Spectrum Brands: Should it Merge Its Sales Staff?

Spectrum Brands is a highly diversified company, encompassing consumer batteries, lawn and garden care products, specialty pet supplies, and shaving and grooming products. There is no single consumer profile for all of these products; a wide range of demographics are encompassed although overall Spectrum capitalizes upon a strategy of a broad market outreach with relatively low prices, versus niche marketing. Consumers usually wish to purchase the majority of products issued by Spectrum at the lowest price possible.

However, solely competing on price is not a wise idea given that price wars can drive product pricing below what is profitable, even for a company able to operate on a large economy of scale such as Spectrum. Additionally, to distinguish it from generics and cultivate some kind of brand loyalty is wise: customers should ideally believe that all the products give them some added value in terms of quality, durability, and other desirable features.

Formerly as famous the Rayovac Corporation, the company is attempting to capitalize upon its synergies while still remaining true within each product segment to what consumers have liked and been loyal to for many years. The fact that the company is newly merged with other organizations is an additional challenge for Spectrum. This is the central dilemma of Bob Falconi, vice-president of sales and marketing for the Canadian division.

"Falconi wanted to ensure, despite the differences amongst the diverse groups, that he still maintained a team that would effectively and efficiently continue to increase the sales of each business unit" (Falconi 2007:1). However, Falconi remains unsure if changing the current sales structure is preferable or retaining the structure, given the successes it has generated in the past. The company has attempted to accrue value through economies of scale through strategic acquisitions.

Although the conventional wisdom is that mergers often fail, the organization believed that these acquisitions made sense in several critical respects. First, they would allow the organization "to leverage global distribution channels, purchasing power and operational processes. These mergers provided the company with an extended brand portfolio. This allowed all of the brands to access a number of new retailers where they had not previously been able to gain shelf space. In turn, this increased the ability for each brand to compete within its given markets.

Spectrum became the global leader in aquatic supplies; the number two player in the lawn and garden industry, the household insect control market," and pet supplies as a result of several mergers with smaller entities (Falconi 2007:5). The company's diversification also allowed it to negotiate the challenges of dealing with products with highly seasonal demand. Batteries are at peak demand during Christmas, when people give many personal electronic products; lawn and garden supplies are most desirable in the spring; aquatic supplies in the summer.

The current sales team is organized by distribution channel and by geographic area depending on the product and the location (Falconi 2007:9). Falconi must find a way to reorganize the sales staff for the newly merged entity to capitalize upon its current strengths while still leveraging the benefits from the merger. For example, in Canada, the Rayovac/Remington sales force is organized by distribution channel: "the eight sales representatives serving this division were responsible for selling all products under both the Rayovac and Remington brand names to their assigned retailers" (Falconi 2007:9).

But what worked for Rayovac and Remington did not work for all of the brands under the Spectrum umbrella. For example, Nu-Gro "had been struggling as the company's operations and product offerings were extremely unfocused" despite having a similar organizational profile in terms of its sales force (Falconi 2007:9).

For Tetra/United Pet Group, while "the sales force for this division in the United States was regionally-based so that each sales rep could ensure an ample supply of product for their distributors and dealers," in Canada sales for the division were handled by distributors" (Falconi 2007:10-11). Thus even within brands, there was bifurcation in terms of how sales were handled. Sales managers were responsible for managing the representatives in their specific geographic regions.

Within Canada, Falconi determined he would "organize around three regions: the West, Ontario and the East, with one manager responsible for the sales reps within each region" (Falconi 2007:11). There is no standard organization for sales teams for the industry within which the Spectrum organization operates: for example, Philips, the producer of Norelco, ensured that representatives of that brand were exclusively responsible for selling only Norelco, while Braun sales reps only sold Braun, and Duracell venders only sold that particular battery brand.

In contrast, "both Scotts and CGPC operated their sales divisions in a different manner. Their sales forces were organized by product category, but covered all retail channels. Thus, they had specific sales reps for categories such as fertilizers, soils and seeds, insect control products, and pet supplies (CGPC only), but each sales rep would service clients across multiple channels" (Falconi 2007:11). The value of sales reps knowing their product extremely well had to be weighed against the value of a consistent, cross-brand message.

The disadvantage of having category-based reps across multiple channels is a possible dilution of the ability of each rep to focus on the unique characteristics of each brand and region; the advantage is that consolidation is possible vs. segmenting the sales force on a brand-by-brand basis.

From Spectrum's perspective, while separate sales forces would ensure reps had the maximum degree of expertise on each brand, "maintain the momentum they had already generated for their product lines" and allow them to capitalize upon the knowledge they had gained over the years, this would not take advantage of the cost reductions and desired symmetries Spectrum wished to gain from the merger (Falconi 2011:12).

A merged sales force would be cheaper, smaller, and more efficient, allowing each representative to "be responsible for becoming an expert on all product lines and selling every brand to their specified customers" (Falconi 2011:12). It is also expected that a merged force would be better able to balance the seasonal shifts.