Destructive Discounting Jeff Carter was recently appointed vice president of sales at Marathon Electric, a manufacturer of small engines. Marathon...

Jeff Carter was recently appointed vice president of sales at Marathon Electric, amanufacturer of small engines. Marathon Electric had grown rapidly over recent years, butits profit margins were declining and Jeff was brought in to address the problem.Unfortunately, after three months on the job, he doesn’t like what he is seeing from thecompany’s nine salespeople. The sales force seems focused on closing as many deals aspossible, regardless of whether they provide good solutions for customers. Salespeople arediscounting so much that Marathon’s margins have continued to decrease. Clearly, Jeffwould be in trouble if this continued since this was precisely what he was hired to change.Furthermore, his bonus is based on achieving profit margin objectives.When Jeff talks to the salespeople, they say that they were previously taught to focus onsales volume, not the profitability of the deals. Obviously, Jeff needs to make some changesor his profitability goals will never be met.

Questions

1. What is the main issue in this case?

2. What are the possible causes of the sales force’s pricing behaviors?

3. What should Carter do first?

4. Create a chart that would show the profit effects of discounting.