Reference no: EM131828826

Tim Christensen sells industrial lubricants to manufacturing plants. The lubricants are used for the plants' machinery. He is calling on Ben Campbell, a purchasing agent for Acme Manufacturing Company. Ben currently buys Tim's Hydraulic Oil 65 in drums. Tim's sales call objective is to persuade Ben to switch from purchasing his oil in drums to a bulk oil system. The secretary has just admitted him to Ben's office. Salesperson: Hello, Ben. Customer: Well, if it isn't Tim Christensen, my lube oil salesperson! How is everything over at Major Oil these days? Salesperson: Fine! We're adding to our warehouse, so we won't be quite as crowded. Say, I know you like to fly. I was just reading in a magazine about the old Piper Tri-Pacer. Customer: Yeah! I do enjoy flying and fooling with old airplanes. I just got back this weekend from a fly-in over at Houston. Salesperson: You don't say! What type of planes did they have? Customer: They had a bunch of homebuilts. You know, many pilots spend from 5 to 15 years just building their own planes. Salesperson: Would you like to build your own plane someday? Customer: Yes, I would. But you know, this job takes so much time-and with my schedule here and some travel, I don't know if I'll ever get time to start on a plane, much less finish one. Salesperson: Well, I don't know that I can save you that much time, but I can save the people in the plant time and reduce your cost of Hydraulic Oil 65. Also, I may even save your office some time and expense by not having to place so many orders. You know, we talked a couple of weeks ago about the possibility of Acme buying Hydraulic Oil 65 in bulk and thus reducing the cost per gallon by buying larger quantities each time you order. In addition, you will save tying your money up in the $20 drum deposit or even losing the deposit by losing or damaging the empty drum. Customer: Sounds like this is fixing to cost us some money. Salesperson: Well, we might have to spend a little money to save a larger amount, plus make it easier and quicker in the plant. Do you know exactly what you are paying for Hydraulic Oil 65 now? Customer: I think it's about $1.40 a gallon. Salesperson: That's close. Your delivery cost is $1.39 per gallon, not counting drum deposit. You used approximately 20,000 gallons of Hydraulic Oil 65 last year at a total cost of $27,800. Customer: Between what I pay at the gas station and what we pay here, I see why Major Oil is getting bigger and richer all the time. How much money can you save us? Salesperson: Well, we try to get by and make ends meet. However, I can save your company more than $2,800 per year on oil costs alone. Customer: That sounds awful big. How are you going to do that? Salesperson: I am going to show you how you can purchase oil in bulk, save 14¢ per gallon on each gallon you buy (14¢ times 20,000 gallons equals $2,800), and eliminate handling those drums and having your money tied up in deposits. Last year, you purchased about 364 drums-and I'll bet you did not return all the drums to us. Customer: I know we damaged some drums, and I imagine we furnished some trash barrels for our employees. I wonder how much of a total deposit we pay? Salesperson: The total deposit on those drums was $7,280. Are you and your company totally satisfied with the performance of Hydraulic Oil 65? Customer: It seems so. I have heard nothing to the contrary, and our bearing supplier, Timken, says that the oil is doing a first-class job. You know, this savings sounds good in theory, but will it really work? Besides, where will we put a big bulk system? Salesperson: Ben, I've already thoroughly checked into what the total equipment and installation will cost. Here's a picture of the installation we made over at the Foundry and Machine Shop. We put the installation above ground to save the expense of digging holes for the tanks. The cover shown here in the picture protects the pump and motor from the weather, and the pipe into the shop goes underground. There's a control switch for the pump motor mounted inside the building next to the nozzle outlet. It looks good, doesn't it? Customer: It certainly does, Tim, but what about the cost? Salesperson: We can get two new 3,000-gallon tanks delivered here for a cost of $1,700 from our tank supplier. This is about $120 less than what you could buy them for. Our quantity purchases of tanks give us a little better price-and we'll be glad to pass those savings on to you. I have checked with Pump Supply Company, and they have in stock the pump and motor with flexible coupling and built-in pump relief valve, just what we need for handling this oil. The cost is $475. The control switch, pipe, pipe fittings, inside hose, and nozzle come to $120, and the person who does our installation work has given me a commitment to do all the installation work for $500, including furnishing the blocks to make the tank supports. This totals $2,795, so let's round off to $2,800. And at a savings of 14¢ per gallon, based on your present usage of 20,000 gallons per year, this would be paid off in about 12 months, during which time you'd pay $1.25 per gallon for your oil rather than the $1.39 you now pay. How does that sound to you, Ben? Customer: That sounds pretty good to me, Tim. Didn't you have an article about this in a recent issue of your company magazine? Salesperson: We sure did. It was in the March issue. Here it is, right here. The situation was a little different, but the basic idea is the same. Our company has used this idea to considerable advantage; and over the past three years, I have set up six installations of this type. Do you have any questions regarding the plan I've outlined? Customer: Just one thing-you know we're short on space behind the warehouse. Have you thought about where we might locate an installation of this type? Salesperson: Yes, I have, Ben. Recall one of our earlier conversations where you told me about your plans to clean up that old scrap pile near the corner of the warehouse. That would be an ideal location. We could then locate the control switch, filling hose, and nozzle right on the inside at the end of the assembly line so the units could have their initial oil fill just before they come off the assembly line. How would that fit into your plans? Customer: That's a good idea, Tim. That way we can get that junk pile cleaned up, replace it with a decent looking installation, and then make our initial oil fill the last step in our assembly procedure. Salesperson: Do you have any other questions, Ben? Customer: No, I believe I've got the whole picture now. Salesperson: Good. Now, to sum up our thinking, Ben, the total cost of installation will be about $3,000. Immediately on completion of the installation, and when you receive your first transport truckload shipment of Hydraulic Oil 65, instead of being billed at $1.39 per gallon, as you are now paying for barrel deliveries, you will be billed $1.25 per gallon. I'll work with Bill Smith, the plant superintendent, and I'll handle all the outside contacts so that we can make the installation with little turmoil. Customer: That sounds good to me. When can we start the installation? Salesperson: Tomorrow. I'll bring a contract for you to have your people sign. It should take about three to four weeks after the contract is signed. Customer: Good. What do I need to do right now? Salesperson: If you'll arrange to clean the junk out of the corner, then we'll be ready. I'll order the equipment and have it moving so that we can be ready in about four weeks. What would be the best time to see you tomorrow? Customer: Anytime will be OK with me, Tim. Salesperson: Swell, Ben. Thanks for your help. I know you will be pleased with this new installation and also save money. See you tomorrow.

Questions

1. Evaluate Tim's sales presentation. Include in your answer comments on his approach, presentation, use of trial closes, handling of objections, and close.

2. How would you develop visual materials to illustrate Tim's sales presentation, including the arithmetic?

3. Now that Tim has sold to Ben, what should Tim do next?