short description about the case

1. Burgoyne Fite
MKTG 4370
November 27, 2012
Case Eight: Atomic Company
Atomic Company is a small company focusing on the manufacturing and selling of men’s
casual and leisure wear clothing. Though Atomic originally manufactured their clothing in the
United States, they are currently producing in Taiwan for a lower cost to the company. Due to
an increase of sales of popular product, Tiger Pants, the company’s sales and profits increased
dramatically within a year (2000-2001). Some of the employeeshave begun to disagree when it
comes to the approaches that should be taken when marketing their products. Vice president
of sales for the company, Roger Post, had implemented two programs to help market the
brand. By creating a bonus clothes system, he was able to reward store managers who were
increasing their sales. Though it sounds like a solid idea, it was costing the company lots of
money ($10,000 in 2000 and $75,000 in 2001). In addition to this program, Post was also giving
out merchandise to celebrities hoping that they would wear the clothes. From 1999-2001 he
gave away a whopping $52,000 worth of merchandise. In April of 2001, the company caught a
lucky break, and sells soared. This was made possible by up and coming band, Punk Rock
Academy, when they sported the company’s Tiger Pants in a music video. So, now the
company is approaching the end of the first quarter in 2002, and sells are higher than ever. The
Tiger Pants have brought in $12,130,000 alone, in under a year! Seeing that Atomic Company’s
Tiger Pants line has generated an enormous amount of revenue for the company, executives
are currently beaming.
One of the problems that Atomic Company now faces is forecasting the sales for the rest
of 2002. The rise in sales will not be permanent and will only last as long as the band stays on
top, or until they decide on a new fashion trend. Since Atomic manufactures their products in
Taiwan, it is vital to the company to correctly forecast future sales. Not only because rush
orders are extremely hard to configure and have cost the company money, but also because

2. the company offers production discounts. If Atomic is able to give a firm annual sales figure
they could receive as much as a 20 percent discount. The next problem the company will face
deciding how to go about the sales force. They currently have three independent sales
representatives, none of which have a college degree. Because of the recent ‘boom’ in sales,
they will each be receiving a giant sum of money. Reps are paid a flat 15 percent commission
rate on all sales, but since product sales are now skyrocketing, they will be paid $852,000 for
the first quarter in 2002 alone. This is more than four times the amount of money the vice
president of finance, Ramon Fernandez, makes in a year. Also, these large numbers are not a
result of the salespeople’s direct actions, rather their ability to pick up the phone and complete
orders that were being placed. Fernandez is convinced that if Atomic were to hire company
salespeople they could set them up on a salary and benefit package with a smaller commission
rate, thus saving the company money.
Let’s take a look at a few solutions for the problems Atomic Company and its executives are
currently facing:
What do you think was responsible for the success of the Tiger Pants line? Luck? Excellent
marketing decisions? A great effort by the sales team? Unfortunately for Atomic Company, I
think that the success of the Tiger Pants line was related to luck. Though I have no doubt that
the line would have been profitable, I do not think it would have reached the magnitude that it
did without pure luck. Roger Post did have a bonus clothes and celebrity clothes program set
up, but these specific programs were not responsible in the $12 million dollar sales increase.In
April of 2001, Roger Post’s 17 year old daughter, Lonnie, asked him for four pairs of the Tiger
Pants for a local band called “Punk Rock Academy.” A few members from the band had seen
Lonnie wearing the pants at a concert and liked them. However, Lonnie had added a little extra
‘style’ to her Tiger Pants, adding red marker and a tiger symbol to the back of the pants
complete with blood dripping fangs. Not necessarily what you would think of when hearing
“men’s casual and leisure wear clothing.” Taking into consideration that this band had recently
signed a contract with a record company, after some hesitation, Roger gave his daughter the
pants she had requested. What happened next is where the luck comes into play. Punk Rock

3. Academy wore the modified version (like Lonnie’s) Tiger Pants in their new music video, which
ended up going gold, and was viewed by millions on MTV. Not only was this a lucky break for
the band, but also for Atomic Company and their Tiger Pants. Not only were the Tiger Pants
being worn in a different setting than the companies intended cliental, but they were also
conformed from the original manufactured product. I do not think it is fair to give Roger Post
credit for this increase in sales because he had no idea what he was doing. He simply gave
away the pants to make his daughter happy, and expected to get nothing in return for it. After
the bands album sales exploded, so did the Tiger Pants. The increase of sales of the Tiger Pants
line was directly correlated with the timing of the Punk Rock Academy success. You have to
give some credit to the recent success of Atomic to the sales team. As the orders continued to
pile in for the Tiger Pants, the sales force was able to restock as effectively as possible, even
with their manufacturer being located overseas. It should also be noted that Roger did have the
idea to implement the celebrity clothes program. As proven with the Punk Rock Academy
band, this can be a profitable program, if the products are given to the ‘right’ people. I think
Roger was on the right track to succeeding with his marketing tactics, but would not have
experienced the results without the unpredicted luck he experienced.
What do you think sales of Tiger Pants will be in 2002? How much confidence do you have in
your sales forecast? Because the huge increase in popularity of Tiger Pants was caused by a
rising rock band, I do not think this is permanent. In other words, the fan base of Punk Rock
Academy will only wear Tiger Pants until they move onto the band’s next fashion venture.
Unfortunately, we do not know when this ‘fad’ will phase out, which makes the 2002 forecast
extremely subjective. Another factor to take into consideration when forecasting Tiger Sales
for 2002 is that they have already sold $5,680,000 worth of product with three weeks
remaining in the first quarter.Usually when preparing a sales forecast, you would use either a
qualitative or quantitative method. Though we do have historic data of Atomics’ past sales, it is
now irrelevant because of the sudden and steep increase of sales. The best method in this
situation would be to estimate the sales of 2002 using a Jury of Executive Opinion. This puts

4. the forecasting in the hands of experienced managers. With the level of uncertainty involved
with this situation, I do not think a computer will estimate the best forecast. Atomic is
composed of three vice presidents, and a CEO. These four people should be responsible for
forecasting the 2002 sales to the best of their abilities.
a. The total sales for 2001= $6,690,000 ($4,100,000 caused by increase in Tiger
Pants sales). Meaning that without the sudden increase in Tiger Pants due to the
celebrity endorsement, sales for 2001 could have been as low as $2,690,000.
Assuming that they would earn at least $100,000 during the fourth quarter.
b. Total sales for 2002 so far(first quarter only, with three weeks left) = $5,680,000.
i. Roger Post predicts that there will be an additional $400,000 of sales of
Tiger Pants for the last three weeks of the quarter.
ii. First quarter sales alone are only about 1 million short of the entire sales
of 2001.
iii. I do not predict that this fad will continue to increase through the second
quarter of 2002.
Assuming that Roger is correct when he estimates $400,000 for the remaining three
weeks of the first quarter, I predict that sales will decrease each quarter until they reach
a consistent rate.
2002 Forecast:
Quarter 1- $6,080,000
Quarter 2- $4,080,000 (Decreasing by 2 million dollars, Fad has begun to phase out)
Quarter 3- $2,080,000 (Decreasing by 2 million)
Quarter 4- $1,000,000 (Atomic has secured a base of customers that are now
hooked on their product. They will continue to benefit from this at least
through the fourth quarter. They have however lost most of the ‘get it
while its hot’ customers.)
My estimation for 2002 total sales is $13,240,000. Though this is higher than the sales in 2001,
you have to remember that Punk Rock Academy sales did not begin until April/May of the year
and the first quarter of 2002 brought in the most money in three years. I predict sales of Tiger
Pants will suffer the most in 2003, assuming that the sales average out at about $1,000,000 per
quarter.

5. Make a recommendation for the sales team that should be used for Tiger Pants for the last
three quarters of 2002. Be sure to consider all relevant financial and nonfinancial factors. I
think that Ramon (VP of finance) is right when he mentions that Atomic could hire their own
salespeople and come out better than paying 15% commission for the individual salespeople
they currently have. However, it does not send out a good message to fire the salespeople that
were ‘responsible’ for the Tiger Pants sales boom. If they fire these salespeople, they will be
sending out the wrong message to other independent reps for the company. Since Roger does
not have anyone lined up to replace the current salespeople, they must be very careful when
making their decision. The last three weeks of the first quarter of 2002 are going to be more
than critical for the company. They must capitalize on this lucky break and the fad of the Tiger
Pants, because it is not going to last much longer. I think that the current sales team should be
kept of board for the remaining three weeks of the quarter. They know what they are doing
and are experienced with selling the Tiger Pants product. There is no way that Roger could hire
new salespeople and have them trained to perform at the same level of the current salespeople
in a matter of three weeks. Since we are dealing with a time constraint, this is going to be the
best option. After the sales of the Tiger Pants begin to decline, the company should consider
hiring their own personal salespeople. To obtain from scaring other independent salespeople,
they should offer the job to the current independent reps working for the Tiger Pants line.
Once explained to them that these commission rates were not a permanent increase, I think
that they would be happy to accept a salary with benefits and a smaller commission rate.
If you were Roger Post, what actions would you take concerning setting up the bonus pool as
the CEO suggested?As stated above, I think that the salespeople should remain employed
throughout the first quarter. If they fire them and cancel the orders placed for the quarter,
they have no one to capitalize on new orders or to carry out the orders that are coming in.
Though a $200,000 bonus sounds nice for each person on top management, I think they would
actually earn more money in the long run if they wait this one out. Without the current
salespeople aboard, the incoming Tiger Pants orders will suffer.
Eventually, the commission system does need to be changed. When it was set up, they never
dreamed that the number of sales would ever get this high. Thanks to Lonnie Post and the
success of Punk Rock Academy, Atomic has experienced profits beyond what they could have
predicted. Hopefully for the company, this fad will last way longer than forecasted, and people
everywhere will be wearing marker stained Tiger Pants.
For now, we will not be letting go of the salespeople that have assisted the company in this
wave of success. At least not until the sales of Tiger Pants become more predictable, and we
are able to better estimate future sales.