LAHORE SCHOOL OF ECONOMICS

Omega Medical Products, Inc.

Sales Force Management
Section III

Ahmed Murtaza Arif Bilal Amir Chaudhry Haider Hayat Hussnain Tariq

Omega Medical Products, located in Denver, Colorado, is one of the top manufacturers of lifesupport medical equipment and surgical pharmaceuticals. The company has experienced an increase in sales at an annual rate of 18 percent per year over the past three years and in 1998 recorded sales of $380 million. The company currently employs 175 sales reps, including a separate sales force of 40 handling the anesthesia line. Five years ago, Omegas president retired and the top position was filled by executive vice president, Christopher John. Several other major changes occurred in the executive hierarchy. The most important were elimination of the executive vice president position and creation of the position of vice president, marketing and sales. Earl Callahan was appointed to this post and was handling many different departments as can be seen in the organizational structure below.

Earl Callahan

VP Internation al Sales

GM Medical Equipment Marketing

GM Distribution

GM Customer Services and Gases

Director Market Research and Strategic Planning

Director Communic ation

Marketing Manager Architectural Products

Earl Callahan had no prior sales experience and instead held the top marketing job in a firm that produced medical products unrelated to those sold by Omega. Callahan was pressured by John to have a revised sales organization chart completed before the new fiscal year. After reviewing

Omegas current organization charts, sales figures and marketing plans for new products, Callahan realized there were several major problems. Qualitative Statements Sales Force was expected to sell bulk oxygen and nitrous oxide as well as Omegas architectural product line equipment to new hospitals and those being remodeled. This required that sales reps work closely with architects and construction contractors, usually a very time consuming endeavor, ranging from several months to over one year. Many products sold with little or no sales effort because of the Omega name and strong dealer network. Omegas lack of experience in the medical electronics field would require an intensive sales effort to enter the market profitably. Callahan thought drugs and equipment required substantially different sales techniques and one force could not adequately handle both. There were several competitors in the medical electronics field.

Quantitative Statements Increase in sales at an annual rate of 18 percent per year over the past three years The respiratory therapy line accounted for $66 million in sales in 1998. The anesthesia drug ahs high profit margins, in 1998 it had profits of $35 million. Anesthetize gas used by 60% of all surgical patients. No more than 10% of the reps had any interest in learning about or selling the new equipment. The general sales line consisted of 135 sales reps.

The service department consisted of 172 technicians and 16 zone managers.

Problems There was an ill-feeling among employees regarding the hiring of Callahan who was brought into the company. Employees were not happy that someone from within the company was not promoted. Omega was known as an inferior quality, poor product design, and inadequate service. This meant that competitors were strong and Omega has not been able to market themselves to the potential customers. There was no training or experience to the sales reps to sell state of art electronic monitoring equipment. There was no sales force for each product rather the sales force was generally divided into just two categories and it was believed that products and equipment required different type of sales force. Also that Omega sold several thousand items, which realistically is too much for a sales rep to handle effectively. Sales reps spent disproportionate amount of sales time to respiratory therapy which resulted in poor sales. There was a wage disparity as general line sales reps were paid less than the general line representatives who were responsible for selling a large range of products as compare to anesthesia representatives.

Core Problem Sales force structure is the core problem. They were not given specific roles where they had to sell a particular product; instead they had to be good in selling all products though each product required different knowledge and time to sell. This led to disproportionate time and potential sales loss. Recommendations Sales force should be structured product wise where sales reps are assigned at selling different products in which they had expertise. This would be helpful since medical instruments required knowledge of the product. Proper sales force training to be provided to the sales force and in cases where it is important, experienced sales force should be hired. Salaries should be aligned with the complexity of the product they are selling and some form of wage equality being implemented. Succession planning should be ensured in the organization which would help motivate employees to perform and work hard. Proper sales territories should be marked along with sales quotas being assigned to the sales force to achieve better results.