Business Writing Sample #1: Case Study


By Mike Johnson
2/93 Convenience Store Decisions
( Trade publication for the convenience store industry)

"PAY PHONES: HANDLE WITH CARE"


Fiddling with telephone commissions is a lot like handling C02 tanks. There's something in both you can't see, you don't quite understand how they work and, if handled improperly, can blow up in your face.

Five years ago, Kwik Trip, a 231-store chain based in La Crosse, Wisconsin, disconnected its local telephone companies, switching to a carrier who promised to ring up 40% commissions vs. the norm of 15% to 30%.

Ka-Boom!

"It seemed like a good idea at the time," says Garry Hayes, the chain's director of operations. "But in reality, this phone carrier was overcharging our customers and giving us a bad name."

"It's not that they were doing anything illegal," he adds. "They just charged customers the highest legal rate, no matter when the call was made -- which ended up reflecting on us."

To make matters worse, complaints didn't filter into headquarters until the chain had switched all 300 of its phones -- and signed a five-year contract.

One of the first customers to complain of high bills was Todd Roberge, Kwik Trip's own direct store delivery manager. "I was overcharged by our own phones. I've learned a lot in the past five years," he admits.

Look for reliability


Kwik Trip operates stores in Wisconsin, Minnesota and Iowa. Roberge says they deal with "45 or so" different local phone companies, with local charges that vary from 25 cents, 20 cents, and until 18 months ago, even 10 cents. Adding to the confusion are phone companies' varying commission rates and four different commission sources: coin and box, local, short long distance (Intra-LATA) and long distance (Inter-LATA). It's easy to picture Mr. Roberge with a severe case of red ear.

One of the local companies that Kwik Trip is returning to is GTE. Becky Bernhagen, the GTE Account Executive who handles Kwik Trip, stresses reliability and consistency. "If it were me, I wouldn't want to run the telephone business," she says. "I'd want my vendor to run the telephone business for me, in my best interest."

Roberge is all for that. "We see pay phones first as a customer convenience, and secondly as a revenue generator," he says. He's discovered that with GTE, phone service is hassle-free to both customers and employees.

Negotiable commissions


Other than the occasional cleaning and customer change requests, Kwik Trip employees are not involved with the pay phones. Kwik Trip has 12 pay phones on-line with GTE and is scheduled to increase the number to 42 as old contracts expire. Roberge has found that commissions in the phone business are negotiable. "The more phones you have, the better chance you have for a good commission structure," he says.

Carlton Baker, GTE's manager of public market strategy agrees. "The commission structure is determined by the strategic importance of the account. A lot of it depends on revenue," he says.

Most Kwik Trip stores are on GTE's "ABC" program. 'A' stores do more than $150 per month in sales and receive free equipment placement and service plus 20% of all revenues. 'B' stores do $100-$150 and receive the equipment package and no revenues. 'C' stores, of which Kwik Trip only has one, do less than $100 per month, receive no commissions and must pay an installation charge of $90 and a monthly service fee of $36 to $42. Most Kwik Trips are in the 'A' category.

Garry Hayes recommends caution in assessing phone commissions. "In our stores without gas, telephone commissions are less than .01% of sales. "We certainly don't want to lose customers over a pay phone."

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