Ed Patarski is the Sales Vice President for National Insurance Corporation (NIC). NIC offers life, hospitalization, and disability insurance to both small and large companies— primarily in the southwestern United States— through its company salespeople. Each salesperson currently receives a small, fixed salary and a commission that is based on closed sales within a geographical territory. Over the past decade, the turnover rate for NIC’s salespeople increased from less than 20 percent to more than 50 percent annually. Patarski had the firm’s accounting department conduct a financial analysis regarding the total cost of hiring new salespeople, including the cost of advertising to attract applicants as well as interviewing, training, and licensing them. He’s surprised when the figure he receives amounts to more than $ 6 million dollars per year! With a turnover rate exceeding 50 percent, Patarski quickly concludes there is a tremendous amount of waste associated with the firm’s current sales structure. Consequently, Patarski is considering partnering with independent sales agents, located in all of the company’s current sales areas, because of their marketplace knowledge, market status, similarity of goals and values, and ability to create winwin situations for all parties involved in transactions. However, to make this a reality, NIC’s sales managers would need to contact the agents operating in the various sales territories and convince them of the benefits of partnering with National. Patarski also understands that utilizing this new market channel would make NIC’s current salespeople unhappy, because the independent reps would compete— at least indirectly— with them. Still, as Patarski considers the money NIC could save, and how the independent reps have strong reputations and sales histories in their local areas, he knows partnering with independent salespersons is probably the way to go.
1. What are the benefits of partnering with independent reps, as opposed to a company sales force? Can a case be made for finding a way to retain Patarski’s current salespeople instead of hiring sales agents to replace them?
2. Why would the turnover rate be significantly lower for NIC if it hired sales agents?
3. What type of resistance might NIC encounter from its current sales reps if it hired sales agents?
4. Can NIC integrate an independent rep strategy with its existing company sales force? How?
Tanner, Jeff; Honeycutt, Earl; Erffmeyer, Robert. Sales Management 2nd Edition (Kindle Locations 5681-5685). Wessex Press. Kindle Edition.