (30,850) 56,934 31.665 132 (8.00 (24.954) 35.205 5.02 (10.763 Income (los) before extra ordinary item Net Income (los) (25,297) 53,497 12.759 (2.180) Cases Royal Corporation 441 150 $50 Total managing time and territory FIGURE 2 Estimated SMA Costs developing proposals and persuasive presentations First Year Second Year Impressed with the opportunities of such a pro Baste: gram, Bill began to think about a program that would Hardware $3.500 provide Businessland's salesforce the productivity tools Software 1,000 $1.500 that would increase selling productivity and at the same Supplies 500 time, lower selling costs. Immediately, Bill set up a task Total $5,000 $1,500 group to help him outline the goals and objectives for Operational the project and to identify the resources that would be Insurance $100 $100 required -- financial, equipment and support person Electronic mail 150 nel. The group identified three fundamental objectives Software Upgrade 100 100 that would evaluate the effectiveness of such a program: Extended Warranty 350 Total $350 $700 1. To increase sales productivity and Implementation effectiveness by 25 percent. Consultant $300 Training 400 2. To increase customer visibility of Spare Equipment Businessland's automation solutions through $1,050 the use of their own products (computers). Overall Total $6,400 $2,200 3. "To increase sales rep job satisfaction. confidence and motivation. Amount added for $1,500 $500 management support personnel In order to evaluate future sales productivity, the group analyzed the past performance of the salesforce. Grand Total $7.400 $2,700 They identified work patterns falling into the following major categories with time spent as shown: Contact with Customers 26% force regarding their satisfaction with the implement tion and usage of SMA. The group, however, was much Administrative Sales Activities 91% more concerned as to how they would measure the Travel and waiting 15% productivity of the sales automation and with the de Meetings and training termination of the return on investment. Bill was 19% rather clear that he wanted to know the break even Office and personal time 15% point before he would be willing to include the pro- Total 100% posal in the budget. The group estimated the automation costs to run Royal Corporation about $7500 per salesperson as shown in Figure 2: The As Mary Jones, a third-year sales representative for task group thought it would be relatively easy to mea- sure the second and third objectives by randomly the Royal Corporation, reviewed her call plans for to- surveying both Businessland's clients and the sales force once the program was initiated. They proposed that clients could be surveyed as to how they per Source: Copyright 1994. This ce was prepared at Habion College ceived sales automation and the impact Businessland by Professor it. David Hennessey and Barbara Kalunia, graduate had upon their purchasing decisions. Similarly, they student, as the basis for disco rather than to illustrate either effective or ineffective sales performance. Names and locations have thought that reports could be obtained from the sales been digised . 40 Cases Businesstand Computers, Inc. What If We Automated Our Salesforce? usinessland's orders for the last year increased only So as compared to a 19% increase five years earlier. In similar pattern, current year revenues increased only 3.8% compared to a revenue growth of 21.15 the revious year and 42.7% two years earlier. Earnings owever, decreased to a negative of $23 million in he last year as compared to a decreasing growth rate 91.5% in the previous year and 37% two years ear er. Parallel to this, Bill noted that the category of xpenses identified as selling, general, and adminis ative increased nearly 19% during the past year com ared to only 9.6% the previous year. It was immedi- ely apparent that revenues were still increasing but at decreasing rate but that actual orders had almost be me stagnet during the past year. By contrast, opera- - expenses were running wild and if Businesland ere to remain competitive, these would have to brought back under control. Will began to focus pon alternatives. Revenues and earnings are shown in gure 1. Sales and Marketing Automation At a recent seminar entitled "Marketing Technolog Bill had been exposed to the concept of Sales and Marketing Automation (SMA) which is a wstem de signed to add efficiency to sales operations. In the words of Steve Humet, a sales rep for Nation's Carri ers, "The laptop allows one to follow through with a customer rather than having to get back to them at later time. I permits a rep to hook right up to mainframe via a modem and get ansvers to any ques tion the customer may have night on the spot. SMA alto improves alesforce productivity and increases el fectiveness by reducing the amount of time a salesperson devotes to administrative tasks such as the preparation of all reports tracking sales leads FIGURE 1 Business and Computers, Inc. Five Year Selected Financial Date Year (last final prie Year 2 3 Your $1,567,170 $1,200,028 S900119 $501.053 156.475 267.550 319,645 198956 298,076 250,762 208.673 199.444 fins the mind) Net Sales Grous Profit Selling, General, Administrative Exp Rearucturing Exp Income (los) from Operations Income (los) for IRS 25,685 (24.161) 62,854 57,195 (30,850) 56,934 31.665 132 (8.00 (24.954) 35.205 5.02 (10.763 Income (los) before extra ordinary item Net Income (los) (25,297) 53,497 12.759 (2.180) Cases Royal Corporation 441 150 $50 Total managing time and territory FIGURE 2 Estimated SMA Costs developing proposals and persuasive presentations First Year Second Year Impressed with the opportunities of such a pro Baste: gram, Bill began to think about a program that would Hardware $3.500 provide Businessland's salesforce the productivity tools Software 1,000 $1.500 that would increase selling productivity and at the same Supplies 500 time, lower selling costs. Immediately, Bill set up a task Total $5,000 $1,500 group to help him outline the goals and objectives for Operational the project and to identify the resources that would be Insurance $100 $100 required -- financial, equipment and support person Electronic mail 150 nel. The group identified three fundamental objectives Software Upgrade 100 100 that would evaluate the effectiveness of such a program: Extended Warranty 350 Total $350 $700 1. To increase sales productivity and Implementation effectiveness by 25 percent. Consultant $300 Training 400 2. To increase customer visibility of Spare Equipment Businessland's automation solutions through $1,050 the use of their own products (computers). Overall Total $6,400 $2,200 3. "To increase sales rep job satisfaction. confidence and motivation. Amount added for $1,500 $500 management support personnel In order to evaluate future sales productivity, the group analyzed the past performance of the salesforce. Grand Total $7.400 $2,700 They identified work patterns falling into the following major categories with time spent as shown: Contact with Customers 26% force regarding their satisfaction with the implement tion and usage of SMA. The group, however, was much Administrative Sales Activities 91% more concerned as to how they would measure the Travel and waiting 15% productivity of the sales automation and with the de Meetings and training termination of the return on investment. Bill was 19% rather clear that he wanted to know the break even Office and personal time 15% point before he would be willing to include the pro- Total 100% posal in the budget. The group estimated the automation costs to run Royal Corporation about $7500 per salesperson as shown in Figure 2: The As Mary Jones, a third-year sales representative for task group thought it would be relatively easy to mea- sure the second and third objectives by randomly the Royal Corporation, reviewed her call plans for to- surveying both Businessland's clients and the sales force once the program was initiated. They proposed that clients could be surveyed as to how they per Source: Copyright 1994. This ce was prepared at Habion College ceived sales automation and the impact Businessland by Professor it. David Hennessey and Barbara Kalunia, graduate had upon their purchasing decisions. Similarly, they student, as the basis for disco rather than to illustrate either effective or ineffective sales performance. Names and locations have thought that reports could be obtained from the sales been digised