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Selling: Building Partnerships Case Study 9.2
On December 5, 1933, the U.S. Congress passed a bill that would repeal the Eighteenth Amendment and thus would end prohibition in this country. The imple- mentation of prohibition had been linked to many negative social issues, such as organized crime, bootlegging, and racketeering. Some historians have commented that the alcohol industry accepted stronger regulation of alcohol in the decades after repeal as a way to reduce the chance that Prohibition would return.
Today, the American beer industry is the most heavily regulated industry in the country, even more than the tobacco industry, and Minnesota is a leader when it comes to heavy regulation and high taxes. For example, here are the beer laws in Minnesota:
1. All retailers must be offered the same price at all times.
2. Beer distributors cannot pay for any cooperative advertising.
3. Beer distributors cannot give any product for free.
4. Beer distributors have a maximum of $300 per brand, per year, to promote the brand within the account (using things like neon lights and point-of- sale items), but this can’t be in the form of price cuts for an individual retailer.
I was the sales representative for a beer distributor in Minnesota. My territory volume was trending down, and I was told by my manager that I needed to secure incremental activity to promote Miller Lite. My largest customer, Bill, at Save-a- Lot Liquor, gave me an opportunity for an additional holiday ad in his weekly flyer. I knew this ad would yield a 200 percent lift in sales for the week and in turn would pay a nice commission to me.
To secure the ad, Bill was asking me to lower the price of my product by 50 cents per case to cover the cost of the ad. Bill also stated that if I decided not to participate, my competition had already committed to the ad. I believed that my competition had lowered the price in the past, and there had never been any repercussions from the authorities. What should I do? I had totally lost the inter- est of Bill, who would turn elsewhere to buy the bulk of his beer!
I had several options. I could write a personal check for the amount of the ad, but that would have repercussions down the road, and I was sure I’d be asked to do so again and again. I could try to see if Bill really did have the competitor’s agreement to cut the price, but that could backfire on me and make the customerthink I didn’t trust his word. I could give all the other liquor stores in my territory the same 50-cent discount, but that would cut into our profit margins.
Questions 1. What should the salesperson do at this point?
2. What will be the repercussions of your answer to question 1?
Expert Answer
At this specific situation sales person should go and discuss with their company as its not his authority to sell the products at a reduced prices. When discussing with the company sales person should put the fact that other competitors had also reduce the price of the beer.
Is sales person has authority to decide to whom he wants to sell then he must have gone with the 50% discount idea. By giving out the 50% discount each and every Store in the territory he can easily capture the market. By supplying to more stores, yes Company get easily increase and balance the overall profits rather than getting full profit from only one retailer. This would increase the company is overall image in the society as well as produce a successful passive ad for their brand. Bigger market capture meaning larger revenues from selling bigger stocks, which will allow company to grow in this competitive field.
An initial cut in profit margin would be there tell each and every store starts to selling your beer in there stores. This process is time taking which would directly decrease the company’s overall efficiency. After application of this is specific solution, it is feared that company has to stay at the discount price for a long time to maintain their business.
