CASE 5

Hyde-Phillip Chemical
Company
Alternative Forms of Sales Representation

Michael Claxton, a recent marketing graduate of a well-known college, has been assigned
the task of evaluating Hyde-Phillip Chemical Company’s methods of selling the firm’s
products. Hyde-Phillip currently utilizes a mix of salespersons to present its products to
current and potential users: (1) company sales force, (2) industrial distributors, and
(3) manufacturers’ agents. While this mix of channels is somewhat unusual in this
industry, it reflects the orientation of management over time as to the relative values of
alternative forms of sales representation. Claxton’s challenge is to review the data that
have been gathered on the three types of channels, determine if additional information is
needed, and make recommendations as to what changes, if any, should be made in the
firm’s approach to sales representation.

Information on the Company

Hyde-Phillip was formed in the early 1960s through the merger of Hyde Industrial Chemicals
and Phillip Laboratories. Both firms had a broad range of experience in the development
and production of certain types of chemicals and related supplies for a variety of industrial
users. While the two firms had a few overlapping product lines, each brought to the merger
some exclusive product offerings. The resulting combination of the two firms yielded a
new organization capable of marketing a complete line of chemicals for industrial use.
Prior to the merger, Hyde Industrial Chemicals had utilized a group of industrial dis-
tributors (merchant wholesalers) to market its products. Phillip Laboratories, on the
other hand, had several manufacturers’ agents (agent wholesalers) who sold its product
offering. The new firm, after the merger, retained some of the industrial distributors and
some of the manufacturing agents and then began to develop its own sales force.
Today, Hyde-Phillip serves 30 sales territories in states east of the Mississippi through
its own sales force of 50 individuals (6 women and 44 men), 9 industrial distributors,
and 9 manufacturers’ agents. The 50 salespeople are about evenly allocated across 12 of
the sales territories. Each of the industrial distributors and manufacturers’ agents has ex-
clusive selling rights in one of the 18 remaining sales territories. Individual distributors
and agents have from 5 to 30 people working for them and many represent other non-
competing manufacturers. The 30 sales territories were originally established to represent
areas of approximately equal sales potential for Hyde-Phillip’s products.
Many types of sales support are made available to each sales territory by the company. In-
dividual managers of the territories have the option of using or not using each type of sales
support. Sales support items currently available include (1) a variety of descriptive brochures
to supplement the information given in the firm’s product catalog, (2) study programs with
DVDs and online access to Hyde-Phillip’s Web site to enable sales representatives to be
more familiar with the firm’s products as well as current market situations and developments,
544
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 Case 5: Hyde-Phillip Chemical Company 545

(3) a program to provide generous product samples to potential customers for test purposes,
and (4) direct-mail and e-mail blast promotions aimed at prospective customers to solicit in-
quiries for descriptive materials and product samples.

Data on Sales Territories

As a first step in beginning his analysis, Claxton asked his assistant to compile the avail-
able information on each of the 30 sales territories. This information is presented in
coded form in Exhibit 1.

EX HIBIT 1 Available
Data on Sales Territories Territory Level of Type of Use of Sales Geographic
Number Sales Representation Support Location
1 2 1 2 3
2 3 1 3 3
3 2 2 1 1
4 1 1 1 1
5 2 3 1 1
6 2 1 2 1
7 3 3 2 3
8 1 2 1 1
9 2 1 2 2
10 2 1 2 3
11 1 2 1 1
12 1 1 1 2
13 2 2 2 2
14 2 3 2 1
15 1 1 2 3
16 2 3 2 2
17 2 1 3 1
18 1 2 1 2
19 2 3 2 2
20 3 1 3 2
21 1 3 1 3
22 2 2 1 3
23 3 3 1 1
24 3 1 3 2
25 3 2 3 1
26 1 2 1 2
27 2 1 2 2
28 1 2 1 3
29 2 3 3 3
30 2 3 2 3

Codes: Level of sales: 1 ¼ over $2 million; 2 ¼ $1$2 million; 3 ¼ under $1 million

Type of representation: 1 ¼ company sales force; 2 ¼ industrial distributor; 3 ¼ manufacturers’ agent
Use of sales support: 1 ¼ extensive user; 2 ¼ moderate user; 3 ¼ light user
Geographic location: 1 ¼ Northern; 2 ¼ Southern; 3 ¼ Eastern

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546 Part 5: Cases

In terms of level of sales, 9 territories have annual sales in excess of $2 million, 15

have sales between $1 and $2 million, and 6 have sales less than $1 million. As already
indicated, in 12 of the territories the firm is represented by its own sales force, and in-
dustrial distributors and manufacturers’ agents each represent the company in 9
territories.
Based on estimates provided by the sales support department, 12 of the territories
make extensive use of the available sales support programs, 12 are moderate users, and
6 are light users. Each of the firm’s sales territories is also divided into one of three geo-
graphic divisions: Northern, Southern, or Eastern. As indicated in Exhibit 1, each of
these geographic locations includes 10 sales territories.

Initial Analysis
Using the information in Exhibit 1, Claxton constructed the cross-tabulation of sales ver-
sus type of representation shown in Exhibit 2. He first set up the cross-tabulation using
raw numbers and then calculated the conditional probabilities for each row and column.
As seen in part (B) of Exhibit 2, 55.6 percent of Hyde-Phillip’s territories with sales
over $2 million were served by industrial distributors. Only 11.1 percent of the largest
sales territories were represented by manufacturers’ agents, and 33.3 percent were
served by the company’s sales force. Stated differently, as shown in part (C) of Exhibit 2,

EXH IB I T 2
Cross-Tabulation of Level Company Industrial Manufacturers’
of Sales versus Type of Sales Force Distributor Agent
Representation (1) (2) (3) Totals (A)
Level of Sales Over $2 million 3 5 1 9
$1–2 million 6 3 6 15
Under $1 million 3 1 2 6
Totals 12 9 9 30

Company Industrial Manufacturers’

Sales Force Distributor Agent
(1) (2) (3) Totals (B)
Level of Sales Over $2 million 33.3 55.6 11.1 100.0
$1–2 million 40.0 20.0 40.0 100.0
Under $1 million 50.0 16.7 33.3 100.0
Totals 40.0 30.0 30.0 100.0%

Company Industrial Manufacturers’

Sales Force Distributor Agent
(1) (2) (3) Totals (C)
Level of Sales Over $2 million 25.0 55.6 11.1 30.0
$1–2 million 50.0 33.3 66.7 50.0
Under $1 million 25.0 11.1 22.2 20.0
Totals 100.0 100.0 100.0 100.0%
Notes: (A) 5 Raw numbers
(B) 5 Row conditional probabilities
(C) 5 Column conditional probabilities

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 Case 5: Hyde-Phillip Chemical Company 547

25.0 percent of territories served by the company’s sales force had sales over $2 million,
while 55.6 percent of the industrial distributors and 11.1 percent of the manufacturers’
agents served territories with sales over $2 million.
Claxton’s initial reaction was that the firm should consider replacing part of its own
sales force and the manufacturers’ agents with more industrial distributors. He was con-
cerned, however, with what other variables should be taken into account to more fully
analyze and evaluate Hyde-Phillip’s current approach to sales representation.

Discussion Question
1. What changes, if any, should Hyde-Phillip
Chemical Company make in its approach to sales
representation?

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Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.