CASE 7.2 TechSales & Services, Inc.: Responding to Rapid Growth TechSales & Services, Inc. (TSS) is a sales software company located in Palo Alto, California. TSS sells sales force automation software to niche markets as an addon to larger more wellknown companies selling branded CRM packages. TSSs bestselling product is designed for companies selling medical devices and supplies to the healthcare industry. Its major competitive advantages are the ability to recognize words and phrases associated with the medical and healthcare industry in most major languages (English, French, German, Spanish, and Italian) and the userfriendly interface it has developed with companies selling contact information for prospects likely to be interested in purchasing healthcare equipment and supplies. TSS has several other innovative software products that appear to have significant market potential and should be ready to introduce in the next 1218 months. The owners of the company are Rex Sanford, a former Microsoft software engineer, who has been developing the products, Hassan Raiyani, a wealthy entrepreneur who has been funding the business, and Ginny Miller, a former Cisco sales representative, that has been handling most of the sales management responsibilities.

TSS has experienced rapid growth since it was founded in 2016, but sales have not yet reached expectations. Average annual sales have been increasing slowly and are now about 4250 units a year worldwide. The owners are not sure why sales have not grown as anticipated. When the company was formed, they hired a consultant from Stanford University to develop a business plan and his projections estimated sales would reach 11,000 units after three years.

TechSales & Services, Inc. has used three primary methods to sell. One is telemarketing directly to users in economically developed countries, mostly North America, South America, European Union, and Australia. The objective of the telemarketing strategy was to maintain as much control as possible over the distribution and sales of products. The second method was to establish distributor relationships with local companies operating in the various geographic territories. A third method of selling was via both the companys website and social media platforms, which sometimes involved direct purchasing via downloads and other times requires one of the telemarketers to work with the customer.

Business Plan Sales Projections in Units Projection Year 2016 2017 2018 2019 2020 Optimistic 10,000 15,000 22,000 37,000 46,000 Likely 7,000 11,000 16,000 23,000 34,000 Pessimistic 4,000 9,000 11,000 18,000 28,000 Substantial growth was anticipated after 2018 based on market awareness and new products. The TSS sales force was organized geographically into territories so that each of the four sales reps has sole responsibility for a defined territory. With the exception of distributors and Internet sales, reps are expected to sell TSS products via telephone and mail. Sales reps are generally fluent in the languages of their geographic areas in all regions except the European Union because of the number of different languages spoken there. In addition to telemarketing activities, sales reps are expected to visit major distributors at least twice a year to build relationships and provide training on recent developments and future plans. The philosophy of senior management is personal contact with distributors is important to ensure their full support in selling TSS products.

TSS Organization Chart

TSSs owners decided to retain the consultant who had prepared the original business plan to work with them to better understand why sales had not developed as expected. After reviewing the situation, the consultant noted the following:

The current organizational approach is working relatively well except in the European Union. The multiple languages are creating a problem. Because of the potential of this market it may need to be divided into several smaller markets, perhaps on a countrybycountry basis. Telemarketing activities are both outbound and inbound. Outbound is working better than inbound but both have problems. The inbound telemarketing calls are generated by advertisements in trade journals, booths at trade shows, social media platforms, and by TSSs website. There is a tollfree number for the sales rep in each of the four territories. The consultant suggests that perhaps inbound telemarketing activities need to be centralized and handled out of the home office in Palo Alto, or outsourced to another company that could provide 24/7 coverage. Further, because of the many languages involved it may be necessary to have more than one company handle the telemarketing, but this could cause problems as well. Sales reps are expected to sell to distributors located in their geographic territory. The distributors are often small and carry a wide assortment of software packages. Sales reps have been given little support in selling to distributors. In three of the geographic territories the accounts were the result of distributors contacting TSS about distribution possibilities. Channel conflicts have resulted in numerous situations where telemarketers and distributors have argued about who should get the commission on a particular sale. These conflicts are complicated by the fact that some inquiries originate from the website and it is not clear whether the telemarketer or distributor should get the credit. The consultant recommended that the strategy in accepting distributors needed to be closely studied. Distributors must be highly motivated, well supported by training and technical consultation, and aggressive in contacting potential customers and providing feedback to TSS management. In addition, reps need to make more frequent contact with distributors and be given more direction on how to effectively work with distributors. In reviewing the four sales territories the consultant and management concluded the current arrangement needs reconsideration. The geographic areas are large and difficult to adequately service, and the potential differs substantially. TSS attempted to become a global company to quickly and needs to consider a more focused strategy in the areas with greatest potential. This is particularly important where sales reps are expected to establish personal relationships with distributors. The sales reps are typically young (ages 2735), college graduates, and enthusiastic about working for the company. But a couple of problems have emerged. The two top sales reps are highly motivated by money. It appears that some of the leads generated by dealers were taken by the sales reps and classified as Internetoriginated, but this has been difficult to trace. Another problem is time management. The reps have had difficulty balancing their efforts on telemarketing and distributor visits, and with the differences in time zones for the European Union and Australian reps there often is a problem in responding to inquiries in a timely manner. The consultant suggested outsourcing the telemarketing activities either to a central location in the United States that operated 24/7 or to remote locations in the appropriate time zones. Questions Which of the consultants recommendations should be implemented, and if more than one is accepted, what is the highest priority and why? Should TSS divide the European Union into several territories? If yes, what factors should be considered in making this decision? If the sales reps responsibilities are divided so they handle contacts only with distributors, will this help resolve the time management problems? Explain. Should the two top sales reps that appear to be stealing customers from distributors be fired? Or how should this be handled by TSS?