Case 2 Sales Force Training at Arrow Electronics Marketing 458- Sales Management Mike Atwood Carson Young Brittany Carmichael Tyler Torbett Nick Meyer

Outline Background Business Case Issues Analysis Business Problems Solution

Company History Radio-equipment retailer in 1935. In the 1950’s and 1960’s, Arrow began selling electronic components. 1977- main distributor in the United States Industry growth in the 1970’s Growth from regional to national company 1993- Arrow had the highest sales in North America.

Business Case Issues Customers Market Offerings Competition Sales Force Structure Sales Force Compensation Sales Strategy Other Sales Force Issues

Customers Arrow ordered products from suppliers. Sell the components to Original Equipment Manufacturers (OEMs) Smaller companies Start-up companies

Market Offerings Extensive relationships with customers Handled the supplier’s goods. Access to thousands of products from hundreds of suppliers

Competition Around 350 competitors within this High-growth Industry Many sales people left Arrow to work with competitors -Departing Arrow sales people took their clients with them Mainly competed with 20 large regional or national companies

Sales Force Structure Sales divided into 4 distinct operating groups based on product type: 1) Commercial Semiconductors 2) Military and aerospace semiconductors 3) Passive and connector products 4) Computer systems, peripherals, and software Sales Force divided into geographic divisions -Each of which had a Branch Sales Office

Branch Office Structure

Sales Force Job Description General Manager (GM) Field Sales Representatives (FSRs) Sales and Marketing Representatives (SMRs) Product Managers (PMs)

Branch Office Compensation Branch Office Employee Compensation Average yearly income General Managers (GM) 35% of salary is bonus based on branch performance (measured by operating profit) $60,000-$120,000 Field Sales Representatives (FSR) $300/week draw against a commission (8% of gross profit dollars shipped to the FSR’s customers) $60,000-$80,000 Sales & Marketing Representatives (SMR) Paid entirely on commission, earned 4-5% of gross margin dollars generated $40,000-$50,000 Product Managers (PM) 25% of compensation based on sales & gross margin of product lines $35,000-$75,000

Sales Strategy Relationship based selling - Sales strongly tied to individual FSR’s relationship with suppliers -Sales Force of 300 people with no formal sales training -Sales Force used a lot of “T & E”

Typical Sales Force Gender: Men and Women Age: 30’s and 40’s Personality: high energy, highly aggressive, strong monetary motivation Education: high school graduate Most did not have college degrees

Problems with Sales Strategy Sales Force challenging to retrain Sales Force “wine & dine” customers instead of solution selling -creates a lack of customer loyalty High Turnover Rate -lack of company loyalty

Sprout Background Arrow needed more salespeople, but wanted to change the make-up of sales force Decided to hire kids fresh out of college The plan was to go on college campuses, interview kids, choose the best ones, make offer, hire, train, and send to the field

Objectives of Sprout Training Upgrade professionalism of sales force by hiring kids and molding them into modern salespeople Teach classic sales skills Teach how to manage territory, cold calss, overcoming objections, and how to close sale

First Steps Train Arrow managers how to interview college students Taught managers to look for self starters, goal-orientated, leadership skills, and people skills Conducted mock interviews with students

Sprout’s Training Went to company headquarters for weeklong orientation Sprout’s sent to warehouses for two weeks Six months of on the job training Returned to headquarters for a week of sales skills training

Formal Training Program Needed more formal training program Rented training facility where sprouts would live for 13 weeks of classroom learning 13 weeks of on the job training 3 weeks of training before entering field permanently GMs noticed huge difference in sprouts

Sprouts Compensation New Recruits - $18,500 First year “Sprouts” - $24,000 Second year “Sprouts” - $27,000 Competitors - 30 to 60 percent more - First year “Sprouts” - $30,000 - Second year “Sprouts” - $40,000 to 45,000

Class Discussion and Questions Are there any questions so far?

Business Problems Turnover Rate Arrow/Industry? Initial Sprout Training Existing/New Salesforce Modified Sprout Training Competitors move in on Sprouts

Solutions Company Loyalty Regional National Compensation Training

Class Discussion and Questions ?