Unit 2
Sales Organization
Structure and Sales Force
Deployment
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
Sales Organization Concepts
Specialization
The degree to which individuals perform some
of the required tasks to the exclusion of
others. Individuals can become experts on
certain tasks, leading to better performance
for the entire organization.
Centralization
The degree two which important decisions and
tasks performed at higher levels in the
management hierarchy. Centralized structures
place authority and responsibility at higher
management levels.
Sales Force Specialization Continuum
Generalists
All selling activities
and all products to
all customers
Some
specialization
of selling
activities,
products, and/or
customers
Specialists
Certain selling
activities for
certain products
for certain
customers
Selling-Situation Factors and
Organizational Structure
Organizational Environmental
Task
Performance
Structure
Characteristics Performance Objective
Specialization
High Envir.
uncertainty
Nonroutine Adaptiveness
Centralization
Low Envir.
Uncertainty
Repetitive
Effectiveness
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
Area Sales
Area Sales
Area Sales
Manager1
Manager2
Manager3Manager4
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
Line and Staff
Organisation
Head-Marketing
Customer Service
Promotional
Marketing Research
Sales Manager
ManagerManager
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:
performance
Better
marketing
decisions,
superior
sales
Disadvantages: High cost and coordination, slower decision
making, conflict may arise if staff managers role is not clear
Functional
Organisation
Head-Marketing
Customer Service
Marketing Research
Promotional
Sales Manager
Manager
Manager 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, minimising line authority to
functional managers
Advantages: Qualified specialists guide salesforce, simple to
administer
Disadvantage: confusion due to more managers giving orders
to salesforce
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
cross-functional teams. Used by firms having partnering
relationships with customers.
Advantages: Reduction in supervision, unnecessary tasks, &
cost; Improved efficiency and customer responses.
Span of Control vs. Management Levels
Flat Sales Organization
District
Sales
Manage
r
District
Sales
Manage
r
District
Sales
Manage
r
District
Sales
Manage
r
Span of Control
District
Sales
Manage
r
Management Levels
National
Sales
Manager
Span of Control vs. Management Levels
Tall Sales Organization
Regional
Sales
Manager
Regional
Sales
Manager
District District District
Sales
Sales
Sales
Manage Manage Manage
r
r
r
District District Distric
Sales
Sales
t Sales
Manage Manage Manag
r
r
er
Span of Control
Management Levels
National
Sales
Manager
Line vs. Staff Positions
National Sales
Manager
Regional Sales
Managers
District Sales
Managers
Salespeople
Sales Training
Manager
Sales Training
Manager
Staff
Position
Line
Position
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
Customer and Product Determinants
of Sales Force Specialization
Customer Needs
Different
Simple
Produc
t
Offerin
g
MarketProduct/Market
Driven
-Driven
Specialization Specialization
Complex
Range
GeographyProductof
Driven
Driven
Product
Specialization Specialization
s
Customer Needs
Similar
Geographic Sales Organization
National Sales
Manager
Sales Training
Manager
Eastern Region Sales
Manager
Western Region Sales
Manager
Zone Sales Managers (4)
Zone Sales Managers (4)
District Sales Managers (20)
District Sales Managers (20)
Salespeople (100)
Salespeople (100)
Geographic
Specialisation
Head-Marketing
Marketing Research General Sales
Customer Service
Promotion
Manager
Manager
Manager
Manager
Branch SalesBranch SalesBranch SalesBranch Sales
Manager-1 Manager-2 Manager-3 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 Sales Organization
National Sales
Manager
Office Equipment Sales
Manager
Office Supplies Sales
Manager
District Sales Managers (10)
District Sales Managers (10)
Salespeople (100)
Salespeople (100)
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
Head-Marketing
specialists
Marketing Research
General
Promotion Sales Training
Manager
Sales Manager Manager Manager
Area Sales Managers
Area
Sales Managers
Product Group A Product Group B
Salespeople
Salespeople
Product Gr. A Product Gr. B
Fig. x Sales Organisation with product specialised salesforce
Product Specialisation (Continued)
Head-Marketing
Marketing Research
Promotion General
Product Manager
Product Manager
Manager
Manager Sales Manager
Product Gr. A
Product Gr. B
Area Sales
Managers
Salespeople
Fig. y Sales Organisation with Product Managers as Staff
Specialists
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
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
Market Sales Organization
National Sales
Manager
Commercial Accounts
Sales Manager
Government Accounts
Sales Manager
Sales Training
Manager
Zone Sales Managers (4)
District Sales Managers
(5)
District Sales Managers
(25)
Salespeople (50)
Salespeople (150)
Market
Specialisation
General Sales
Manager
Sales ManagerSales ManagerSales ManagerSales ManagerInternationalConsumer Markets
Commercial Government
Markets
Area SalesArea
MgrsSales ManagerArea Sales ManagerArea Sales MgrsInternational
Commercial Government Consumer 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
customer-centred philosophy of the company
Disadvantages: Geographic duplication, high cost
Combination Sales
Organisation
Director Sales
& Marketing
General Manager
General Manager
General Manager
General Manager
Sales - North Sales - East Sales - WestSales - South
Regional Sales
Regional Sales Regional Sales
Mgr. Govt.
Mgr. - Dealers
Mgr. - Commercial
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
Hybrid Sales Organization Structure
National Sales Manager
Commercial
Accounts
Sales Manager
Major Accounts
Sales Manager
Government
Accounts
Sales Manager
Regular
Accounts
Sales Manager
Field Sales
Manager
Office
Office Supplies
Equipment
Sales Manager
Sales Manager
Telemarketing
Sales Manager
Western
Eastern
Sales Manager Sales Manager
Comparison of
Sales Organization Structures
Organizational
Structure
Advantages
Disadvantages
Low Cost
Limited
No geographic
specialization
Geographic duplication
Lack of
No customer
management
duplication
control over
Fewer management
product or
levels
customer emphasis
Salespeople become
High cost
experts
Geographic
Product
in product attr. &
duplication
applications
Customer
Management control over
duplication
selling effort
Comparison of
Sales Organization Structures
Organizational
Structure
Market
Function
al
Advantages
Disadvantages
Salespeople develop
better understanding of
High cost
unique customer needs
Management control over
Geographic
selling allocated to different duplication
markets
Efficiency in performing
selling activities
Geographic
duplication
Customer duplication
Need for coordination
Size of Account
Identifying Major Accounts
Large Large
Account
Major
Account
Regular
Small Account
Complex
Account
Simple
Complex
Complexity of Account
Major Accounts Options
Develop Major Account
Salesforce
Assign Major Accounts to
Sales Managers
Assign Major Accounts to
Salespeople along with Other
Accounts
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
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
Create a separate salesforce
Salesforce Deployment
Sales Force deployment decisions can be
viewed as providing answers to three
interrelated questions.
1. How much selling effort is needed to cover
accounts and prospects adequately so that sales
and profit objectives will be achieved?
2. How many salespeople are required to provide
the desired amount of selling effort?
3. How should territories be designed to ensure
proper coverage of accounts and to provide each
salesperson with a reasonable opportunity for
success?
Interrelatedness of
Sales Force Deployment
Decisions
Allocation
Allocation of
of
Selling
Selling Effort
Effort
How much selling effort is needed to cover
accounts and prospects adequately so that
sales and profit objectives will be achieved?
Sales
Sales Force
Force
Size
Size
How many salespeople are required to
provide the desired amount of selling effort?
Territory
Territory
Design
Design
How should territories be designed and
salespeople assigned to territories to ensure
proper coverage of accounts and to provide
each salesperson with a reasonable
opportunity for success?
Analytical Approaches to
Allocation of Selling Effort
Easy to Develop and Use
Single
Single Factor
Factor
Models
Models
Low
Analytical
Rigor
High
Analytical
Rigor
Portfolio
Portfolio
Models
Models
Decision
Decision
Models
Models
Difficult to Develop and Use
Single Factor Models
Easy to develop and use/low analytical rigor
Accounts classified into categories based on
one factor, such as market potential
All accounts in the same category are
assigned the same number of sales calls
Effort allocation decisions are based on the
analysis of only one factor and differences
among accounts in the same category are
not considered in assigning sales call
coverage
Single Factor Model
Example
Market PotentialAverage Sales Calls to
Average Sales Calls to
Categories
an Account Last Yearan Account Next Year
A
B
C
D
25
23
20
16
32
24
16
8
Portfolio Models
Account Opportunity - an
accounts need for and ability to
purchase the firms products
Competitive Position - the
strength of the relationship
between the firm and an account
Portfolio Model Segments and
Strategies
High
Low
Account Opportunity
Competitive
Position
Strong
Weak
Segment 1 Segment 2
Segment 3 Segment 4
Decision Models
Simple Basic Concept - to allocate
sales calls to accounts that promise
the highest sales return from the
sales calls
Optimal number of calls in terms of
sales or profit maximization
Sales Force Size: Key
Considerations
Sales Productivity - the ratio of sales
generated to selling effort used
In early stages, the addition of salespeople
increases sales considerably more than the selling
costs. As salespeople continue to be added, sales
increases tend to decline until a point is reached
when the costs to add a salesperson are more than
the revenues that salesperson can generate.
Salesforce Turnover
Is very costly
Should be anticipated
Sales Force Size: Analytical
Tools
The Breakdown Approach is used to
determine the number of salespeople needed
to generate a forecasted level of sales. This
approach is easy to develop. However, it is
weak conceptually. The concept underlying
the calculations is that sales determine the
number of salespeople neededputting the
cart before the horse.
Salesforce size = Forecasted sales / Average sales
per person
Sales Force Size: Analytical
Tools
The Workload Approach determines how
much selling effort is needed to adequately
cover the firms market. Then the number of
salespeople required to provide this amount
of selling effort is calculated. This approach
relatively simple to develop and is sound
conceptually.
Number of
salespeople =
Total selling effort
needed
Average selling effort per
salesperson
Sales Force Size: Analytical
Tools
The Incremental Approach is the most rigorous
for calculating salesforce size. Its compares the
marginal profits and marginal costs associated
with each incremental salesperson. The major
advantage is that it quantifies the important
relationships between salesforce size, sales, and
costs. However, this method is difficult to
develop, and it cannot be used for new sales
forces where historical data and accurate
judgments
are notMarginal
possible.
# of
Marginal
Salespeople
100
101
102
103
Contribution
$85,000
$80,000
$75,000
$70,000
Cost
$75,000
$75,000
$75,000
$75,000
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)
Workload Method (Continued)
Advantages: simple method, conceptually sound, used
for all types of selling situations
Disadvantages: Neglects sales productivity & salesforce
turnover
Sales Potential / Breakdown Method
The formula used is:
, where
S
N
(1 T )
N=Number of salespeople
P needed, or salesforce size
S=Annual sales forecast for the company in value (Rs.
Million)
P=Estimated productivity of the average salesperson in
sales (Rs. Million)
T=Estimated percentage of annual salesforce turnover
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
Salesforce
Staffing
It is one of the most challenging and
important responsibilities / activities of sales
management
Salesforce Staffing Process includes following
stages:
Planning
Recruiting
Selecting
Hiring
Socialisation
We shall briefly discuss each of the above
stages
Planning
Stage
It consists of three steps:
Establish responsibility for staffing process
Decide number of salespeople needed
Outline the type of salespeople needed
Establish responsibility for staffing process
Company management decides responsibilities
for various stages / activities of staffing
process
Generally in a medium / large size company,
middle and senior levels H.R. and sales
managers are responsible
Proper coordination needed between sales,
marketing, and HR executives
Planning Stage (Continued)
Decide the number of salespeople
needed
Steps followed by each territory sales manager to
plan requirement of sales people:
1) Decide optimum salesforce size (using methods
discussed earlier)
2) Add number of promotions, retirements, transfers
out, terminations, resignations expected from
existing salespeople
3) Subtract expected transfers into the territory and
existing salesforce
4) Make a total of new salespersons needed
Territory sales managers submit their requirements
to national / general sales manager, who calculates
the total number of new salespersons to be hired
Outline Type of Salespeople
Needed
The
steps involved in the process are:
Conducting a job analysis
Preparing a job description
Developing job qualifications / specifications
Conducting a Job Analysis
It is done by a person from sales / H. R.
department, or a consultant. It consists of two
tasks:
(1) Analyse environment in which the
salesperson would work E.G. nature of
customers, competitors, products.
(2) Determine duties and responsibilities of the
salesperson. Obtain information from sales
managers, customers, etc.
Preparing a Job
Description
It is a written document developed from the
job analysis
The detailed job description is a useful tool for
recruiting, selecting, training, compensating,
and evaluating salespeople
Some of the points it generally covers are:
Job title, reporting relationship, types of
products / services sold, types of
customers, duties and responsibilities,
location and geographic area to be covered
Developing Job Qualifications /
Specifications
These are generally based on job description
Job
specifications
/
qualifications
include
education,
sales
experience,
skills,
and
personality traits
Many studies done, but no generally accepted job
qualifications for selecting salespeople, due to
many types of sales jobs
Some methods used for developing job
specifications are as under:
Study job description. Useful for a new
company
Analyse personal histories of salespersons
Ask customers
Recruiting
Salesforce
Recruiting include activities to get individuals who
will apply for the job
The general purpose of recruitment is to get
enough qualified candidates, to enable company
select the right persons
H.R. and sales managers must update information
on government employment regulations
Recruiting stage / process includes following
activities:
Finding the sources of sales recruits
Evaluating and selecting recruiting sources
Contacting candidates through the selected
source
Finding the Sources of Sales
Recruits
For identifying prospective candidates, firms use
internal and external sources. They include:
Internal Sources
Employee referral
programmes
Current employees
Promotions and transfers
External Sources
Advertisements in
newspapers and journals /
magazines
The Internet (job sites)
Educational institutions
Employment agencies
Job fairs
Other companies
Evaluating and selecting Recruiting
Sources
Recruiting sources are evaluated based on the
database built over number of years
Evaluating factors are:
Performance rating of salespeople, after 2
years working
Percentage of salespeople retained, after 2
years working
Total cost of recruiting
Selecting most effective source of recruiting at
least cost
For a new company, selection depends on cost
Contacting candidates through the selected
source is done by H. R. department
Selecting
Salesforce
Selection process consists of seven major
selection steps / tools
Companies differ in using selection tools,
depending on expenditure budget and time
available
Major selection tools / steps are:
Screening resumes
Application blank
Initial interview
Intensive interview
Testing
Reference check
Physical examination
Screening Resumes
It is done when the company receives many
resumes
This step / tool not required, if somebody else like
employment agency does initial screening
Initial screening of resumes are done by
comparing with job specifications
Application Blank
Widely used, it is a methodical way of collecting
relevant information from the applicant
Advantages of using application blank (also called
formal application form) are:
(1) Easy comparison of many applicants
(2) Useful for asking question during interview
sessions
Intervie
ws
Widely used selection tool
A good predictor of the candidates performance
Initial interviews are used for screening
candidates
Intensive interviews are conducted to get indepth
view of candidates
Interview structure / type of interviews:
Structured / patterned / guided interviews
Unstructured
/
non-directed
/
informal
interviews
Semi-structured interviews
Behaviour and performance based interviews
Stress interviews
Purpose is to decide a candidates fitness for a job
Testin
g
Many firms use tests as a selection tool EG P&G, IBM
Purpose of testing: To find whether applicants have
traits / characteristics that lead to success in sales job
Type of selection tests:
Aptitude tests measure ability for selling and
learning
Intelligence tests find out mental intelligence or
intelligence quotient (IQ)
Interest tests find out level of interest in a sales
career
Knowledge tests measure knowledge of products,
markets, etc
Personality tests find out attitude or traits like
empathy, self-confidence
Tests must have reliability and validity
Tests should be one of the selection tools and not the
Reference Checks
They are important due to possibilities of resume
frauds and false personal information
They are done by letters / e-mails, telephones, or
personal visits
Instead
of
candidates
references,
previous
employers / customers to be included for reference
checks
Physical Examination
Objective is to find a physical problem that may
prevent job performance of an applicant
Most companies want their prospective employees to
undergo physical examination
Increasing number of firms ask applicant to complete
the health information form without seeing a medical
doctor
Hiring Stage
After completing selection process, a list of candidates
to be hired is made
In hiring stage, two activities are performed:
(1) The company making the job offer
(2) Persuading the applicant to accept it
Socialisation Stage
It is the process through which new salespeople learn
values, norms, attitudes, and behaviour of people
working in the firm
Socialisation
process
starts
before
the
new
salesperson accepts the job offer and continues until
the person is assimilated into the company culture
Assimilation is the second stage of socialisation
process
Companies have this process, in order to retain new
salespeople
Designing Territories
Territories consist of whatever
specific accounts are assigned to a
specific salesperson. The territory
can be viewed as the work unit for a
salesperson.
Territory Considerations
Trading areas
Present effort
Recommended effort
Territory Design Procedure
Select
Planning
and
Control Unit
Analyze
Planning and
Control Unit
Opportunity
Form
Initial
Territories
Assess
Territory
Workload
Finalize
Territory
Design
