Amity School of Business

BBA V Semester
Sales and Distribution Management

Module-2
Sales Organization
 OBJECTIVE
MODULE-2

 Sales Organization

 Purpose and Importance of Sales Organization

 Various Types of Sales Organizations

 Coordination amongst other departments

 Changing sales organization structure in modern times

Sale forecasting and its techniques

 Concepts of Sales Organization

• A sales organization is a structural body

through which the functions of Sales
management are carried out.
• This assists the sales manager to carry out
needed tasks efficiently and effectively to
achieve results
 Nature of Sales Organization
• An organization is simply an arrangement of
activities involving a group of people. The
goal is to arrange these activities so that the
people involved can act better together than
they can individually.
• Trend is towards a flatter organization in
which coordination across activities is more
important than top down control.
• Salespeople are more often a part of the cross
functional team design to serve specific
customers.
Purpose of Sales Organization

• To permit the development of specialists

• To ensure that all necessary activities are performed

• To achieve coordination

• To define authority

• To economize on executive time

Functions of Sales Organization

• Planning Function
– Sales Forecasting
– Sales Budgeting
– Selling Policy
• Administrative Function
– Selecting Salesmen
– Training Salesmen
– Control of Salesmen
• Executive Function
– Sales Promotion
– Selling Routine : Execution of customer’s orders
Principles of Sales Organization

• Degree of centralization
• Degree of specialization
• Line and Staff positions
• Marketing orientation
• Effective coordination
• Span of control
 Setting up a Sales Organization

• Defining the objectives

• Delineating the necessary activities
• Grouping the activities into “Jobs” and
“Positions”
• Assigning Personnel to positions
• Providing for coordination and control
 Basic Types of Sales Organizations

Sales organizations are generally classified

into four basic types:
• Line Organization
• Line and Staff Organization
• Functional Organization
• Horizontal Organization
 Line Organization

Head
Marketing

Sales
Manager

Area Sales Area Sales

Area Sales Area Sales
Manager3 Manager4
Manager1 Manager2

salespeople salespeople salespeople salespeople

Characteristics: All managers have line
authority .i.e. people in management
positions have authority to direct and
control immediate subordinates . Used in
small firms / departments
Advantages: Simple organization, clear
authority, quick decisions, low cost
Disadvantages: Too much depends on the
head of sales. No support to line
managers from subordinates who have
specialized knowledge / skills like
Advertising, Market Research etc. Less
time for planning / analysis
 Line and Staff Organization

Head-Marketing

Marketing Research Promotional Customer Service

Sales Manager
Manager Manager Manager

Area Sales Area Sales Area Sales

Manager-1 Manager-1 Manager-1

Salespeople Salespeople Salespeople

Characteristics: Specialists called as Staff
managers are available for senior marketing
/ sales managers. Staff managers’ role is to
assist / advise line managers. Used in
medium and large size organizations
Advantages: Better marketing decisions,
superior sales performance
Disadvantages: High cost and coordination,
slower decision making, conflict may arise
if line authority of staff managers is not
clear
 Functional Organization
Head-Marketing

Marketing Research Promotional Customer Service

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, minimizing
line authority to functional managers
Advantages: Qualified specialists guide
sales force, simple to administer
Disadvantage: confusion due to more
managers giving orders to sales force
 Horizontal Organization
Operations Team:
Research & Design •Production /
Team:
Operations
•Customer •Quality Assurance
Research •Systems
•Product / Service
Engineering
Design

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

Customer Support Customer

Team: Satisfaction Team:
•Information •Sales & Marketing
•Service •Pricing,
•Training 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.
 Specialization within Sales Organization
• Needed to increase effectiveness of sales force
• Done by expanding basic sales organization
• Basis of specialization
• Geography
• Type of product
• Market
• Combination of above
• Criteria for selection –
(1) nature of product,
(2) sales force abilities,
(3) demands of selling job,
(4) customer and market facts
 Geographic Specialization
Head-Marketing

Marketing Research General Sales Customer Service

Manager Manager Manager
Promotion
Manager

Branch Sales Branch Sales Branch Sales Branch 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 sales
force, quick response to local conditions &
competition
•Disadvantages: Limited specialization of
marketing tasks. Hence, it is combined with
product / market sales organization
 Product Specialization
• Used when the company has
many products and / or brands
• Two types of product
specialization
– (x). Sales organization with
product specialized sales force
– (y). Sales organization with
product managers as staff
specialists
 Head-Marketing

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 Organization with Product Specialized Sales force

In fig. ‘x’: Characteristics: Salespeople
in each product group sell only the
products in that group.
Advantage: Each product gets
specialized attention from the sales
force
Disadvantage: Sometimes, more
salespeople contact the same
customer, resulting in customer
dissatisfaction and higher cost
 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 Organization with Product Managers as Staff Specialists

In fig. ‘y’: Characteristics: Each product
manager plans and implements
marketing plans for each group of
products, no line authority over the
field sales managers & the sales force.
Each sales person sells all the
products of group A & group B.
Advantage: Corrects the problem of
duplication calls on a customer by
salespeople
Disadvantage: Lack of product
specialization by salespeople
 Market Specialization
General Sales
Manager

Sales Manager- Sales Manager- Sales Manager- Sales Manager-

International- Commercial Government Consumer Markets
Markets

Area Sales Mgrs Area Sales Manager- Area Sales Manager- Area Sales Mgrs-
International Commercial Government Consumer Markets

Sales Executives Salespeople Salespeople Salespeople

• Characteristics: Desirable when customers are
classified by type, user industry, or channel of
distribution. Salespeople carry out all activities for
all products but only for specific customer groups.
These customer groups , e.g. government,
commercial and dealers have different buying
practices and preferences. E.g. HP, GE,IBM etc.
• Advantages: Meets needs of specific customer
groups, implements customer-centered philosophy
of the company
• Disadvantages: Geographic duplication i.e. diff
sales persons working in the same territory but
covering separate customer groups , and resulting in
high selling cost.
 Combination Sales Organization
Director – Sales
& Marketing

General Manager General Manager General Manager General Manager

Sales - North Sales - East Sales - West Sales - South

Regional Sales Regional Sales Regional Sales

Mgr. – Govt. Mgr. - Commercial Mgr. - Dealers

Salespeople Salespeople Salespeople

• Characteristics: Many firms use some
combination of specialization
organizations, called hybrid or
combination sales organization, with a
view to minimize disadvantages and
maximize advantages of specialization
organizations
 Emerging Organizational Design
• Agency and Distribution Selling
– Independent private businesses
– Contractual agreement with the selling organization
– Payment is based on commission
– Salespeople have less specialized knowledge about the product and
company
– Company’s sales force policy is flexible
• Shared Sales Force
– Divides the sales force among the number of divisions or product
lines of an organization to reduce
• Operating cost
• Increased efficiency
• Achieve synergy
• Achieve economies of scope
– Puts additional pressure on the salesperson to coordinate and
monitor customers, competitors, product features, other
department’s people
 Sales Forecasting
What is Sales Forecasting?

“It is an estimate of sales during a specified future period

which is tied to a proposed marketing plan and which
assumes a particular set of uncontrollable and competitive
forces”
-Cundiff and Still
 Importance of Sales Forecasting
• Helps manufacturing department for setting up
production capacity and planning production

• Finance department for raising cash for investment

and operations as well as for profit planning

• Purchase function for planning their purchases

• HR function to help them plan for manpower

planning
 Factors Influencing the Sales Forecast

• Marketing Plans
– Changes in price structure, channels of
distribution, promotional plans, products may
influence the future sales.
• Conditions within the industry
– Competitor policies and new entrants into the
market needs to be taken into consideration.
• Market Conditions
– Awareness about the changes in the primary
demand for the industry’s output.
• General Business Conditions
– General state of the economy
 Types of Sales Forecast
• Product Level
– All Sales
– Industry Sales
– Company Sales
– Product Line Sales
– Product Variant Sales
– Product Item Sales
• Time Period
– Long Term
– Medium Term
– Short Term
• Geographic Area
– World
– Nation
– Region
– Territory
– Customer
 Terms Used in Forecasting
• Market Potential
– Maximum possible sales opportunities
present in a particular market segment and
open to all sellers during a stated future
period.
• Market Forecast
– Expected industry sales for a given product or
service at one specific level of industry
marketing expenditure, in a given market, for
a specific period of time.
• Company Sales Potential
– Best possible estimated sales of a given
product or service for a company in a given
geographic
area for a specific period of time.
• Company Sales Forecast
– Estimated company sales of a given product or service,
under a proposed marketing plan, in a given market, for
a specific period of time.
• Sales Budget
– It is a detailed schedule showing the expected sales for
the budget period; typically, it is expressed in both
revenues and units of production.
– Sales budget is used for making purchasing, production,
manpower and cash flow decisions.
• Sales Quota
―Individual sales target figure assigned to
each sales unit such a sales person, dealer,
distributor, region, or territory, as a required minimum
for a specified period (month, quarter, year).
―Sales quotas may be expressed either in currency figures
(monetary terms) or in number of goods or services sold
(volume terms).
 Sales Forecasting Methods
Qualitative Methods Quantitative Methods

• Executive opinion • Moving averages

• Delphi method • Exponential smoothing

• Sales force composite • Decomposition

• Survey of buyers’ intentions • Naive / Ratio method

• Test marketing • Regression analysis

• Econometric analysis
 Executive opinion method
• Most widely used
• Procedure includes discussions and / or
average of all executives’ individual opinion
• Advantages: quick forecast, less expensive
• Disadvantages: subjective, no breakdown into
subunits
• Accuracy: fair;
• Time required: short to medium (1 – 4 weeks)
 Delphi method
Process includes a coordinator getting forecasts separately
from experts, summarizing the forecasts, giving the summary
report to experts, who are asked to make improvements and re-
evaluations; the process is repeated till some consensus is
reached.

• Experts are company managers, consultants,

intermediaries, and trade associations
• Advantages: objective, good accuracy
• Disadvantages: getting experts to the common
consensus , time required: medium (3/4 weeks)
to long (2/3 months)
 Sales force composite method

• An example of bottom-up or grass-roots

approach
• Procedure consists of each salesperson
estimating sales. Company sales forecast is
made up of all salespersons’ sales estimates
• Advantages: Salespeople are involved,
breakdown into subunits possible
• Disadvantages: Optimistic or pessimistic
forecasts, medium to long time required
• Accuracy: fair to good (if trained)
 Survey of Buyers’ Intentions Method

• Process includes asking customers about their

intentions to buy the company’s products and
services
• Questionnaire may contain other relevant
questions
• Advantages: gives more market information,
can forecast new and existing products, good
accuracy
• Disadvantages: some buyers’ unwilling to
respond, time required is long (3-6 months),
medium to high cost
 Test Marketing Method

• Methods used for estimating sales for a new

product. Conducted in a limited market area to
obtain consumer reaction. Selecting carefully a
few representative market areas, marketing
manager can observe the impact of various
combinations of the marketing mix on sales .
• Advantages: minimizes risk of national launch
and good accuracy.
• Disadvantages: Competitors may disturb the
results, medium to high cost, medium to long
time required