Central problem of low sales in corporate reseller channel at Double A Company

CONTENTS 1. PROBLEM CONTEXT........................................................................................................... 3 1.1. INTRODUCTION............................................................................................................ 3 1.2. COMPANY OVERVIEW................................................................................................ 3 1.3. NEW PRODUCTS AND ITS DISTRIBUTION CHANNELS........................................ 4 2. SYMPTOM.............................................................................................................................. 6 3. INITIAL CAUSE-EFFECT MAP........................................................................................... 9 4. POSSIBLE PROBLEMS......................................................................................................... 9 4.1. Corporate Resellers-Less focused on introducing product........................................... 10 4.2. Low awareness for Double A smart stapler at Corporate Reseller’s Consumers........ 12 4.3. Inappropriate product for Corporate Reseller’s Consumers ....................................... 12 5. MAIN PROBLEM VALIDATION ....................................................................................... 13 6. POTENTAIL CAUSES ......................................................................................................... 15 6.1. Low brand recognition of Double A Smart Stapler Product ........................................ 16 6.2. Low brand recall of Double A Smart Stapler Product ................................................. 16 7. MAIN CAUSE VALIDATION.............................................................................................. 17 8. ALTERNATATIVE SOLUTIONS ....................................................................................... 18 8.1. Problem-related inputs .................................................................................................. 18 8.1.1. The model of the present system............................................................................ 18 8.1.2. Solution Requirements........................................................................................... 19 8.2. Possible Solutions ........................................................................................................... 19 9. SOLUTION SELECTION .................................................................................................... 21 10. ACTION PLAN IN ORGANIZATION ............................................................................ 27 11. CONCLUSION .................................................................................................................. 29 REFERENCES.............................................................................................................................. 30 APPENDIX – IN-DEPTH INTERVIEW...................................................................................... 33 2 1. PROBLEM CONTEXT 1.1. INTRODUCTION The basic feature of the market economy is competition. Companies have continuously launched their new products and services considered to be profitable. Further, the development of new products helps companies survive in the tough competitive environment. They are not only the start-up companies launching their products to look for the market positions, but also the branding companies releasing new products as their competitive advantages. However, all new products may carry risks affecting the companies. This assignment mentions the problem of developing new products in copy paper Company, named “Double A”. Through data collection and information, the real problem of the company is recognized. In addition, basing on the most important cause leading to the real problem, all relevant solutions are suggested to help the company improve its performance in the involved market. 1.2. COMPANY OVERVIEW Double A (1991) Public Company Limited (and subsidiaries) is a leading manufacturer and distributor of pulp and paper in Thailand. The Company was established on August 8, 1991. Currently the Company have 2 pulp mills with the capacity to produce pulp for 580,000 tons, 3 paper mills with 600,000 tons capacity per annum. In the year of 2000, Double A was introduced as a premium brand of copy paper and internationally recognized as the leading provider. In 2002, The Company set up Double A Paper and Stationery Company Limited to manage and distribute stationeries for domestic customers. Also, its products have been extended to innovative stationery products. It has been the leading brand in Thailand for 10 consecutive years due to its quality and consistency. It has presented in more than 100 countries. In 2005, Double A paper was 3 launched in Vietnam market. In 2015, Double A stationery was launched in Vietnam market as new products. It has established two representative offices located in Hanoi city and Ho Chi Minh City. The staff in the representative offices of Ho Chi Minh city consist of 1 General Manager, 1 Marketing Manager, 1 Marketing Executive, 4 Channel Development Executives and 1 Admin being in charge of human resource management. Totally, the scare resources are 8 persons. General Manager - 1 Marketing Manager - 1 Channel Development Manager - Absent Finance Manager - 1 Marketing Executive - 1 Channel Development Executive - 4 Finance Executive - 1 Figure 1.1 - Organization structure of Double A Representative Office in HCMC Source: Double A Company 1.3. NEW PRODUCTS AND ITS DISTRIBUTION CHANNELS In 2018, the company has developed new stationery products known Smart Stapler in Vietnam. Its prominent function is to staple up to 30 sheets of copy paper 70gms with less efforts of 50 to 60 percent comparing to usual staplers. Furthermore, the stapling result in flat clinch up to 30 percent more filling space. This new product has strongly developed in Taiwan, China, Singapore, Thailand…despite of its high price compared to regular stapler. 4 The company focuses on developing this new product in Vietnam. In order to releasing them, one main distributor in Ho Chi Minh City will import Double A smart stapler from Thailand. Then, it will provide to all regional dealers throughout Vietnam who will supply this new product to other retailers. In the area of Ho Chi Minh City, this main distributor will directly supply Double A smart stapler to about 590 retailers that include 90 book store shops which will sell products to mainly 80% individual end-users and 20% corporate end-users, 200 shops of corporate resellers which will sell products to 100% corporate end-users and 300 stationary shops which will sell products to about 70% of individual end-users and 30% of corporate end-users. Individual end-users include students, personal office workers, individuals…and corporate end-users include corporates, companies...Thus, these retailers play the crucial roles of introducing new products to the end users in Ho Chi Minh City. Among of them, corporate end-users are the key target consumers of the Double A company. 1 Distributor 90 Book Stores 200 Corporate Resellers 300 Stationary Shops 80% Individual End-Users 20% Corporate End-Users 100% Corporate End- Users 70% Individual End-Users 30% Corporate End-Users Figure 1.2 - Current distribution in HCMC for Double A Smart Stapler Source: Double A Company 5 2. SYMPTOM Recently, the total market demand of normal stapler is about 150,000pcs/year. In February 2018, Double A launched new stapler product to the market which called Double A smart stapler and targeted to achieve about 15% total market demand of normal stapler. In launching time, Double A sold 6.498 units of Double A smart stapler to one distributor. Till the end of the year 2018, this distributor sold 2.550 units to its retailers. But at the end of the year 2019, the sales out of Double A smart stapler of distributor to its retailers was only 1.848 units. Based on the data, the sales out of Double A smart stapler from distributor to retailers in 2019 was decreased nearly 30% compared to the year of 2018 and its sales volume per year was very low compared to the target (only achieved about 2% compared to demand of stapler market). Distributor Sales Q1 2018 Sales Q2 2018 Sales Q3 2018 Sales Q4 2018 TOTAL 2018 Sales Q1 2019 Sales Q2 2019 Sales Q3 2019 Sales Q4 2019 TOTAL 2019 TOTAL 2018 + 2019 Import 6,498 Sales 252 804 1,002 492 2,550 192 282 684 690 1,848 4,398 Inventory 3,948 2,100 2,100 Table 1.1 - Sales and Inventory of Double A smart stapler distributor in 2018 and 2019 Source: Double A Company By going into details of sales by channel to see why the sales volume of this smart stapler that this distributor sells to its retailers has dropped in 2019. Recently, there are about 590 retailer shops that are selling paper and stationery in Ho Chi Minh City, Double A company divides 590 retailer shops into three kinds of channel include corporate reseller 6 channel, stationary shop channel and book store channel. There are about 200 corporate resellers, 300 stationary shops and 90 bookstores in Ho Chi Minh City. Corporate reseller channel includes the sellers whose customers are corporates buying for employees to use in the office. They often sell via email, phone, catalogue. Stationary shop channel includes the sellers whose customers are mostly individual customers, pupils, students…and they are almost located at high streets so that customers can go to the store and choose products to buy. Book store channel includes the sellers whose customers are mostly pupils, students, individuals and book stores are usually located at large supermarkets. In addition, book stores does not only sell stationary products, they but also sell many books, textbooks…In 2018, Double A smart stapler covered total 284 shops include 80 shops of corporate resellers, 150 shops of stationary and 54 shops of book store. Till the end of the year 2019, Double A smart stapler covered 446 shops include 140 shops of corporate reseller that accounting for 70% of total shops of corporate reseller, 225 shops of stationary that accounting for about 75% of total shops of stationary, 81 shops of bookstore that accounting for about 90% of total shops of bookstore. From 2018 to 2019, corporate resellers bought from distributor total 858 pcs of Double smart stapler, stationary shops bought 1.320 pcs and Bookstores bought 2.220 pcs. The inventory of smart stapler at the end of the year 2019 was 719 pcs, 926 pcs and 455 pcs at corporate resellers, stationary shops and bookstores accordingly. The sales out volume of Double A smart stapler in corporate reseller channel was only about 6 pcs per month, stationary shops sold about 17 pcs per month and bookstores sold about 77 pcs per month from 2018 to 2019. Hence, corporate resellers had slowest sales out volume of Double A smart stapler. Corporate resellers are providing stationery for corporate end-users which have been using and buying about 70% the demand of stationary market compared to individual end-users. Therefore, the symptom of very low sales out volume of Double A smart stapler at 7 Corporate resellers needs to be found out the real problems and solutions in order to increase the sales volume of Double A smart stapler significantly in coming years. Corporate Reseller channel Stationary Shop channel Book Store channel Total shops in HCMC (A) 200 shops 300 shops 90 shops Total coverage shops in 2018 (B) 80 shops 150 shops 54 shops Coverage shops/ Total shops at the end of 2018 (C= B/A*100%) 40% 50% 60% Total more coverage shops in 2019 (D) 60 shops 75 shops 27 shops Total coverage shops at the end of 2019 (E=B+D) 140 shops 225 shops 81 shops Coverage shops / Total shops at the end of 2019 (F=E/A*100%) 70% 75% 90% Total buy in 2018 + 2019 (G) 858 pcs 1,320 pcs 2,220 pcs Inventory at the end of 2019 (H) 719 pcs 926 pcs 455 pcs Total sell out in 2018 + 2019 (I=G-H) 139 pcs 394 pcs 1,765 pcs Average sell out/ month from launching time in Feb’19 to Dec’20 (J=I/23) 6.04 pcs 17.13 pcs 76.74 pcs Table 1.2 - Sales volume, Coverage and Inventory by channels of Double A smart stapler in 2018 and 2019 Source: Double A Company 8 3. INITIAL CAUSE-EFFECT MAP Based on Literature reviews and interview data, we have initial cause-effect map as below: 4. POSSIBLE PROBLEMS To find out the problem mess for identified symptom the company is facing, desk research and interview research techniques were performed. The relevant issues of low sales at Corporate Reseller Channel are studied from literatures combined with available data which collected by interviewing related members of the company and its customers to identify the possible problems as well as their causes and consequences to the company's performance. More specifically, interviewees included Double A Marketing Manager, Double A Channel Development Manager Representative – a person that responsible to develop this product, 10 owners of corporate reseller and 3 purchasers of corporate resellers’ consumers who were conducted to consolidate and specify possible problems and main 9 problem. The collected data is the basis for drawing the cause-and-effect tree, which to structure the problem mess and identify the main problem. Based on the interview results with 10 corporate resellers, 3 consumers of corporate resellers, Double A Marketing Manager and Double A Channel Development Manager Representative who is responsible for developing this product, there are 3 potential problems leading to the low sale volume of Double A smart stapler at corporate reseller channel. - Problem 1: Corporate Resellers-Less focused on introducing product - Problem 2: Low awareness for Double A smart stapler at Corporate Reseller’s Consumers - Problem 3: Inappropriate product for Corporate Reseller’s Consumers 4.1. Corporate Resellers-Less focused on introducing product About less focus on introducing Double A smart stapler products, among 10 corporate resellers that have low sales, there are 3/10 corporate resellers answered that they not have any introductions for this product, they only base on their habit to let consumers choose the stapler product they need and corporate resellers only focus on easy-to-sell products so that 10 sellers can easily achieve their sales targets and get bonuses from other brands monthly. Meanwhile, Double A do not have any this kind of bonus to motivate them to introduce product. Otherwise, there are 3/10 corporate resellers answered that their customers buy this product because of their introduction but customers bought only one or two pieces to try this product. Moreover, among three interviewed consumers of corporate reseller, we have one consumer said that they buy this product because the seller introduce it and they want to try. In addition, according to person that is responsible for developing this product, he said that some corporate channels that are having low sales of Double A smart stapler do not introduce product. He emphasized that this product is only sold out when corporate resellers introduce it to their customers and they let their customers try this product so that sales team should have to try their best to encourage corporate resellers to stock and focus introduction for this Double A smart stapler product. Moreover, there are some literature review that prove how the important of channel partner in success of new product. The success of launching a new product depends greatly on retailer’s acceptance and introduction of a manufacturer's new product (1). The sellers and the consumers have a relationship that has accumulated over time so the role of the seller to bring the product to consumers based on the relationship of the seller needs to be focused, the manufacturers taking advantage and meeting the requirements of the sales channel is a factor to create a competitive advantage for the manufacturers (2). In addition, a company rarely owns all the capabilities needed in launching new product, cooperation with the channel partners is needed to gain a competitive advantage so that the role of corporate resellers is very important (3) In conclusion, based on the interview and literature review, the role of the seller to introduce the company's new products is very important and effects on the sales volume of 11 new products so that Corporate Resellers-less focused on introducing this product is one of the problems caused low sales volume at this channel. 4.2. Low awareness for Double A smart stapler at Corporate Reseller’s Consumers According to Double A Marketing Manager, she said that corporate resellers have low sales for this smart stapler because this smart stapler is a new product, less consumers know it and they do not know its benefits that can help their work more effectively. In addition, there are 6/10 corporate resellers said that their consumers rarely ask this product to buy. Moreover, by interviewing consumers of corporate resellers, 2/3 consumers said that they do not know much about the benefits of this product and they have never seen and tried this product so that they do not buy it. In addition, based on some literature reviews, brand awareness is one of the most important factors for consumers decide to buy a product. Brand awareness is defined that include brand familiarity, potential of being recalled, information and the product ideas (4). Brand awareness play key role in consumer’s decision making (5) and high brand awareness will encourage consumers to create a more positive perceived belief of the products (6) Hence, corporate resellers have low awareness for key benefits of this product is one of the problems that cause to low sales at this channel. 4.3. Inappropriate product for Corporate Reseller’s Consumers A product is not suitable when consumers have still not accepted it although they have already bought it to use but do not want to buy it again. Too innovatively and so unacceptably to customers, some new products will cause low sales volume for this new 12 product (7). In addition, based on interview, there are 4/10 corporate resellers mentioned that their consumers do not want to buy this product because it does not meet their demand and it is not necessary to use it compared to regular stapler. According to one of consumers of corporate resellers, they said that this product is not necessary to use with the high price. It is very easy to be lost and it is difficult for the upper level to approve to buy this high price smart stapler. So that one of the problems for low sales at this corporate reseller channel because of inappropriate product. 5. MAIN PROBLEM VALIDATION Based on the data of interviewing 10 corporate resellers that have low sales Double A smart stapler, 3 consumers of corporate reseller, Double A Marketing Manager and Double A Channel Development Manager Representative who is responsible for developing this product, the main problem that caused low sales at Corporate Reseller Channel is that the consumers of corporate resellers has low awareness for Double A smart stapler product. More specifically, among interviewed 10 Corporate Resellers, there are 3/10 (30%) Corporate Resellers did not recommend this product and their consumers also did not ask for this product, so they did not sell it, so there are two issues that Corporate Resellers could not sell this product because they do not introduce Double A smart stapler product and their consumers do not know this new product to ask to buy as well. Other 7/10 (70%) Corporate Resellers introduce this product, only 3/10 (30%) Corporate Resellers can sell this product by introduction but not much as the regular stapler sales volume. 4/10 Corporate Resellers (40%) that introduce this product said that their consumers did not buy this product because they do not need to buy this product with 3 times higher price than regular stapler, they can use regular stapler to staple document as normal. Therefore, the problem that these 4 Corporate Resellers cannot sell Double A smart stapler product because the product is not suitable for their 13 consumers. In order to know what is the main problem, there are 3 Corporate Resellers’ consumers were interviewed. One of consumers who bought this product said that they want to buy multi-sheet stapler product that they are using, they asked their Corporate Reseller and the seller introduced this Double A smart stapler because this seller was out of stock the product that their consumer need at that time. Although the price is higher than current products, this consumer only bought 2 pieces to try. Based on interview information of this consumer, it showed that consumer has demand for the benefits of this Double A smart stapler product, then they ask their suppliers, their suppliers recommend Double A smart stapler product, then they made a decision to buy it. Therefore, acknowledging in advance the needs and benefits of the product from consumers will help increase the sale out volume of this Double A smart stapler. In addition, the other 2 interviewed consumers said that they did not know much about this product, the price was quite high so they did not buy it. Upon further investigation, they answered that in order to buy this high-priced product, the employees of their company first have to propose to buy it and then have to get approval from their manager. They also answered that this product is very good, they can also buy a trial for the company to use. Therefore, although there is introduction from the seller, the consumer still do not buy this product because the price is higher than the current product, they have to submit to the superior for approval and they do not know much about this product as well so they decide to reject to buy this product from the seller. All 3 interviewed consumers found that the product is good, has many useful features so they can buy 1-2 for the company to try instead of the current stapler. Therefore, employees, purchasers and superiors of the company knowing more benefits of this new smart stapler is the most important factor for Corporate Resellers to sell this product. In addition, Double A's Marketing Manager also said that this smart stapler product is new, has many useful features, but the price is quite high compared to the stapler on the market. Communicating the benefits of this product to the Corporate 14 Resellers’ consumers will help consumers to better understand the product in order to increase their decision to buy this product. In conclusion, we can conclude that the main problem that cause to low sales at corporate reseller channel because consumers has low awareness for Double A smart stapler. 6. POTENTAIL CAUSES Double A smart stapler is an innovative product compared to regular stapler products that available on the market. Low awareness for Double A smart stapler at Corporate Reseller’s consumers is the main problem that makes sales volume to be very low. By interviews and literature review, we have 2 causes that lead to low awareness for Double A smart stapler at corporate reseller’s consumers as diagram below: - Cause 1: Low brand recognition of Double A Smart Stapler Product - Cause 2: Low brand recall of Double A Smart Stapler Product