Harvard Business School
Rev. February 9, 1998.
WESCO Distribution, Inc.
Late in June 1997, Jim Piraino, VP marketing for WESCO Distribution, Inc. (see Exhibit 1), was preparing for a yearly review meeting with his CEO Roy Haley. At the top of the agenda was the performance of the National Accounts (NA) program during the first half of 1997 (see Exhibit 2). Haley had ambitious plans for WESCO over the next five years. He had charted out a course that called for an annual growth rate of 6% to 8% in sales, and more important, an annual increase of 12% to 16% in profitability. "In 1996, we were a $2.2 billion company with an EBIT of around 3%. I want us to be a $3 billion company with an EBIT of over 5% by the year 2000. This
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Once the NA agreement was signed, the customer plant, which generated only $50,000 per year in sales and which was located two hours away from WESCO’s branch, had demanded semi-monthly sales calls. Whitney described his situation bluntly: They may be a good customer for the company. But from my perspective, they and other NA customers demand a lot of service that is not commensurate with their sales volume — either current or potential. Unless compelled, I wouldn’t call on NA customers in my region even without the long commute they usually require. The opportunity costs of serving these customers are way too high — both for me and for the branch. I would rather spend my time selling to other customers. The third conversation that Piraino considered was with Larry Worthington, a WESCO branch manager whose branch had traditionally obtained a major portion of its sales from electrical contractors. In order to serve recently acquired NA customers, the branch had been forced to change the way it managed its business. Worthington was concerned: “We’re investing an awful lot of resources to serve NA customers, and it’s tempting our contractor customers to abandon u s.” Piraino realized that he needed to develop a clear plan for the upcoming meeting with Haley. We must isolate the root cause of the NA program shortfall. If we are trying to market a new way of doing things that our customers don't really understand or appreciate, then it's time to make some hard…