Question

Please read the case and answer the questions at the end. Please respond to two of your peers. Do you agree or disagree? Collegiate Promotions distributes products that are marketed to students and alumni of major universities. High-selling products include coffee mugs and T-shirts that bear collegiate logos. In order to distribute its products, Collegiate Promotions has adopted an independent sales representative model. The sales representatives work for themselves and are not actual employees of Collegiate. They have independent contractor status. Becoming an independent sales representative is easy. An interested person pays a $300 fee to obtain catalogs and other literature needed to advertise and sell the line of products. The sales representative then begins to write orders for products. A sales representative can sell to anyone through any channel. This means that there are no protected territories, so several sales representatives are often working in the same geographic location. Many representatives also sell through Internet websites. Collegiate Promotions does not set an absolute price for its products. Instead, it uses a wholesale plus pricing strategy that allows sales representatives to sell within a relatively broad range. The range is normally 30 to 50 percent higher than wholesale. For instance, if the wholesale price of a coffee mug is $10, then the representative can choose to sell the mug at a price anywhere between $13 and $15. The sales representative receives a commission of half the amount charged over the wholesale price. If the mug sells for $13, the representative receives $1.50. If the mug sells for $15, the representative receives $2.50. Because they are independent contractors, the sales representatives receive no other compensation. Questions: Do you think the compensation system at Collegiate Promotions is effective? Why would a sales representative try to sell at the top of the price range? Why at the bottom of the price range? Do you predict that most sales are made at the top or bottom of the range of possible prices? How does the lack of geographically protected sales areas affect salespersons' behavior? How committed do you think the independent contractors are to Collegiate Promotions? What are some positive features of the independent contractor status for the organization? What might be some positive features for the independent representatives? Would you expect sales representatives to have long-term associations with the company?

Answer 1

a. The compensation system at Collegiate Promotions is independent and is not related to the organsiation's payscale. It is like earn for yourself and every sales representative is an enterpreuneur in their own rights. If they sell more they earn more or if they sell at a higher range they earn more even if the sale they do is lesser in quantity. Therefore, I feel the compensations system at Collegiate Promotions is a good option as there is no cost involved. The only cost that they bear is giving away 50% of their profits which is still viable as there is not additional cost involved. The company is anyways covering its production cost by seeling the product higher than the cost price.

b. A sales representative who is smart and has a knack of selling would be able to sell at a higher range. This can be done either by identifying the influencer in the group of students or alumni and making the influencer work for you instead the sales reperesentative going and meeting each individual. The influencer gets paid instead for the efforts put. By doing this, the sales representative can sell at a higher range which would cover the volume of sale as well as make him or her earn more money. The idea of selling at a higher range is making more money out of the sale.

c. In sales, normally there are two strategies, one is selling at a higher range where you would not make volumes of sale. The other way is you sell a lower price but the volume of sale is high. If there is a mismanagement of volume in the sale which is done at a lower range then it would be a problem. Therefore, if an individual is selling at a lower range, then he or she should plan to sell at a huge volume. By doing this, they will grab more market share and can cater to larger number of individuals compared to those who are selling at a higher range.

d. Like I mentioned in the earlier answers, it is methods and areas where the sales representative concentrates derives the price and volume of the products being sold. If an individual is working tirelessly to cater to a larger group of people then they would sell at a lower price and gather larger volumes. In the otehr case, a sales represenatative can choose to cater to a certain society of people who are not worried about the cost of the product but they are more concerned on the quality of product and service that the sales representative is giving.

e. A geographically protected sales areas can affect both positively and negatively. In a positive way, a salesperson is free to work anywhere in his or her territory and conduct activities or cater to several individuals according to the sales plan. There would be no competition and they can operate as monopoly in the market. It can be taken negatively if an individual is given a territory which is not potential enough to generate business and they would be demotivated to work further. The level of efforts that is needed reduces if they are demotivated and therefore it would affect in the overall sales of the products.

f. Independent contractors are as I mentioned enterpreuners in their own way as they need to earn their own money. They are not employees of Collegiate promotions and they do not get fixed salaries. They will only make money if they make some sale in their respective territories. Therefore, if an individual wants to earn good money then would be committed to selling as many as possible and make as much money as possible.