Ch 2-2.1 Marty Selig was looking over his financial statement for E-Town, his small chain of electronics stores. Marty’s company sells electronics such as HDTVs, but where he really distinguishes his company from big box discounters like Best Buy and Walmart is in service. His best opportunities to provide value and make money are for services such as installing home theaters. But a tight economy has buyers either downsizing their purchases or not buying at all, and Marty is worried about whether his business will make it. A knock at the door interrupted his thoughts. “Hey, Marty!” exclaimed Amanda Duron as she entered his office and sat down. “We’ve just come out with a limited offer, something that we have very few units for, and we’re targeting value-added resellers like E-Town.” Amanda represented a lesser-known Korean brand of televisions and other electronics. “What we’d like to do is consolidate all of our remaining inventory on this year’s models into stores like yours, then offer a 30% rebate to you. You can use it as a spiff for your reps, a sales price for customers, or a combination of the two. And we won’t consolidate these models into any store here in San Antonio except E-Towns. What do you say?” “Why the big rebate? Are these closeouts?” he asked. “Yes, they are. With this big rebate, I can’t help you with advertising costs, but you can offset advertising costs by charging full price and keeping the rebate. Or, as I said, offer your sales staff a spiff.” “How many do I have to take?” “I worked out a plan that is 50 units per store, and based on your past sales with us, I’ve already got a matrix for allocating the various models to each store. Can I count on you for this promotion? I’d rather it be E-Town than Circuit Country!” she said, mentioning one of Marty’s toughest competitors. Marty considered her offer. The brand she represented had good picture quality but was known, at least among dealers, for needing more service. The cost for installation was also a bit higher in home theater applications because of the way the cabling had to be done, but more service and higher installation costs would mean more revenue for Marty. Marty decided to take Amanda up on her offer. He marked the TVs down 10 percent, offered the salespeople a 10 percent spiff (ranging from $50 to $350), and applied the final 10 percent to local advertising costs. As he walked through one of his stores, he overheard a salesperson say about one of Amanda’s TVs, “This TV is every bit as good as that one (pointing to a different brand), but this sale price makes it the best choice for you.” Questions 1. If you were Marty, how would you have spent the 30 percent rebate? Are there any ethical issues in the choices he made? 2. Should Marty step in and clarify what the salesperson is talking about? Or let the rep handle the customer? 3. Many retail store clerks work on straight commission and may get spiffs for selling certain products. Should this information be publicly available— perhaps posted somewhere in the store? Why or why not?

Question 1

As a representative of Marty, the 30% rebate would be subdivided to bring in more customers and make the highest profit. 15 % of the rebate would be spent on advertisements and marketing. 10% would be spent on discount for TV sales and the remaining 5 % on salespersons. Marketing would constitute the largest share since it would be important to inform the customers of an offer which was limited. Additionally, it helps to galvanize the market share and expand on the client base, besides building on a better corporate image to beat rivals or competitors like Circuit Country (Trevino, & Nelson, 2016). The image would go a long way in achieving a competitive edge against rivals and thumping authority in the market. The ten percent discount on TV sales would be an incentive for a customer to buy more of the sets. It helps to clear of the stocks as fast as possible and get the installations done. The quality of the TV would be attractive to customers, however, getting such good quality at a subsidized price in a good consumption incentive. It helps consumers make decisions easier to maximize their utility. Salespersons would be given 5% spiff since they can benefit from a huge number of customers coming to consume the commodities. The higher the customers, the higher the increase in the value of the five percent spiff. Moreover, the staff can still be rewarded and compensated using the internal reward system. However, the ethical issues arising is the heavy investment in the marketing on products which need more repairing and maintenance just to get more profits.

Question 2

Marty should not step in to rectify what is being explained by the sales representative. Instead, he should wait and rectify the issues of concern once the customer is gone. It is because by rectifying the salesperson immediately, he lowers their confidence and let the consumer know that the sales representatives are not the best in the industry or that the information they give is not credible. In addition, the customer might not be able to trust the first information or the second information. It is important to note that consumer confidence is important in maintaining customer loyalty.

Question 3

The retail store clerks are working on straight commissions and often get little spiffs on certain commodities they sell, hence such information should be made public in the store. Such information forms the basis for inspiring the sales agents on what to expect in the sales they make. The commissions they make, and spiff to expect. It is one of the motivations that a store manager or owner can have on his or her salespersons. Conversely, when such information is posted publicly, the employees get the trust of the owner in terms of service delivery that they cannot be shortchanged. However, it is important to note that such information should be made public, while the management of a store uses other reward systems to motivate and inspire the workforce in their organization.

References

Trevino, L. K., & Nelson, K. A. (2016). Managing business ethics: Straight talk about how to do it right. John Wiley & Sons.