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C A S E N E T

CETUS Computer Corp. Sales Force

Bruce Greenwald
Columbia University

C
ETUS Computer Corporation manufactures and sells high-speed
scientific workstations (i.e., powerful personal computers). Since its
founding in 1979, by three former Hewlett-Packard engineers, CETUS
has distributed its products through third parties, either specially retail chains
or value added resellers like the DuCommen Corp. which adds its own
software to CETUS computers and sells the resulting system through its own
contact sales force, or original equipment manufacturers who special purpose
system (e.g., for monitoring chemical reactions). Prior to 1985, CETUS had
only a very limited force of technical sales representatives who dealt with
these highly sophisticated third parties and represented CETUS at trade
shows and conventions. CETUS had no salespeople who called directly on
end-use customers. In early 1985, however, the head of Product Development
at CETUS, who was also Director of Sales, became uneasy with these indirect
marketing arrangements. Lack of direct final-customer contact placed CETUS
at a disadvantage in several significant ways. First, technical information and
customer requirements for new product applications filtered through to
CETUS only via third parties, adversely affecting CETUS’ product
development efforts in its rapidly changing technical market. Second, without
a contact sales force, CETUS could not develop long term relationships with
large customers, a necessary part of selling effectively to those customers.
Finally, CETUS felt that third parties sometimes failed to take full advantage
of the capabilities of CETUS products; but, lacking direct knowledge of the
ways in which its machines were used, CETUS could not effectively coach the
third party vendors in refining and extending their use of CETUS Products.
As a result, CETUS decided to develop its own sales force for dealing with
large end-use customers and was faced with decisions on how to staff that
sales force.
The first step in this process was to identify those accounts that would be
the focus of the new direct-contact sales force’s efforts. Based on a careful
review of existing and potential customers, consultants to the Director of Sales

This case was prepared by Bruce Greenwald, Columbia University, to serve as the basis for class discussion rather
than to demonstrate the effective or ineffective handling of an administrative situation. Copyright © 1996
Bruce Greenwald. Published by South-Western College Publishing.

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CETUS Computer Corp. Sales Force ISBN 0-538-87511-9

identified 2,700 such accounts covering 265 companies. A single large

company like IBM, AT&T or General Electric would be organized into many
separate accounts. Each of these 2,700 accounts was, therefore, of roughly
comparable size.
The second step was then to estimate the cost of sales representatives who
would staff the new direct contact sales force. Here, CETUS was faced with
two basic alternatives: it could hire highly experienced technical computer
sales representatives from existing competitors (like Hewlett-Packard, DEC,
Sun, or Apollo) or it could hire less experienced salespeople with little or no
technical sales experiences. CETUS had neither the time, the expertise, nor the
resources to develop sales representatives from scratch.
There were both benefits and costs to hiring highly experienced technical
sales representatives. The chief benefit was their greater efficiency in selling.
Working with a standard sales territory of 30 accounts, a highly experienced
salesperson could expect to sell about 18 CETUS computer systems per year
at an average value of $20,000 each. This was derived from an average sales
cycle of 4 days, a success rate in attempted sales of about 50%, and about 144
selling days per year. In contrast, a less experienced salesperson would sell
only about 8 systems per year at $20,000 each in a standard 30-account
territory. The difference lay predominantly in the lesser ability of the latter in
identifying sales opportunities. In a 30-account territory, a less experienced
salesperson was typically limited by his or her ability to identify only 16–20
sales opportunities per year of which slightly less than half would be
converted to actual sales. Thus, in contrast to the highly experienced
representatives whose number of sales did not increase with territory size
(being constrained by available selling time), a less experienced sales
representative could be expected to sell an average of 12 systems per year in a
60-account territory and 15 systems per year in a 90-account territory (each
worth $20,000 in revenues). On the cost side, however, highly experienced
sales representatives would command average salaries of $60,000 per year
compared to $36,000 per year for less experienced salespeople. (Overall
annual salesperson costs are presented in Exhibit 1). Highly experienced
salespeople were scarce. At a $60,000 per year salary, CETUS could expect to
hire 30 highly-experienced representatives. In order to attract any more
experienced representatives, CETUS would have to raise its salary offer by
30%; at that salary, CETUS could hire about 45 highly-experienced sales
representatives (more than 45 could not be found within a year). In contrast,
CETUS could expect to find up to 200 less experienced sales representatives at
the $36,000 per year salary.
Finally, the contribution of direct sales to CETUS’ profits would be about
50% of revenues generated. The cost of producing, shipping, installing, and
servicing a $20,000 system was about $9,500 and each salesperson received a
commission of $500 on such a sale. (Note: commissions would not increase
benefit costs which were tied to salary).
The questions facing the CETUS sales manager were: 1) how many, if any,
highly experienced sales representatives to hire, and 2) how many, if any, less
experienced representatives to hire.
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ISBN 0-538-87511-9 Bruce Greenwald

Exhibit 1 Cost Per Sales Representative Per Year (Not Including Commissions)

*This difference is largely behavioral (and aIso a recruiting inducement to highly experienced salespeople) and, for less experienced salesperson, would not
increase significantly with territory size.
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CETUS Computer Corp. Sales Force ISBN 0-538-87511-9

NOTES