Case Study 9: Isabella and Deceptive Sales Practices
Summary
TLDRIn this video case study, Isabella Lopez, Northern Area sales manager at Kudos Kitchen and Recreation, grapples with a new sales policy proposed by her boss, Roger McDonald, VP of sales. The policy aims to boost extended warranty sales by increasing commissions for high performers and introducing sales targets. Isabella is concerned about the potential for deceptive practices, as sales staff may be incentivized to mislead customers about the value of extended warranties. She must balance her ethical concerns with the need to support Kudos' profitability and her own reputation as a team player.
Takeaways
- π Kudos is losing market share to online retailers like Nile and needs to increase profits from sales.
- π¬ Kudos has an advantage over Nile due to personal contact between sales staff and customers, which helps sell more extended warranties.
- πΌ Isabella Lopez is the Northern Area sales manager for Kudos, concerned about the impact of a new sales policy on customer interactions.
- π§ Roger McDonald, Kudos VP of sales, proposed a new policy to increase extended warranty sales by offering higher commissions and incentives.
- π° The new policy allows store managers to raise the commission rate to 20% for high-performing salespeople on extended warranty sales over $2,000 per month.
- π£οΈ Store managers would be allowed to disclose each salesperson's warranty sales and could terminate staff not meeting sales targets.
- π€ Isabella is worried that the new policy might encourage hard-sell tactics and negatively affect customer relationships.
- π’ Three-year extended warranties are profitable for Kudos as the likelihood of payout is low due to the manufacturer's warranty and product longevity.
- π Roger hopes the new policy will motivate sales staff to sell more extended warranties, improving Kudos' bottom line.
- π€ Isabella is conflicted; she wants Kudos to be profitable and be seen as a team player but is also concerned about the ethical implications of the new policy.
Q & A
What is the main challenge faced by Kudos kitchen and Recreation?
-Kudos is losing market share to online retailers such as Nile and needs to extract more profit from the sales it makes.
What advantage does Kudos have over online retailers like Nile?
-Kudos has the advantage of personal contact between its sales staff and customers, which allows for more extended warranty sales.
What is the current commission rate for extended warranty sales at Kudos?
-The standard commission rate for extended warranty sales at Kudos is 15%.
What is the proposed new policy regarding extended warranties?
-The new policy would allow store managers to raise the commission rate to 20% for any warranty sales over two thousand dollars per month and to disclose each salesperson's warranty sales at monthly meetings.
What is the potential consequence for sales staff who do not meet the extended warranty sales target under the new policy?
-Sales staff who fail to sell at least one thousand dollars worth of extended warranties for two months in succession may be terminated.
What is the rationale behind the new sales policy?
-The new policy aims to increase the incentive for sales staff to sell extended warranties, which would help Kudos' bottom line.
Why are three-year extended warranties highly profitable for Kudos?
-Three-year extended warranties are profitable because the probability of a payout is low, as most products either break down from manufacturing defects soon after purchase or last much longer than three years, with the manufacturer's warranty covering the first year.
What ethical concerns does Isabella have regarding the new policy?
-Isabella worries that the new policy may encourage hard sell practices and mislead customers about the actual return rate of products during the second and third year of their life.
What is Isabella's role within Kudos?
-Isabella Lopez is the Northern Area sales manager for Kudos.
What is the opinion of the other area managers regarding the new policy?
-Isabella expects that the West Central and South area managers will support the policy, while the East area manager will criticize it.
What is the dilemma Isabella faces in deciding her stance on the new policy?
-Isabella is torn between her concerns about the policy's effect on customer interactions and her desire for Kudos to be profitable and for Roger to see her as a team player.
Outlines
ποΈ Introduction to Isabella Lopez and Kudos Kitchen's Sales Challenges
Isabella Lopez is the Northern Area Sales Manager for Kudos Kitchen and Recreation, a major retailer of household appliances and electronics across North America. Kudos faces increasing competition from online retailers like Nile and is working to increase profits from its remaining sales. A key advantage Kudos has over Nile is the in-person interaction between sales staff and customers, which allows them to sell more extended warranties, a significant profit source for Kudos.
π§ New Sales Policy Proposal
Isabella's boss, Roger McDonald, the VP of Sales at Kudos, recently sent an email to five area managers, including Isabella, asking for their opinions on a new sales policy. The policy is designed to boost extended warranty sales by increasing commission rates for high-performing salespeople. Store managers could raise the standard commission from 15% to 20% for those who sell over $2,000 worth of warranties in a month. Additionally, salespeople's performance on warranties would be revealed at monthly meetings, and staff failing to meet the $1,000 warranty sales threshold for two consecutive months could be terminated.
πΌ Isabellaβs Concerns About the Policy
While Roger hopes the new policy will motivate staff and improve Kudosβ financial performance, Isabella is concerned about its potential impact on customer interactions. Extended warranties are highly profitable, but the likelihood of customers actually needing them is low, as products typically break down either early on (covered by the manufacturer's warranty) or much later. To sell these warranties, sales staff may resort to withholding key information about product reliability and emphasizing rare instances of product failures.
π Potential Consequences and Dilemma
Isabella is worried that store managers might use the new policy to push salespeople towards aggressive, hard-sell techniques. While some area managers will likely support the policy, others may criticize it. Isabella faces a dilemma: she wants to maintain ethical sales practices and avoid alienating customers, but she also wants Kudos to succeed financially and to be seen as a team player by Roger. She now must decide what stance to take and what feedback to provide Roger regarding the proposed policy.
Mindmap
Keywords
π‘Deceptive Sales Practices
π‘Market Share
π‘Extended Warranties
π‘Personal Contact
π‘Commission
π‘Hard Sell Practices
π‘Sales Incentive
π‘Sales Staff
π‘Monthly Sales Meetings
π‘Profit Center
π‘Sales Policy
Highlights
Isabella Lopez is the Northern Area sales manager for Kudos Kitchen and Recreation, facing market share loss to online retailers like Nile.
Kudos seeks to extract more profit from sales, leveraging personal contact between sales staff and customers.
Extended warranties are a significant profit center for Kudos and other appliance and electronics retailers.
A new sales policy is proposed by Kudos VP of sales, Roger McDonald, to increase extended warranty sales.
The policy would allow store managers to raise the commission on extended warranty sales for high performers.
Store managers could increase the commission rate from 15% to 20% for sales over two thousand dollars per month.
Kudos would also permit managers to disclose each salesperson's warranty sales at monthly meetings.
The new policy proposes termination for sales staff failing to sell at least one thousand dollars worth of extended warranties for two consecutive months.
Roger hopes the policy will incentivize sales staff to sell more extended warranties, benefiting Kudos' bottom line.
Isabella is concerned about the policy's impact on the relationship between sales staff and customers.
Three-year extended warranties are profitable due to the low likelihood of payout within the warranty period.
Sales staff must avoid discussing the return rate for the second and third year of a product's life to sell extended warranties.
Isabella worries that store managers might use the new policy to increase hard sell practices.
Roger has asked for opinions from area managers, whose views often influence his decisions.
Isabella anticipates that West Central and South will support the policy, while East will criticize it.
Isabella is torn between her concerns about the policy and her desire for Kudos to be profitable and for Roger to see her as a team player.
The decision Isabella makes in response to Roger will significantly impact the sales strategy and customer relations at Kudos.
Transcripts
hello and welcome to this video case
study on the topic of deceptive sales
practices
Isabella Lopez is the Northern Area
sales manager for Kudos kitchen and
Recreation a large retailer of household
appliances and consumer electronics with
stores across North America
Kudos is losing market share to online
retailers such as Nile and needs to
extract more profit from the sales that
it does make
one advantage that Kudos has over Nile
is the personal contact between Kudos
sales staff and customers
personal contact allows the Kudos sales
staff to sell more extended warranties
the Nile is able to sell online extended
warranties are an important profit
Center for Kudos as they are for other
Appliance and electronics retailers
yesterday Isabella's boss and Kudos VP
of sales Roger McDonald circulated an
email to his five area managers asking
their opinions on a new sales policy
regarding extended warranties
the new policy would aim to increase
extended warranty sales by allowing
store managers to raise the commission
on extended warranty sales for high
performing sales people
the standard is 15 the new policy would
allow store managers to raise the rate
to 20 for any warranty sales over two
thousand dollars per month
Kudos would also allow store managers to
reveal each salesperson's warranty sales
at monthly sales meetings and to
terminate any sales staff who failed to
sell at least one thousand dollars worth
of extended warranties for two months in
succession
Rogers hope is that this new policy will
increase the incentive for sales staff
to sell extended warranties and thereby
help Kudos bottom line
Isabella worries about the effect of
this policy on the interaction between
sales staff and customers
three-year extended warranties are
highly profitable because appliances and
electronics are most likely either to
break down from manufacturing defects
soon after purchase
or to break down from wear and tear
towards the end of their design lives
the probability of a payout on a
three-year extended warranty is low
because the manufacturer's warranty
covers the first year and most products
are designed to last much longer than
three years
in order to sell extended warranties
sales staff must avoid telling customers
the return rate for the second and third
year of a product's life and must get
customers to focus on horror stories
regarding the very few products that
customers actually do return
Isabella's worry is that Kudos store
managers may use the new policy to
increase their stats usage of Hard Sell
practices
Roger has asked for opinions from his
area managers and their views often sway
his decision Isabella is almost certain
that West Central and South will get
behind the policy suggestion
but that East will criticize it
she's worried about the consequences of
the new sales policy
but she also wants kudos to be
profitable and for Roger to see her as a
team player
so the question is
this with is what should Isabella say to
Roger
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