Sales Organization and Staffing Sales Force

By Rakhi Dutta

Learning Objectives

To understand the concepts of the sales organisation, and the basic types of sales organisations To know specialization within the sales organisation, and alternative organizational approaches for major accounts

To determine the size of the salesforce by using various methods

Concepts of Sales Organisation

A sales organisation assists the sales manager to carry out needed tasks efficiently and effectively to achieve results The basic concepts of the sales organisation are: Degree of centralisation Degree of specialisation Line or staff positions Market orientation Effective co-ordination

Basic Types of Sales Organisations

Sales organisations are generally classified into four basic types: Line Organisation Line and staff organisation Functional organisation Horizontal organisation We shall discuss main characteristics, advantages, and disadvantages of each type of sales organisation

Line Organisation
Head Marketing Sales Manager

Area Sales Manager1

Area Sales Manager2

Area Sales Manager3

Area Sales Manager4

salespeople salespeople salespeople salespeople

Characteristics: All managers have line authority to direct and control subordinates. Used in small firms / departments Advantages: Simple organisation, clear authority, quick decisions, low cost Disadvantages: No support to line managers from subordinates who have specialised knowledge / skills. Less time for planning / analysis Example: Encyclopedia Britannica(India) Pvt. Ltd.- A junior employee in a particular dept. receives order from and reports to his boss only thus there is no scope for confusion. EB India is a very small organization with a straight reporting structure

Line and Staff Organisation

Head-Marketing

Marketing Research Manager

Sales Manager

Promotional Manager

Customer Service Manager

Area Sales Manager-1

Area Sales Manager-1

Area Sales Manager-1

Salespeople

Salespeople

Salespeople

Characteristics: Specialist staff managers are available for senior marketing / sales managers. Staff managers role is to assist / advise line managers. Used in medium and large size organisations
Advantages: Better marketing decisions, superior sales performance

Disadvantages: High cost and coordination, slower decision making, conflict may arise if staff managers role is not clear

Functional Organisation
Head-Marketing

Marketing Research Manager

Sales Manager

Promotional Manager

Customer Service Manager

Area Sales Manager #4

Salespeople

Characteristics: Each functional specialist has line responsibility over salespeople. Used by a large firm with many products / market segments.

Advantages: Qualified specialists guide salesforce, simple to administer

Disadvantage: confusion due to more managers giving orders to salesforce, marketing head has tough time co-ordinating the functional heads

Horizontal Organisation
Research & Design Team: Customer Research Product / Service Design

Operations Team: Production / Operations Quality Assurance Systems Engineering

Planning Team: Strategic Planning Accounts, Finance HR, Administration Chief Operation Officer

Customer Support Team: Information Service Training

Customer Satisfaction Team: Sales & Marketing Pricing, Promotion Channels, Logistics

Characteristics: Removes management levels & departmental boundaries. Except planning team, all others are members of crossfunctional teams. Used by firms having partnering relationships with customers. Advantages: Reduction in supervision, unnecessary tasks, & cost; Improved efficiency and customer responses. Example: Motorola and General Electric

Specialisation within Sales Organisation

Needed to increase effectiveness of salesforce Done by expanding basic sales organisation Basis of specialisation Geography Type of product Market Combination of above Criteria for selection (1) nature of product, (2) salesforce abilities, (3) demands of selling job, (4) customer and market facts

Geographic Specialisation
Head-Marketing

Marketing Research Manager

General Sales Manager

Promotion Manager

Customer Service Manager

Branch Sales Manager-1

Branch Sales Manager-2

Branch Sales Manager-3

Branch Sales Manager-4

Salespeople

Salespeople

Salespeople

Salespeople

Characteristics: salespeople, assigned geographic areas, are responsible for all selling activities to all customers within assigned areas. Branch sales managers adjust marketing plan to local needs Advantages: Better market coverage and customer service, more control over salesforce, quick response to local conditions & competition Disadvantages: Limited specialisation of marketing tasks. Hence, it is combined with product / market sales organisation

Product Specialisation

Used when the company has many products and / or brands Two types of product specialisation
(x). Sales organisation with product specialised salesforce (y). Sales organisation with product managers as staff specialists
Head-Marketing

Marketing Research Manager

General Sales Manager

Promotion Manager

Sales Training Manager

Area Sales Managers Product Group A Salespeople Product Gr. A

Area Sales Managers Product Group B Salespeople Product Gr. B

Fig. x Sales Organisation with product specialised salesforce

In fig. x: Characteristics: Salespeople in each product group sell only the products in that group Advantage: Each product gets specialised attention from the salesforce Disadvantage: Sometimes, more salespeople contact the same customer, resulting in customer dissatisfaction and higher cost

Product Specialisation (Continued)

Head-Marketing

Marketing Research Manager

Promotion Manager

General Sales Manager Area Sales Managers

Product Manager Product Gr. A

Product Manager Product Gr. B

Salespeople

Fig. y Sales Organisation with Product Managers as Staff Specialists In fig. y: Characteristics: Each product manager plans and implements marketing plan, for a product group Advantage: Corrects the problem of duplication calls on a customer by salespeople Disadvantage: Lack of product specialisation by salespeople Example: Proctor and Gamble-The product managers are moving from managing a toothpaste brand(oral B) to managing toothpaste category (category management) to managing mouth care.

Product Specialisation (Continued)

Head-Marketing

Marketing Research Manager

Promotion Manager

General Sales Manager Area Sales Managers

Product Manager Product Gr. A

Product Manager Product Gr. B

Salespeople

Fig. y Sales Organisation with Product Managers as Staff Specialists In fig. y: Characteristics: Each product manager plans and implements marketing plan, for a product group Advantage: Corrects the problem of duplication calls on a customer by salespeople Disadvantage: Lack of product specialisation by salespeople

Example of Product Sales Organization

President (Marketing)
Product Manager (A) Manager (Sales) Product Manager (B)
Manager (Training)
Manager ( Promotion)

Manager (Sales)

Manager (Training)

Manager ( Promotion)

Godrej has 25 divisions selling diff. kinds of products-locks to computer terminals and office equipment, it is difficult for the salesmen to know about all product lines. This type of design is also followed by firms in high-tech sales market. This design is expensive to maintain but customer satisfaction levels are high.

Market Specialisation
General Sales Manager

Sales ManagerInternationalMarkets

Sales ManagerCommercial

Sales ManagerGovernment

Sales ManagerConsumer Markets

Area Sales Mgrs International

Area Sales ManagerCommercial

Area Sales ManagerGovernment

Area Sales MgrsConsumer Markets

Sales Executives

Salespeople

Salespeople

Salespeople

Characteristics: Desirable when customers are classified by type, user industry, or channel. Salespeople carry out all activities for all products only for specific customer groups Advantages: Meets needs of specific customer groups, implements customercentred philosophy of the company, easy to carry out customer profitability analysis and varied service delivery Disadvantages: Geographic duplication, high cost Example: Crompton Greaves and Xerox have moved from product groups

Combination Sales Organisation

Director Sales & Marketing

General Manager Sales - North

General Manager Sales - East

General Manager Sales - West

General Manager Sales - South

Regional Sales Mgr. Govt.

Regional Sales Mgr. - Commercial

Regional Sales Mgr. - Dealers

Salespeople

Salespeople

Salespeople

Characteristics: Many firms use some combination of specialisation organisations, called hybrid or combination sales organisation, with a view to minimise disadvantages and maximise advantages of specialisation organisations Figure above shows combination of geographic and market specialisations

Alternatives for Major Accounts

Major accounts / customers are called by various names like key accounts, corporate accounts, house accounts They make up a large share of a firms sales volume and profits. (In sales we use Pareto Principle or the 80/20 rule many a times to point out that few top clients give more business that many bottom clients put together) Firms use the following alternative approaches to deal effectively with them Create a position of major / national account manager Use existing territory sales managers Create a separate division

Size of the Salesforce

How many salespeople needed (or salesforce size) to achieve a firms sales and profit objectives is a key decision Methods available to decide optimum salesforce size are as follows: Workload Sales potential (or breakdown) Incremental We shall discuss these methods briefly:

Workload Method

Assumption: All salespeople have equal workload Steps involved to calculate salesforce size are: 1) Classify customers as per their sales potential 2) Decide time per sales call and call frequencies for each class of customers 3) Calculate total market workload = (1) x (2) in hours 4) Decide total work time available per salesperson 5) Divide total work time available by different activities per salesperson in hours 6) Calculate total number of salespeople needed
total market workload (3) total selling time available per salesperson (5)

Refer to the pdf for an illustration on this

Workload Method
Eureka Forbess call norm(no. of calls to make a sale)=5 No. of calls that can be made in a day=10 in a 25 day month Sales target=3000 units/yr. No of calls to be made in a yr.=3000*5=15000/yr Calls that can be made by a sales person in a yr=10*25*12=3000

So no. of salespersons needed=15000/3000=5

Case Study on Workload Method

A company has 1000 accounts in all the following types: A-200 B-300 C-500 The salesman is required to call the A accounts 40 times a year for 60 min., B accounts 20 times a year for 30 min. and C accounts for 15 times a year for 10 min each. The salesman would be involved in selling task for 50% of the time, non-selling task 20% of his time and travelling task for 30 % of the time. Question: If the salesman works for 42 weeks in a year, 8 hrs. a day, find out the total no. of salesmen required.

Workload Method (Continued)

Advantages: simple method, conceptually sound, used for all types of selling situations Disadvantages: Neglects sales productivity & salesforce turnover

S Sales Potential /T Breakdown Method N (1 ) P

The formula used is: , where N=Number of salespeople needed, or salesforce size S=Annual sales forecast for the company in value (Rs. Million) e.g. Rs. 50 million P=Estimated productivity of the average salesperson in sales (Rs. Million) e.g. Rs. 2 million T=Estimated percentage of annual salesforce turnover e.g. 20% So N=50000000/2000000 * (1 + 0.20) =30 salespeople Advantages: Simple and straight forward Disadvantages: Conceptually weak; lead time needed for a new salesperson to reach average productivity

Incremental Method
It is based on marginal analysis theory of economics Basic concept: Net profits will increase when additional salespeople are added, if the incremental sales revenues exceed the incremental costs Merit: Conceptually accurate, as it quantifies relationships between salesforce size, sales, costs, profits Demerit: Can not be used if historical data on sales and costs are not available Notes on the problem in the pdf given along with this ppt:

The sales volume is not the total sales volume but additional sales volume achieved when a salesperson is added. To arrive at the expenses on the sales persons, like salaries, commission and TA, DA, go through the explanations for the same in the PDF The overall net profit does not decrease but net profit