Pro-Audio Sales Agent Case Study

Case Study: Pro-Audio Sales Agent Program

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Case Study: Pro-Audio Sales Agent Program

After nearly 18 months of experimenting with the Pro-Audio Sales Agent Program, Steve March was pondering the difficult assignment of re-evaluating the Pro-Audio Sales Agent Program.  The program has been extolled by some as “creative” and “pioneering”, and an important effort to stem the tide of discounting that seemed to be harming the overall studio equipment industry.  To others the program was seen as an administrative nightmare that “basically caused the sun to come up in the West, instead of the East.”

Pro-Audio is a manufacturer of electronic sound processing equipment.  Its leading product was an advanced digital reverb unit called PSX-360, which retails for about $12,000.  It was sold primarily to major recording studios and professional musicians throughout the country though an exclusive network of approximately 50 leading professional audio retailers.

In early spring 1998, Steve Marsh began to note some disturbing trends regarding selling activity in the PSX-360’s retail channel.  First, he noticed an increasing dependence on orders from two of PSX’s largest dealers.  One dealer was in Los Angeles and the other in New York, and by April, these two dealers accounted for 70% of the company’s total sales of PSX products.  More troubling was the growing number of complaints from other PSX dealers that they were losing sales to other dealers outside their territories, and often linked the lost sales to heavy discounting being offered by “major dealers in LA and New York”.  In fact, if a customer really wanted a PSX unit, he simply went to the local dealer to get information on the product, and then would call around to other dealers around the country, get the lowest quote and have the unit shipped UPS for arrival in 7-10 days.

This was troubling to Pro-Audio for a number of reasons:  First, it meant that a majority of PSX...