Arrow Electronics Sales Force Analysis

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Arrow Electronics Sales Force Analysis

  1. 1. Sales Force Training at GROUP 6-B | PGP 19 Aditi Rastogi Ankita Datta Ankeeta Deb Bhuwan Kathuria Nitika Soin Rohan Chugh Rohit Rohan Shikha Saket Tarini Bandhu Virat Jain
  2. 2. What are we talking about? • Background of the company • Issues we observed in the case • Analysis of these issues • Business Problems • Solution of the problem SDM | Group 6 | Section B | PGP 19 | MICA
  3. 3. History of Arrow Electronics • 1935 | Started as a radio-equipment retailer • 1950’s and 1960’s | Began selling array of electronic components to small and medium sized manufacturers of electronic equipment • 1977 | Became the main distributor (4th largest) electronic parts distributor in the United States • 1970’s | Growth by 12% annually • 1980 | From regional northeastern company to 2nd largest distributor in US • 1993 | Arrow had the highest sales with $ 2.5 billion in North America SDM | Group 6 | Section B | PGP 19 | MICA
  4. 4. Business Case Issues • Customers • Market Offerings • Competition • Sales Force Structure • Sales Force Compensation • Sales Strategy • Other Sales Force Issues SDM | Group 6 | Section B | PGP 19 | MICA
  5. 5. Customers • Arrow ordered products from suppliers. • Sell the components to • • • Original Equipment Manufacturers (OEMs) Smaller companies Start-up companies SDM | Group 6 | Section B | PGP 19 | MICA
  6. 6. Market Offerings • Extensive relationships with customers • Handled the supplier’s goods. • Access to thousands of products from hundreds of suppliers • They did not have any technical skill • Built on their major asset - people SDM | Group 6 | Section B | PGP 19 | MICA
  7. 7. 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 SDM | Group 6 | Section B | PGP 19 | MICA
  8. 8. 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 SDM | Group 6 | Section B | PGP 19 | MICA
  9. 9. Branch Office Structure Branch General Managers (45) Area Sales Manager (1-3) Inside Sales Manager Field Sales Reps (6-8) Marketing Manager Sales & Marketing Reps (6-12) Admin Manager Product Managers (3-6) SDM | Group 6 | Section B | PGP 19 | MICA Admin Personnel
  10. 10. Sales Force Job Description • General Manager (GM) • Field Sales Representatives (FSRs) • Sales and Marketing Representatives (SMRs) • Product Managers (PMs) SDM | Group 6 | Section B | PGP 19 | MICA
  11. 11. 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 45% 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 SDM | Group 6 | Section B | PGP 19 | MICA
  12. 12. 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” Travel & Entertainment SDM | Group 6 | Section B | PGP 19 | MICA
  13. 13. Typical sales force • Gender: Men and Women • Age: 30’s and 40’s • Personalities : • high energy • highly aggressive • strong monetary motivation • Education: high school graduate • Most did not have college degrees SDM | Group 6 | Section B | PGP 19 | MICA
  14. 14. 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 Attrition Rate • lack of company loyalty SDM | Group 6 | Section B | PGP 19 | MICA
  15. 15. Sprout Background • Arrow needed more salespeople (300 per year) • Also wanted to change the make-up of sales force & sales strategy • 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 SDM | Group 6 | Section B | PGP 19 | MICA
  16. 16. Objectives of Sprout Training • Upgrade professionalism of sales force by hiring graduates and moulding them into modern salespeople • Teach classic sales skills • Train how to manage territory • manage cold calls • overcome objections • close the sales • SDM | Group 6 | Section B | PGP 19 | MICA
  17. 17. First steps • Train Arrow managers how to interview college students • Taught managers to look for self starters • goal-orientated • leadership skills • people skills • • Conducted mock interviews with students SDM | Group 6 | Section B | PGP 19 | MICA
  18. 18. 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 SDM | Group 6 | Section B | PGP 19 | MICA
  19. 19. 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 SDM | Group 6 | Section B | PGP 19 | MICA
  20. 20. 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 SDM | Group 6 | Section B | PGP 19 | MICA
  21. 21. Business Problems • Turnover Rate - Competitors move in on Sprouts • Arrow/Industry ? • Initial Sprout Training • Existing/New Sales force - GM’s hostile to Campus Hiring • Modified Sprout Training SDM | Group 6 | Section B | PGP 19 | MICA
  22. 22. A perspective AGAINST pathways • Cost –benefit analysis • • Are the expenses on training justified? Output is not instant • 1 year of training+ building a new relationship with customers • Insecurity amongst existing members • The programme is a potential threat to the company’s leadership position in the market as well as to the company’s profitability SDM | Group 6 | Section B | PGP 19 | MICA
  23. 23. A perspective FOR pathways • 5 major companies; Switching-cost high • Play on reputation • Identify need to build company Loyalty- an “ Arrow sales person” • Mentorship Programme • • Sense of belongingness to Arrow • • Relationship Building b/w GM’s and Sprouts example Awards for each Hierarchy (Best Sales Rep, Top performers etc.) Training • Incorporate loyalty and mentorship programmes SDM | Group 6 | Section B | PGP 19 | MICA
  24. 24. A perspective FOR pathways (contd.) • Fringe Benefits • • • Compensation, Medi-claim Recreational centres (like Gyms) Campus/Hostels during training • Sabbatical Leave • Loans • • Clause in Appointment Letter • • Attrition within 2 years leads to ineligibility to take job interviews for a minimum period of three years Step by Step Training • • Educational, Home and Car Loans Gradual guidance to grow in Arrow Electronics “Cooling-off period”- 1 year SDM | Group 6 | Section B | PGP 19 | MICA
  25. 25. End of presentation Thank You SDM | Group 6 | Section B | PGP 19 | MICA

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