Sales Organization

Listen to the Customer & act on what they tell you- Pat Nathan,
Vice President
Dell Computer

Dr. Neeraj Dixit

Associate Professor
IES Management
College, Bandra
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Contents

Definition of Sales Organization

Principles of Organization Design
Advantages of Sales Organization
Changing Structural Characteristics of Modern
Corporations
Issues in Developing a Sales Organization
Structure
Basic Types of Sales Organization
Major trends in Sales Organization
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What is an Organization
An Organization is simply an arrangement-a working
structure-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.
Organization is the basic management function of arranging
the firms work activities.
Organization is often viewed as merely the determination of a
structure.
Organization is a continuing task requiring constant
management attention
An Organizational structure is like an human skelton structure
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Definition of Sales Organization

A Sales Organization is an organization of individuals
either working together for the marketing of products
and services manufactured by an enterprise or for
products that are procured by the firm for the purpose of
reselling.
An Organizational structure-whether it is for sales force
or any other group involved in a joint effort to meet a
goal-is a control and coordination mechanism.
The Organizational structure has a direct and significant
bearing on the implementation of the strategic planning.

Principles of Organization Design

1. Organizational structure should reflect a
marketing orientation.
2. Organization should be built around activities,
not around people.
3. Responsibility and authority should be properly
related.
4. Span of control should be reasonable
5. Organization should be stable but flexible.
6. Activities should be balanced and coordinated.
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Advantages of the Sales Organization

Effective structure allows the maintenance of order, which is a
fundamental task in any organization whether it is Private,
Governmental or NGO.
Organization structure also permits the assignment of specific
tasks to a position whose incumbent is then charged with
responsibility for accomplishing them.
An effective organization does not permit buck passing.
A sales force organization allows for integration and
coordination. Various functional areas of the firm can be
coordinated. Functional goals can be integrated to accomplish

the primary corporate or company goals.

Changing Structural Characteristics of Modern Corporation

Old Organizational Design

New Organizational Design

One large corporation

Mini-business units & cooperative

relationships
Vertical communication
Horizontal communication
Centralized top-down
Decentralized participative
Decision Making
decision making
Vertical integration
Outsourcing & virtual organizations
Work/quality teams
Autonomous work teams
Functional work teams
Cross-functional work teams
Minimal training
Extensive training
Specialized job design
Value-chain team-focused job design
focused on individual

Issues in Developing a Sales

Organization

1.
2.
3.
4.
5.

Developing a Sales Organization is not an easy task. Sales

managers must recognize and then deal with the following
basic organizational issues.
Formal and Informal organizations.
Horizontal and vertical organizations.
Centralized and decentralized organizational structures.
The line and staff components of the organization
The size of the company

Formal and Informal organizations

Every firm has a formal organization and an informal
organization.
The formal organization is a creation of management whereas
the informal organization is often developed from the social
relationships existing within the formal organizational structure.
The informal organization is basically a communications pattern
that emerges to facilitate the operations of the formal
organization, it is sometimes called the grapevine.

Horizontal and vertical organizations

Sales forces can have either horizontal or
vertical organizational formats. This
arrangement varies among companies even
within the same industry.
Following figures show horizontal and vertical
organizations.

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Horizontal sales organization

Chief sales executive

New England
district sales
manager

Southern
district sales
manager

Middle Atlantic
district sales
manager

Southwest
district sales
manager

Midwest
district sales
manager

International
sales
manager

Pacific
district sales
manager

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Vertical sales organization

Chief sales executive
Regional or zone sales manager
District sales manager
Sales supervisor

Salesperson

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Centralized and decentralized organizational

structures
In decentralized sales organization
responsibility and authority are delegated to
lower levels of management.
In a centralized sales organization the
responsibility and authority for decisions are
concentrated at higher levels of management.

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The line and staff components of the

organization
Marketing organizations also feature line and staff
components.
A line function is a primary organizational activity and a
staff function is a supporting organizational activity.
In a marketing Organization the selling function is the
line component, whereas advertising, marketing
research, market planning, sales training and distributor
relations are usually considered staff roles.
Following are examples of line organizational structure
and Line and staff organizational structures.

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Line organizational structures

Vice president for sales
General sales
manager

Regional sales
manager A

Regional sales
manager B

Regional sales
manager C

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Line-and-Staff Sales Organization

Chief Marketing Executive

Advertising
Manager

Marketing
Research
Manager

General
Sales
Manager

Sales
Promotion
Manager

Sales
Analysis
Manager

Salespeople
Line authority
Staff advisory authority
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The size of the company

For a small company there is likely to be no
formal organizational structure. The Ownermanager is involved in all aspects of business.
When the company grows big then realizing
that supervision is required he may hire sales
managers and ultimately the small company
may evolve into a Functional organization-one
organized by the various activities performed
within a firm.
This structure is appropriate for most small and
medium sized companies.
When the company becomes bigger then
managers of each functional department tends
to think only in terms of their own functions
problems and needs, at this stage functional
organization looses its relevance and
companies move on to other sophisticated form
of sales organization.

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Functional company organization

President

Finance
and
accounting

Production

Personnel

Sales and
marketing

Basic Types of Sales Organization.

Most company sales
force are organized
on the basis of
Geography
Customers
Products
Combination of above
factors.
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Geographic specialization
According to geographic specialization field
sales force is given the responsibility for direct
selling activities in a given geographical area
or territory.
The sales representative is responsible for
selling the firms full line of products.
Territories are treated as separate profit
centers for purposes of analysis and for the
evaluation of sales force.
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Geographical Sales Organization

Chief Marketing Executive

Advertising
Manager

Marketing
Research
Manager

General
Sales
Manager

Sales
Promotion
Manager

Western Regional
Sales Manager

Eastern Regional
Sales Manager

4 District
Sales Managers

4 District
Sales Managers

Salespeople each
with own territory

Salespeople each
with own territory

Sales
Analyst

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Customer Specialization
Sales forces may be organized in terms of customers
for various reasons, a concept referred to as
customer specialization. The firms customers may
require a specialized knowledge of their industry.
According to proponents of customer specialization,
organizing around customers is necessary if the sales
force is to focus on customers needs and build the
best possible relationships with clients.

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Sales Organization Specialized by Type of

Customer
Chief Marketing Executive

Advertising
Manager

Marketing
Research
Manager

General
Sales
Manager

Sales
Promotion
Manager

Customer
Relations
Manager

Sales Manager
Transportation
Industry

Sales Manager
Steel Industry

Sales Manager
Petroleum Industry

Salespeople

Salespeople

Salespeople

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Product Specialization
Product specialization allows salespeople and sales
Managers to concentrate their efforts on particular lines,
brands or individual items
In most cases product sales specialists are used when a
products complexity limits other options. Although
clients reap the advantage of the specialized knowledge
provided by each salesperson, they may resent the extra
time they must be spend dealing with two vendor
representatives.
Another disadvantage is the expensive duplication of
sales effort.

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Sales Organization with Product-Specialized

Sales Force
Chief Marketing Executive

Advertising
Manager

Marketing
Research
Manager

General
Sales
Manager

Sales
Promotion
Manager

Sales Manager
Product A

Sales Manager
Product B

Sales Manager
Product C

Salespeople
Product A

Salespeople
Product B

Salespeople
Product C

Customer
Relations
Manager

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Combination Organizations
Traditional approaches to sales organization have not
been effective in the rapidly changing, high growth in
which these firms compete. As a result many high-tech
companies are attempting to develop new organizational
strategies.
These new combination organizations can be
characterized by the following traits.
Market, Product and Function
Decentralized staff and line personnel
Complex staff-line relationships
Overlaid organizational mechanisms
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Combination Organizations
Organizational Structure Employing All Three Approaches to Organizing
Sales Forces: Organization by Product, Geography, and Customer.
President

General sales
manager--shears

Eastern
district

Central
district

Machine
tool

Machine
tool

Fabricated
products

Fabricated
products

General sales
manager--fasteners

Western
district

Eastern
district

Central
district

Western
district

Machine
tool

Machine
tool

Machine
tool

Machine
tool

Fabricated
products

Fabricated
products

Fabricated
products

Fabricated
products

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Major Trends in Sales Organization

Telemarketing-Inbound &
Outbound
National account
Management-key, major,
strategic, global or corporate
Indirect sales ChannelsIndependent Reps or
Manufacturers Reps,
brokers, agents, wholesale
distributors
Team Selling
E-Commerce
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Pharmaceutical Companies-Sales
Organization Structure
President/Vice
President (Sales)
General Manager
Regional Sales
Manager
Area Manager
Medical
Representative

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Motorola- Sales Structure

Motorola manages 4 types of sales force
1. A strategic market sales force composed of technical,
applications, and quality engineers and service personnel
assigned to major accounts
2. A geographic sales force calling on thousands of customers
in different territories
3. A distributor sales force calling on and coaching motorola
distributors
4. An inside sales force doing telemarketing and taking orders
via phone and fax.

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