Valley Winery Case Study Essay
Valley Winery, a favorable wine company, hired Pat Waller as their sales manager of the San Francisco region’s chain division. Although the company has had increasing sales for the past several years, Valley Winery has its fair share of problems that have Waller worried. He is very aware of the competitiveness within the wine industry and is concerned that Valley Winery will not be able to continue consistently increasing their sales. Turnover rate is the number one issue at Valley Winery. Every problem the company has bleeds into the turnover rate.
The company’s turnover rate is currently at almost 100 percent a year; this is a huge issue that Waller must address. The existing sales rep employment average is seven months. There are many things that could be causing this problem. Often, sales reps are leaving the company quickly because they can’t meet their quotas. Hiring issues, which will be addressed later, are another contributing cause of the high turnover rate. Sales reps’ aggressive attitudes are another issue that Waller will have to address.
The Valley Winery as a whole is receiving negative feedback. Sales reps are not “playing fair” when it comes to competition. They have been known to tamper with competitors’ merchandise, misrepresent displays, and exaggerate their quotas. The root of these aggressive behaviors lies in the unrealistic quotas sales reps are given. The quotas given to sales reps are nearly impossible to meet each month, so they rely on shortcuts to sell more products each month. While Waller was on the job with Marv Flanigan, he asked him why he was exaggerating sales quotas.
Waller was told that Marv’s current manager advised him to stretch his estimates because it is the only way he can meet his numbers each month. This means that not only are the sales reps exaggerating quotas and being aggressive, but also that upper management is encouraging dishonest behavior. The third issue is hiring, which is also a major cause of their high turnover rate. Currently, Valley Winery has one person responsible for the hiring of warehousing workers, truck drivers, office personnel, and sales force. With so much responsibility given to one person, effectiveness becomes a concern.
The person in charge of hiring judges candidates based on youth and physical characteristics, rather than legitimate credentials. There is no consistency or checks and balances within the hiring process. Essentially, a single person is making all of the hiring decisions without any guidelines from upper management. Hiring sales reps based on qualifications would correlate with a reduction in the turnover rate. The fourth and final issue is the quotas set for the sales reps. Unattainable quotas are the issue behind the turnover rate and the aggressive sales attitudes.
Right now, each sales rep is required to meet monthly display quotas for different lines of products. It is nearly impossible for the reps to meet their quotas, which leads to exaggerating numbers and tampering with competitors’ products. Sales reps are discouraged by unrealistic quotas and overwhelming workloads; a combination that leads to low employee morale and high turnover. In order to solve his laundry list of issues, Pat Waller must do some serious restructuring, beginning with the hiring process. Waller needs to begin recruit top performers from competing firms.
Because the wine industry is incredibly competitive, this will help the Valley Winery stay on top. Also, the interview process needs to be more thorough and realistic. Currently, candidates are wined and dined, rather than taken on ride-alongs with active sales reps. This is an inefficient use of recruitment budget and sets up unrealistic expectations. Waller also needs to reevaluate his hiring management team and set up a concrete measurable grading system of qualifications for hiring. This way, age and looks cannot be taken into consideration and there is consistency in hiring.
More emphasis must be placed on appropriate training for new hires. The training process is integral in creating successful sales reps; a greater investment needs to be made in the staff. More emphasis needs to be placed on the training process. Lower turnover will lead to costs savings associated with neglected accounts. The current quota system is unrealistic and breeds discouragement among the sales representatives. The quota system needs to be transitioned into one that is easily understood and calculated by the sales force.
Despite Valley Winery being a privately held company, more transparency is needed internally. This will help create trust and understanding with the staff and reduce sales reps’ need to play unfair and tamper with their competitors’ displays, as well as exaggerate their sales figures. An activity-based quota would be an effective way of establishing positive habits and long-term relationships between reps and their accounts. It will also help curb the overly aggressive sales style. Sales reps have also expressed discontent with the amount of work that is currently on their plate.
Right now, sales reps are wholly responsible for their territory and accounts. This leads to excessive amounts of time being spent on building displays, versus actual time spent with the client. This takes away from relationship building. By implementing a horizontal, sales function structure, Waller can take advantage of specialized labor and allow sales representatives to do what it is they do best. This will lead to greater efficiency and a better customer service experience. It will also reduce the level of stress on the lone account representative.
Instead, each sale rep will focus on their area of expertise. For example, a sales rep could work on gaining and developing new accounts rather than working with existing accounts. Allowing each sales rep to work in an area they enjoy creates greater job satisfaction, which will lead to lower turnover rates. By implementing a sales function strategy, Valley Winery can also employ telemarketing. Telemarketing will allow for inside sales reps to take care of separate and simple tasks. Right now the sales reps handle everything going on with their accounts, ranging from reorders to merchandising.
With inside telemarketers, certain tasks, such as: reorders and unexpected problems can be handled by the telemarketers. This will help keep things more efficient with smaller accounts and clients located in rural areas. Having telemarketers handle these tasks will give sales reps more time to work on other duties, such as: cold calling, paper work, and preparing for presentations. Valley Winery has a very structured way of enforcing monthly display quotas on each line of their product. The way this is structured is causing the turnover problem Valley Winery is facing.
While looking at the possible pattern of quotas (given in enclosed Exhibit A), it is easy to see the problem at hand: quotas are not being met. The end result: eventual termination of the sales rep due to unmet quotas. Better forecasting must be established, so that excess money is not spent on recruiting and training costs. Figure A So a few questions must be asked: Are the quotas too high? If so, why? Is displaying cases the only basis for determining the success of a sales rep? Does our aggressive behavior correlate with the unmet quotas? All these questions were answered from Pat Waller’s observation with Marv Flanigan.
The veteran sales rep was discouraged over the high display quotas. Flanigan also stretched sales estimates just to make his numbers. In addition to discouraging sales quotas, sales reps are not empowered or allowed to make their own decisions. Empowerment can lead to more successful sales reps and a healthier company, with less turnover. Also, empowerment can be further established by setting achievable activity quotas. These quotas will be based on size of the territory and the number of accounts. To understand what the quota should be, the sales rep and manager should discuss their views on the market potential.
Giving a sales rep a single territory and allowing the rep to establish profitable quotas based on the market potential he/she and the sales manager agreed upon, establishes trust and empowers the sales rep. Sales reps will be able to establish a connection with their territories and feel confident in reaching their quotas. The company will be able to see the investment each rep has in working for the company, rather than just sales figures. In turn, this supports long-term client relationships which help establish a healthy company.
Valley Winery has the potential to go from good to a great competitive force within the wine industry. Despite current internal issues, Valley Winery continuously beats their sales goals. They are also well- known for their innovative sales reps. If the changes suggested are implemented, Valley Winery can differentiate themselves and protect their client-base. Waller must begin by revamping the recruitment and hiring processes, followed by a vast restructuring of both the quota system and selling structure. These steps will help create a positive internal culture and develop healthy, long-term relationships with clients.