UNIT-2

Sales Organization and Relationship:

Sales organisation consists of human beings or persons working together for the
effective marketing of products manufactured by the firm or the products
purchased for resale. Sales organisation co-ordinates the efforts of members of a
group to bring about a desirable result. It provides an efficient, economic and
flexible administrative set up to ensure timely movement of products from the
warehouse to the ultimate consumer. Thus it provides satisfactory job to buyers
and sellers.

A sales organisation has a number of departments. It has a planned and well co-
ordinated structure. It performs the functions of planning, organizing and
controlling marketing and distribution of products. Sales organisation is a
foundation for effective sales planning and sales policies. Systematic execution of
plans and policies and programmes of a sales organisation control all the sales
activities. As such it ensures maximum efficiency and profitability without losing
consumer service and satisfaction.

According to Boiling, “A good sales organisation is one wherein the functions or

departments have each been carefully planned and co-ordinated towards the
objective of putting the product in the hands of the consumers—the whole effort
being efficiently supervised and managed, so that each function is carried out in
the desired manner.”

Need for a Sales Organisation:

“A sales organisation is like a power station sending out energy, which is devoted
to the advertising and selling of particular lines; and there is a tremendous waste of
energy between the power station and the points where it reaches the consumers.
Therefore, there arises the necessity of organizing the sales department.”

So long as the firm is a small one, there is no need for sales organisation, as the
proprietor himself can sell all the output or in certain cases, he is assisted by one or
two salesmen, under his direct control. But when the firm or the business itself
expands, because of extension of markets, production in large-scale, competitive
market etc., the need for a sales organisation is felt.

The need arises because of the following factors:

1. Production in anticipation of demand, which must be sold.

2. To create demand for the products through efficient salesmen.

3. Execution of orders without delay.

4. Satisfactory action against complaints from customers.

5. Collection of credit sales.

6. Keeping enough stock by looking at the future demand.

7. Maximum contribution to profit.

8. To enforce proper supervision of sales-force.

9. To divide and fix authority among the subordinates.

10. To locate responsibility.

Importance of Sales Organisation:

A sales organisation is the mechanism through which a sales manager’s philosophy
is translated into action. The sales organisation provides the vehicle for making
decisions on planning, organisation, selection and training of salesmen, their
motivation, directing and controlling them. It also provides vehicle through which
these decisions are implemented.

“A business organisation is like a home. It has characteristic atmosphere. In some

homes the head of the household and all its members are vitally concerned about
religion, politics or some other interest—the occupations of the individual
members being only of minor interest. In other homes where the personality of the
head of the household dominates the activities and spirit of the members the
opposite occurs. Like any group a business organisation has its own culture,
traditions, and to some extent its own language and climate.” —Hepner
“A sale organisation is like a power-station sending out energy which is devoted to
the advertising and selling of particular lines and there is a tremendous waste of
energy between the power station and the points where it reaches the consumers.
Therefore, there arises the necessity of organizing the sales department.” —Boiling

“Sales are the life blood of business,” Sales organisation is part and parcel of a
business firm. All the departments are carefully plaited in a good sales
organisation.

The importance of the sales organisation, in brief, is:

1. Blood circulation of a human body keeps a man alive and in sound health.
Similarly the sales strengthen the organisation. The more is the sales, the more is
the profit.

2. Increasing sales means progress of the firm. If the sales fall down, it is fatal,
because sales are the life blood of the business, as the blood is to a human body.

3. Consumers are the kings. Manufacturers produce goods for consumers. They
must be satisfied in the market which is full of competitors with products for
similar use. So suitable products are necessary, and for this an organisation is
necessary.

4. To move the products from the factory to the consumers, the sales organisation
is necessary— demand creation.

5. To handle the orders promptly i.e., from the stages of enquiry to order at full
satisfaction to consumers.

6. Collection of dues is also important. Several drops make an ocean; at the same
time milking cows should not be neglected.

7. To keep good public relations by redressing the complaints if any, and to create
a good image of the firm.

Functions of a Sales Organisation:

Modem sales organisation is not only profit-oriented but also customer-oriented.

The following are the important functions of a sales organisation:

1. Analysis of markets thoroughly, including product and market research.

2. Adoption of a selfishly sound but defensible sales policy.

3. Accurate market or sales forecasting and planning the sales campaign, based on
relevant data.

4. Deciding about prices and terms of sales and pricing policies.

5. Packaging for the consumer wants a container which will satisfy his desire for
attractive appearance, keeping qualities, utility, and correct price and many other
factors.

6. Branding the product.

7. Deciding the channels of distribution.

8. Selection, training and control of salesmen and fixing their remuneration.

9. Allocation of Territory and quota-setting.

10. Sales programmers and sales promotion activities.

11. Arranging for advertising and publicity.

12. Order preparation and office recording.

13. Preparation of customer’s record cards.

14. Scrutiny and recording of reports.

15. Study of statistical records and returns.

16. Maintenance of salesmen’s records.

Structure of the Sales Organisation:

The following factors are to be taken into consideration while designing the
structure of a sales organisation:
1. Nature of the market
2. Sales policies of the enterprise

3. Nature of the product

4. Number of products

5. Availability of financial resources

6. Level of distribution system

7. Size of the company

8. Price of the product

9. Ability of the professionals

10. Position of competitors’ Products.

Types of Sales Organizations

1) Line Sales Organization

A Line Sales Organization is one of the simplest forms where every individual is
held accountable for their actions and decisions.

It is the oldest and most basic sales organizational structure, and it is commonly
employed by smaller firms and those with a limited number of sales personnel.
This structure is often used in companies that operate within a specific geographic
area or focus on a narrow product line. In the line organization, the chain of
command flows from top-level sales executives to their subordinates.

In organizations, executives have line authority, meaning subordinates report to

one person at the next higher level. This creates a clear chain of responsibility,
where decision-making and action-taking occur. Authority flows vertically, and
individuals on each level are independent of peers.
Some of the key features of Line Sales Organization are-

• Direct line of communication

• Clearly defined responsibility and authority
• Easy and quick decision-making
• Ideal for small businesses with a narrow product line
• Limited specialization

2) Line and Staff Sales Organization

This structure combines the benefits of Line Sales and specialized staff to support
and advise.

The line and staff sales department is commonly found in large and medium-sized
firms. It employs many sales personnel and sells a wide range of products across
large geographic areas. Unlike the line organization, the line and staff organization
provides the top sales executive with a team of specialists. These experts specialize
in dealer and distributor relations, sales analysis, organization, personnel, planning,
promotion, training, service, traffic, warehousing, and related fields.

The key features of Line and Staff Sales Organization are-

• Combines traditional line organization with staff specialists

• A clear chain of communication
• Specialized teams to provide input on sales strategies and tactics
• Flexible decision-making process
• Increased specialization in various areas
• The presence of specialized staff for advice
• More balanced decision-making
• Ideal for larger businesses with diverse product lines
• Improved coordination and control, etc

3) Functional Sales Organization

Functional Sales Organization focuses on dividing the team based on their area of
expertise.
This represents the complete embodiment of the work specialization principle.
Within this framework, individuals, including executives and salespeople, are
assigned specific tasks and responsibilities to carry out.

This particular sales organizational structure is designed to optimize the

performance of executives and salespeople by assigning duties based on their
individual capacities. However, conflicts can occasionally arise when effective
coordination fails.

The key features of a Functional Sales Organization are-

• Division of sales team members according to expertise

• Improved efficiency and coordination
• Appropriate specialization in various areas
• Improved collaboration and collective decision making
• Decreased chances for conflicts
• Increased customer satisfaction
• Departments based on function
• In-depth expertise in each function
• Streamlined operations
• Ideal for large-scale organizations
• Possibility of functional silos, etc.

4) Committee Sales Organization

Committee Sales Organizational structures are generally employed when decisions

require collective wisdom and democratic leadership by having proper sales team
structures.

This sales organization structure operates without rigid rules, but to enhance the
firm’s performance and sales process, a committee is established comprising sales
executives, sales teams, or a combination of both.

This helps in making complicated decisions and setting goals. This kind of setup is
particularly useful when the sales team has to work on a project or have a
discussion with clients.

The key features of the Committee Sales Organization are-

 • Collective decision-making
• Shared responsibility
• Ideal for complex projects
• Encourages democratic leadership
• Potential for the slower decision-making process
• Possibility of ineffective delegation
• Lower efficiency in routine tasks, etc.

What Is A Sales Organization Structure?

A sales organization structure is the framework and hierarchy of roles that define
how a company’s sales team operates. It includes the various positions within the
sales team, such as sales managers, field representatives, inside reps, and other
members of the sales force. A well-structured organization allows teams to work
together effectively and maximize their success.

In addition to defining roles, a sales organization structure also helps define the
strategies and processes that the team follows. This includes the type of products or
services sold, how pricing is determined, how leads are generated, and the methods
used to close deals. The structure should provide clear guidance on these topics as
well as any other policies that need to be adhered to.

By having a clear and defined structure, teams can collaborate more effectively and
align their efforts with the company’s goals. This helps to ensure that everyone is
working towards the same objective, rather than competing against each other. It
also helps to establish trust within the team, as members will understand how their
roles fit into the bigger picture.

Structures of Sales Organizations

1) Geographical Structure

The geographical structure organizes sales reps based on specific geographic

regions. In essence, a rep is responsible for all customers and prospects within their
assigned location. This is particularly beneficial for organizations with widespread
operations, facilitating an understanding of local market conditions, customer
preferences, and cultural nuances.
2) Product Specialization Structure

In a product specialization structure, sales reps specialize in selling specific

products or product lines. A product sales force structure allows them to gain
extensive knowledge about the product, its applications, and its target market. The
advantage here lies in the ability to provide customers with detailed information
and insights, thereby enhancing customers’ trust and loyalty toward the brand.

3) Customer-based Structures (Industry-Based Structure)

The industry-based structure classifies sales representatives based on the industry

or sector of their clients. It’s ideal for businesses whose products or services cater
to specific industries. By understanding the inner workings, challenges, and needs
of an industry, a sales rep can tailor their approach and sales pitch effectively,
leading to improved customer relationships and sales performance.

4) Customer-based Structures (Customer Account-Size Structure)

The customer account-size structure organizes sales teams based on the size of
their customer accounts. Reps may be assigned to handle small businesses,
medium-sized companies, or large enterprises. This structure enables reps to
understand the unique needs, challenges, and decision-making processes of
businesses of different scales, thereby allowing them to offer the most suitable
products or services and enhancing customer satisfaction.

Sales Department External Relations:

Managing external relations for a sales department involves fostering relationships
with clients, partners, suppliers, and other stakeholders to enhance collaboration,
trust, and ultimately drive sales. This includes effective communication,
negotiation, and maintaining a positive brand image.

The sales department's relationship with external stakeholders is pivotal for the
success of the business. Here's how they interact with various external entities:
1. Customers: The primary focus of the sales department is to engage with
customers. They handle inquiries, provide information about products or services,
negotiate deals, and ensure customer satisfaction post-sales. Building trust and
rapport with customers is crucial for repeat business and referrals.

2. Suppliers: Sales departments rely on suppliers to provide the products or

services they sell. Maintaining positive relationships with suppliers is essential for
ensuring timely deliveries, favorable terms, and resolving any issues that may arise
in the supply chain.

3. Partners and Distributors: Sales departments often work with partners or

distributors to reach new markets or expand their product offerings. Collaborating
effectively with these external entities through clear communication, joint
marketing efforts, and mutually beneficial agreements can help drive sales growth.

4. Industry Associations and Trade Organizations: Engaging with industry

associations and trade organizations provides opportunities for networking, staying
updated on industry trends, and accessing resources or training that can benefit the
sales team.

5. Regulatory Bodies and Government Agencies: Sales departments need to

comply with various regulations and standards relevant to their industry.
Maintaining open communication and staying informed about regulatory changes
ensures compliance and avoids potential legal issues.

6. Media and Public Relations: Sales departments may work closely with the
marketing and public relations teams to manage the company's public image and
promote products or services through press releases, media interviews, and other
communication channels.
7. Investors and Shareholders: While primarily concerned with revenue generation,
the sales department's performance can also impact investor confidence and
shareholder value. Providing transparent reports on sales performance and growth
strategies can help maintain trust with investors.

In essence, the sales department's relationships with external stakeholders are

multifaceted and require effective communication, collaboration, and a customer-
centric approach to drive sales and achieve business objectives.

Distributive Network Relations:

Distributive network relations refer to the relationships between different entities
within a distribution network. A distribution network consists of various
intermediaries, such as wholesalers, retailers, agents, and logistics providers,
involved in the movement of products or services from the manufacturer to the end
consumer.

Here's an explanation of distributive network relations:

1. Manufacturer-Wholesaler Relations: Manufacturers often sell their products to

wholesalers, who then distribute them to retailers or other intermediaries. The
relationship between manufacturers and wholesalers involves negotiations on
pricing, terms, and quantities, as well as coordination of inventory and logistics.

2. Wholesaler-Retailer Relations: Wholesalers typically sell products in bulk to

retailers, who then sell them to individual consumers. The relationship between
wholesalers and retailers involves ensuring timely delivery, managing inventory
levels, and providing support such as marketing materials or promotional
assistance.

3. Manufacturer-Retailer Relations: Manufacturers may also sell products directly

to retailers, bypassing wholesalers. This relationship involves negotiations on
pricing, promotions, and product placement within retail stores. Manufacturers
may provide support to retailers in terms of marketing, training, or co-branding
efforts.

4. Agent-Distributor Relations: In some cases, manufacturers or suppliers may use

agents or distributors to represent their products in specific markets or regions.
Agents or distributors act as intermediaries between the manufacturer and end
customers, handling sales, marketing, and customer support activities.

5. Logistics Provider-Customer Relations: Logistics providers, such as

transportation companies or fulfillment centers, play a crucial role in the
distribution network by ensuring timely and efficient delivery of products to
customers. The relationship between logistics providers and customers involves
coordinating shipments, tracking orders, and managing any issues or delays that
may arise during transportation.

6. Franchisor-Franchisee Relations: In franchise-based distribution networks,

franchisors grant franchisees the right to sell their products or services under a
specific brand name and business model. The relationship between franchisors and
franchisees involves providing training, support, and marketing resources to ensure
consistency in branding and operations across different locations.

Overall, distributive network relations are essential for ensuring smooth operations
and effective distribution of products or services from manufacturers to end
consumers. Strong relationships built on trust, communication, and collaboration
contribute to the success of the distribution network as a whole.