Case 1 Sales Force Integration at FedEx Corporation: A Case Presentation Example For Marketing 458 – Sales Management Team Members: Doug Vorhies Jimmy Buffett “Mac” MacNally The Coral Reefers …

Outline Situation Analysis Assumptions and Missing Information Problem Definition Analysis of Alternatives Recommendations

Situation Analysis Recent acquisitions of freight firms has lead to multiple FedEx Salespeople calling on the same account. Need for unified approach to customers Project ARISE

S.A. - Customers Large Businesses (GT $40,000/yr) Contractual – lower price to customer. Small Businesses ($6,000-40,000 rev.) Try for contracts – lower price to customer.

S.A. - Market Offerings Overnight packages Ground 1, 2 or 3 day delivery Money back guarantee on 1 day. Ground Freight services for large and often heavy packages.

S.A. - Competition Overnight: UPS Airborne USPS Ground: Trucking firms

S.A. – Compensation Express: Revenue Targets w/ Bonus at 96% of goal Primary focus on existing accounts. Goals set by Corporate with adjustment 70% salary Trips/Pres Club as incentive

S.A. – Compensation Ground: Revenue Targets + Activity Targets with bonus at 50% of goal 60% of incentive based on SP F/C No adjustment 82% is salary Bonus financial incentive only

S.A. – Pkg Rev. Results for 2000 demonstrate that integrating the sales force may be problematic due to less revenue attributable to ground. Express AEs might see comp. shortfall if quotas not realigned. Ground AEs would see targets jump creating disincentive.

S.A. -Sales Force Structure Two Units Express and Ground Express: 2,200 Account Executives (AE) Ground: 800 AEs. Both SF structures are hierarchical Multiple AEs call on client No one AE as focus

Express Structure Worldwide – 104 Accts Over $10,000,000 Rev. WWS Global – 237 Accts $1,000,000 -10,000,000 Rev. Global Local/Nat’l – 200 Accts $5000,000 - $1,000,000 Rev. Local/Nat’l Field – 600 Accts $40,000 -$5000,000 Rev. Field Inside – 60 Accts $6,000 - $40,000 Rev. Inside Inside Tel – 211 Accts Below $6,000 Rev. Inside Telephone Sales

Ground Structure National – 59 Accts Top 500 firms National Field – 616 Accts Medium Size Field Inside – 155 Accts Small Custs and Prospecting for new business Inside

S.A.– ARISE Impact Will make dealing w/ FedEx easier. Will integrate shipping systems Designed to improve customer ability to ship via FedEx. Will give opportunities to integrate SF More consultative selling Move toward stronger relationship Build importance of SF to customer

S.A. – Teams Team selling can enable stronger service knowledge by bringing ground and express knowledge to benefit customer. How to compensate. Role of inside sales?

SWOT - Strengths Overnight industry leader (46% Share) Best on-time express performance High brand recognition Consultative selling combined with Industry leading technology brings Innovative solutions to save customer money.

SWOT – Weaknesses Two Sales forces leading to two points of contact for cust’s. Two SF structures & comp systems. Two shipping tech systems. Weaker position in ground Duplication of some operations (e.g., 2 sets of FedEx trucks ground and express.

SWOT – Opportunities Market growth for O/N & Express O/N growth at 6-8% (Ex 2) Ground growth at 8-10% (Ex 2) Cost savings from shipping systems integration (ARISE) Build business when ARISE goes online. Cost savings when ARISE goes online. Cost savings from SF integration

SWOT – Threats Commoditization of O/N business lead to reduced revenue. Ground is commodity business. UPS stronger in ground. Customer confusion due to two SF. Customer confusion w/ two shipping systems. Business is impacted by bus cycle.

Class Discussion The presenting team is to stop their presentation at this point and give the class an opportunity to add to and discuss issues. This is the time for the class to find what the presenting team has missed. I will be evaluating the class on their analysis and ability to find problems or unidentified issues in the presenting team’s presentation.

Assumptions/Missing Info. ARISE will be successful Top Mgmt support Economy continues to grow SF is not able to stonewall changes

Class Discussion What have we missed.

Problem Definition Problems: Different sales strategies Different comp plans Lack of coordination Reduced opportunity for relationship building Multiple customer touch points creating confusion Increased costs

Overall Problem Need to integrate Sales Force to bring unified customer contact.

Alternatives Integrate current sales forces into one Do not integrate but coordinate. Maintain Status Quo – not considered.

Alternative - Integrate Develop one point of contact One shipping system (versus two today) More focus on consultative selling Build Ground Services Business Compensation system for ground not delivering. SF Goals individually set/Targets too low?

Alternative - Do not integrate but coordinate. Maintain two SF’s but create coordination mechanisms. Team Selling for larger accounts Set Ground goals at corporate to match Express approach Move toward higher goals for ground. Create sales support specialists to do the technical integration w/ customer systems.

Recommendation – Integrate! Model comp system after Express – less disruption to revenue. But add “Yield” goal/incentive. Redistribute territories where necessary Cross Train Train on ARISE Create sales support specialists to assist with tech integration. Eliminate duplication in territories – eliminate positions in SF if necessary – cost savings. Maintain salary plus incentive model. Cost savings can be realized from integration of both SF and ARISE.

Class Discussion What has the group missed in their analysis of alternatives?

Questions about process?

Other things for Class to Remember Team Presentation – Approx 30 Minutes of presentation time (not counting questions). Individual 2 page (typed) case outline will be turned in at the beginning of class by each student (presenting team excluded). Hand in 1 copy and keep one for yourself. You may discuss w/ your team but prepare individually (we will check for copying). Presenting team to give 5 T/F questions (with answers) to Dr. V. for inclusion on final exam. Send Dr. V. copy of team slides (via email).