Page 394 - Business Principles and Management

C HAPTER 14 A SSESSMENT

CASE IN POINT

CASE 14-1: Preparing for Change
Kane’s Buy-Rite Used Cars had experienced its third straight year of declin-
ing profits. Although a few more cars were sold each year, the profit per
sale was down. Kane Shouk, the owner, had traditionally relied on a loyal
group of customers who returned to buy a second and even third car,
demonstrating their satisfaction with the company. Fewer customers were
returning each year, however, and the company had to increase its promo-
tional budget. Although the promotional activities were attracting prospec-
tive customers to the business, salespeople were finding it difficult to
convince them to buy. There were fewer new customers than there were
former customers who were not returning.
Kane believed two factors were contributing to the declining business.
First, many new-car dealers were now leasing many of their cars rather
than selling them. This meant customers needed very low or no down
payments and paid lower monthly payments. New-car payments were
now comparable to used-car payments. Second, Kane’s salespeople were
getting more aggressive in order to sell cars. Because profits were down,
more cars needed to be sold. Some customers, especially those who had
purchased from the business before, were complaining they felt pressured
by salespeople.
Kane decided the procedures for selling automobiles had to change.
He knew that several of the new-auto dealers had gone to a one-price,
no-negotiation strategy. A low but fair price was put on each car, and
the car would be sold at that price so there would be no pressure from
the salesperson regarding the price to be paid. Kane hoped the salespeo-
ple would help the customer select the best car rather than worrying
about negotiating the best price. He wanted customers to find a good
value but also to have a very positive experience when they came to
Kane’s Buy-Rite to shop for a used car.
Kane expected two problems in convincing the salespeople that the new
sales strategy would be effective. First, it would require a different type of
selling relationship with the customer, and some salespeople might have a
hard time adjusting. They were already having greater difficulty selling the
number of automobiles they were able to sell in the past. Now, Kane was
asking them not to pressure customers to buy. Second, the salespeople
would be paid a salary rather than a commission. Several of the top sales-
people would not be able to make as much money as they could when
sales were good, but all salespeople would make a decent salary.

THINK CRITICALLY
1. How should Kane work with the salespeople to introduce the
change?
2. How can Kane motivate the salespeople now that commissions will
not be paid on sales?
3. What controlling activities could Kane undertake to be able to
specifically determine why profits have been declining?

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