Reference no: EM132260100
When Steve White announced his retirement from Dollar Express, Jackie Morgan was concerned. After all, Steve had been one of her better customers and she was able to grow the business with Dollar Express by 50 percent over the past three years. Steve not only gave Jackie more business, he also recommended her to his friends, and Jackie was able to win at least two or three new accounts a year as a result. But Jackie really didn’t know anyone else at Dollar Express, so she wasn’t sure who would get this plum job.
Jackie’s company, Heron Ridge, provides IT services to small- and medium-size businesses. Everything from accounting software to CRM software to Web site design and cyber security, Heron Ridge does it all. Steve headed up the Dollar Express online sales division, so he had responsibility for the company’s Web site and digital promotions and social media strategy and execution.
When Jackie heard that Tom Oliver was named Steve’s replacement, she quickly looked him up on LinkedIn. “Oh great,” she groaned. According to his profile, he was coming from Franklin Five & Dime. While she didn’t call on Franklin, she knew that its philosophy was to have multiple vendors with each getting small contracts and competing on price.
But she put her concern aside when Steve called to arrange a lunch meeting to introduce her to Tom.
“I really appreciate this opportunity to meet you, Tom,” smiled Jackie.
“Yes, I appreciate it as well,” Tom smiled back. “I’ve had a chance to review our business with you, and I see your company has done a great job for us. But my experience at Franklin suggests we may be overpaying.” Steve squirmed, but didn’t say anything. “But we’ll do a deep account review with you, as we will with all of our larger vendors, so that I can get up to speed on everything. Do you think you could prepare a presentation on your company’s performance for two weeks from now?”
Jackie nodded, and said she’d have it ready, as well as bring in the service manager for the account. She then asked Tom about his goals and objectives for the company’s online sales division.
“A key issue for us,” he replied, “is profitability.” He went on to say that the CEO had mandated that Tom find ways to improve contribution margin of his department by 10 percent this year. “That’s why we’ll be taking such a close look at price.”
Jackie knew she was in trouble. Her prices to Dollar Express were 5 to 10 percent higher than her competitors’, and while she had been able to save Dollar Express money through streamlined operations, what she had done in the past wouldn’t matter going forward.
As she drove back to the office after lunch, she thought about the Dollar Express account. She knew it was looking at some analytics solutions to support its online promotional campaigns and she had planned to bid on that. In fact, her quota for the year was based on increasing sales at Dollar Express, not decreasing!
Questions
1. Besides lowering price, what actions can Jackie propose to improve contribution margin?
2. What are some strategies she could take to defend the higher prices? What evidence or information would you need to support your ideas?
3. What type of relationship did she have with Steve? What did she do or fail to do that may make the future more difficult with Dollar Express, now that Tom is in charge?