BASIC MARKETING 18th Edition by Jerome McCarthy William Perreault, Joseph Cannon

Exercise 13

The Herrera Group
Maya Herrera, owner of The Herrera Group, is deciding whether to take on a new line. She is very concerned because, although she wants more lines, she feels that something is wrong with her latest possibility.
Maya graduated from a large midwestern university in 2006 with a B.S. in business. She worked selling cell phones for a year. Then Maya decided to go into business for herself and formed The Herrera Group. Looking for opportunities, Maya placed several ads in her local newspaper in Columbus, Ohio, announcing that she was interested in becoming a sales representative in the area. She was quite pleased to receive a number of responses. Eventually, she became the sales representative in the Columbus area for three local computer software producers: Accto Company, which produces accounting-related software; Saleco, Inc., a producer of sales management software; and Invo, Inc., a producer of inventory control software. All of these companies were relatively small and were represented in other areas by other sales representatives like Maya. The companies often sent her leads when customers from her area expressed interest at a trade show or through the company's Web site.
Maya's main job was to call on possible customers. Once she made a sale, she would fax the signed license agreement to the respective producer, who would then UPS the programs directly to the customer or, more often, provide a key code for a Web site download. The producer would bill the customer, and Maya would receive a commission varying from 5 to 10 percent of the dollar value of the sale. Maya was expected to pay her own expenses. And the producers would handle any user questions, either by using 800 numbers for out-of-town calls or by e-mail queries to a technical support group.
Maya called on anyone in the Columbus area who might use the products she sold. At first, her job was relatively easy, and sales came quickly because she had little competition. Many national companies offer similar products, but at that time they were not well represented in the Columbus area. Most small businesses needed someone to demonstrate what the software could do.
In 2008, Maya sold $250,000 worth of Accto software, earning a 10 percent commission; $100,000 worth of Saleco software, also earning a 10 percent commission; and $200,000 worth of Invo software, earning a 7 percent commission. She was encouraged with her progress and looked forward to expanding sales in the future. She was especially optimistic because she had achieved these sales volumes without overtaxingherself. In fact, she felt she was operating at about 60 percent of her capacity and could easily take on new lines. So she began looking for other products she could sell in the Columbus area. A local software company has recently approached Maya about selling its newly developed software, which is basically a network security product. It is designed to secretly track all of the keystrokes and mouse clicks of each employee as he or she uses the computer-so that an employer can identify inappropriate uses of its computers or confidential data. Maya isn't too enthusiastic about this offer because the commission is only 2 percent on potential annual sales of about $150,000-and she also doesn't like the idea of selling a product that might undermine the privacy of employees who are not doing anything wrong.
Now Maya is faced with another decision. The owner of the MetalCoat Company, also in Columbus, has made what looks like an attractive offer. She called on MetalCoat to see if the firm might be interested in buying her accounting software. The owner didn't want the software, but he was very impressed with Maya. After two long discussions, he asked if she would like to help MetalCoat solve its current problem. MetalCoat is having trouble with marketing, and the owner would like Maya to take over the whole marketing effort.
MetalCoat produces solvents used to make coatings for metal products. It sells mainly to industrial customers in the mid-Ohio area and faces many competitors selling essentially the same products and charging the same low prices.
MetalCoat is a small manufacturer. Last year's sales were $500,000. It could handle at least four times this sales volume with ease and is willing to expand to increase sales-its main objective in the short run. MetalCoat's owner is offering Maya a 12 percent commission on all sales if she will take charge of its pricing, advertising, and sales efforts. Maya is flattered by the offer, but she is a little worried because it is a different type of product and she would have to learn a lot about it. The job also might require a great deal more traveling than she is doing now. For one thing, she would have to call on new potential customers in mid-Ohio, and she might have to travel up to 200 miles around Columbus to expand the solvent business. Further, she realizes that she is being asked to do more than just sell. But she did have marketing courses in college and thinks the new opportunity might be challenging.
Evaluate Maya Herrera's current strategy and how the proposed solvent line fits in with what she is doing now. What should she do? Why?