Types of Sales

Organization

by
Anoop Kumar
Gupta
MAIT
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.

Module 4:
Sales Organization Structure and Sales Force Deployment
Sales Force Specialization Continuum

Generalists Specialists
Some specialization
All selling activities Certain selling
of selling activities,
and all products to activities for
products, and/or
all customers certain products for
customers
certain customers

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Sales Organization Structure and Sales Force Deployment
Span of Control vs. Management Levels

Flat Sales Organization

National

Management Levels
Sales
Manager

District District District District District

Sales Sales Sales Sales Sales
Manager Manager Manager Manager Manager

Span of Control

Module 4:
Sales Organization Structure and Sales Force Deployment
Span of Control vs. Management Levels

Tall Sales Organization

National Sales
Manager

Management Levels
Regional Sales Regional Sales
Manager Manager

District District District District District District

Sales Sales Sales Sales Sales Sales
Manager Manager Manager Manager Manager Manage
r
Span of Control

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Sales Organization Structure and Sales Force Deployment
 Line vs. Staff Positions

National Sales Manager

Sales Training Manager

Regional Sales Managers

Sales Training Manager

District Sales Managers

Staff Position

Salespeople Line Position

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Sales Organization Structure and Sales Force Deployment
 Selling-Situation Factors and
Organizational Structure

Organizational Environmental Task Performance

Structure Characteristics Performance Objective

High Envir.
Specialization uncertainty Nonroutine Adaptiveness

Low Envir.
Centralization Uncertainty Repetitive Effectiveness

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Sales Organization Structure and Sales Force Deployment
 Customer and Product Determinants
of Sales Force Specialization

Customer Needs Different

Market- Product/Market-
Driven Driven
Simple Specialization Specialization Complex
Product Range of
Offering Geography- Product- Products
Driven Driven
Specialization Specialization

Customer Needs Similar

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Sales Organization Structure and Sales Force Deployment
Geographical Structure

Module 4:
Sales Organization Structure and Sales Force Deployment
 Geographical Structure

❚ An advantage of this form of organization is its

simplicity. Each salesperson is assigned a
territory over which to have sole responsibility for
sales achievement.
❚ Their close geographical proximity to customers
encourages the development of personal
friendships which aids sales effectiveness. Also,
compared with other organizational forms, e.g.
product or market specialization, travelling
expenses are likely to be lower.
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Sales Organization Structure and Sales Force Deployment
 Geographical Structure

❚ This is the least specialized and most generalized

type of sales-force.

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Sales Organization Structure and Sales Force Deployment
 Geographical Structure

❚ A potential weakness of the geographical structure is

that the salesperson is required to sell the full range of
the company’s products. They may be very different
technically and sell into a number of diverse markets.
❚ In such a situation it may be unreasonable to expect
the salesperson to have the required depth of
technical knowledge for each product and be
conversant with the full range of potential applications
within each market. This expertise can only be
developed if the salesperson is given a more
specialized role.
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Sales Organization Structure and Sales Force Deployment
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)

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Sales Organization Structure and Sales Force Deployment
Product Specialization Structure

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Sales Organization Structure and Sales Force Deployment
 Product Specialization Structure

❚ One method of specialization is along

product lines.
❚ Conditions that are conducive to this form
of organization are where the company
sells a wide range of technically complex
and diverse products and key members of
the decision-making unit of the buying
organizations are different for each
product group.
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Sales Organization Structure and Sales Force Deployment
 Product Specialization Structure

❚ If the company’s products sell essentially

to the same customers, problems of route
duplication (and hence higher travel
costs) and customer annoyance can arise.
❚ Inappropriate use of this method can lead
to a customer being called upon by
different salespeople representing the
same company on the same day.

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Sales Organization Structure and Sales Force Deployment
 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)

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Sales Organization Structure and Sales Force Deployment
Strength & Weakness

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Sales Organization Structure and Sales Force Deployment
Customer-based structures
(Industry-Based Structure)

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Sales Organization Structure and Sales Force Deployment
 Market Sales Organization
National Sales Manager

Commercial Accounts Government Accounts

Sales Manager Sales Manager

Sales Training
Manager

Zone Sales Managers (4) District Sales Managers (5)

District Sales Managers (25) Salespeople (50)

Salespeople (150)

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Sales Organization Structure and Sales Force Deployment
 Customer-based structures

 The problem of the same customer being served by

product divisions of the same supplier, the complexity
of buyer behavior, which requires not only input from
the sales function but from other functional groups
(such as engineering, finance, logistics and marketing),
centralization of purchasing, and the immense value of
some customers have led many suppliers to rethink
how they organize their sales-force.
 Companies are increasingly organizing around
customers and shifting resources from product or
regional divisions to customer-focused business units.
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Sales Organization Structure and Sales Force Deployment
 Customer-based structures
(Market-centered structure)
 Another method of specialization is by the type of market served.
Often in industrial selling the market is defined by industry type.
 Thus, although the range of products sold is essentially the
same, it might be sensible for a computer firm to allocate its
salespeople on the basis of the industry served, e.g. banking,
manufacturing companies and retailers, given that different
industry groups have widely varying needs, problems and
potential applications.
 Specialization by market served allows salespeople to gain
greater insights into these factors for their particular industry, as
well as to monitor changes and trends within the industry that
might affect demand for their products. The cost of increased
customer knowledge is increased travel expenses compared with
geographically determined territories.
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Sales Organization Structure and Sales Force Deployment
Customer-based structures
(Account-size Structure)

Module 4:
Sales Organization Structure and Sales Force Deployment
 Customer-based structures
(Account-size Structure)
❚ Some companies structure their sales-force by account
size. The importance of a few large customers in many
trade and industrial markets has given rise to the
establishment of a key or major account sales-
force.
❚ The team comprises senior salespeople who specialize in
dealing with large customers that may have different
buying habits and demand more sophisticated sales
arguments than smaller companies. The team will be
conversant with negotiation skills since they are likely to
be given a certain amount of discretion in terms of
discounts, credit terms, etc., in order to secure large
orders.
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Sales Organization Structure and Sales Force Deployment
 Customer-based structures
(Account-size Structure)

❚ The range of selling skills required is therefore

wider than for the rest of the sales-force, who
deal with the smaller accounts.
❚ Some organizations adopt a three-tier system,
with senior salespeople negotiating with key
accounts, ordinary salespeople selling to
medium-sized accounts, and a telemarketing
team dealing with small accounts.

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Sales Organization Structure and Sales Force Deployment
 Identifying Major Accounts

Large Large Major

Account Account
Size of Account

Regular Complex
Small Account Account
Simple Complex
Complexity of Account

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Sales Organization Structure and Sales Force Deployment
Major Accounts Options

Develop Major Account Salesforce

Assign Major Accounts to

Sales Managers

Assign Major Accounts to Salespeople

along with Other Accounts

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Sales Organization Structure and Sales Force Deployment
 Customer-based structures
(New/Existing account structure)
A further method of sales organization is to create two teams of
salespeople. The first team services existing accounts, while the
second concentrates on seeking new accounts. This structure
recognizes the following:
❚Gaining new customers is a specialized activity demanding
prospecting skills, patience, ability to accept higher rejection rates
than when calling upon existing customers, and the time to
cultivate new relationships.
❚Placing this function in the hands of the regular sales-force may
result in its neglect since the salespeople may view it as time
which could be better spent with existing customers.
❚Salespeople may prefer to call upon long-established customers
whom they know, rather than prospects where they might face
rejection and unpleasantness.
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Sales Organization Structure and Sales Force Deployment
Customer-based structures

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Sales Organization Structure and Sales Force Deployment
 Functional Sales Organization

The work is organized according to the

functions e.g.
1.Sales
2.Telemarketing
3.Promotion
4.After Sales Service

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Sales Organization Structure and Sales Force Deployment
 Functional Sales Organization

National Sales Manager

Field Sales Manager Telemarketing Sales Manager

Regional Sales Managers (4) District Sales Managers (2)

District Sales Managers (16) Salespeople (40)

Salespeople (160)

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Sales Organization Structure and Sales Force Deployment
 Mixed organization

 In practice a combination of various sales organizational

structures may be used.
 Like many selling decisions, the choice of sales
organization is not a black and white affair, which is why
many sales forces are a blend of general territory
representatives and specialists.
 Many companies use all forms of selling simultaneously:
for very big accounts they use key account specialists; for
the balance of small and medium accounts they use
general territory representatives, perhaps supplemented by
product application specialists who help generalists across
several territories.
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Sales Organization Structure and Sales Force Deployment
 MULTIPLE DESIGN FACTORS
P r e s i d e n t

F u n c t i o V n i ac le P r eV s i i cd e e nP t r eV s i i cd e e nP t r e s i d e n t
P r o d u c t M i o an r k e t i En gn g i n e e r i n g

G e o g r a p h i cU . S . I n t e r n a t i o n a l
M a r k e t iM n g a r k e t i n g
M a n a g eM r a n a g e r

C u s t o m e rC o n s u m I n e dr u s t r i a l I n t e r n a t i o n a l
G o o d s G o o d s S a l e s
M a n a g eM r s a n a g e r s M a n a g e r

P r o d S uo c a tp P Pr o a dp u e cr t Ps F r o do ud c P t s r o d u c Lt s a t i n A s i a n a n
E u r o p e a n
D i v i s i o Dn a i lv i s i o nD a i l v i s i o n a l A m e r Ai c fa r n i c a n
D i v i s i o n
M a n a g eM r a n a g e M r a n a g e r D i v i s iD o ni v i s i o n

E a s t e Cr n e n t r Wa l e s t e r n
S a l e s S a l e s S a l e s
D i v i s i D o ni v i s iD o ni v i s i o n
 Hybrid Sales Organization
Structure

National Sales Manager

Commercial Accounts Government Accounts

Sales Manager Sales Manager

Major Accounts Regular Accounts Office Equipment Office Supplies

Sales Manager Sales Manager Sales Manager Sales Manager

Field Sales Telemarketing

Manager Sales Manager

Western Eastern
Sales Manager Sales Manager

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Sales Organization Structure and Sales Force Deployment
 Comparison of
Sales Organization Structures

Organizational
Structure Advantages Disadvantages
• Low Cost
• Limited specialization
• No geographic duplication
• Lack of management
Geographic • No customer duplication
control over product or
• Fewer management levels
customer emphasis

• Salespeople become experts

• High cost
in product attr. & applications
Product • Geographic duplication
• Management control over
• Customer duplication
selling effort

Module 4:
Sales Organization Structure and Sales Force Deployment
 Comparison of
Sales Organization Structures

Organizational
Structure Advantages Disadvantages
• Salespeople develop
better understanding of
unique customer needs • High cost
Market • Management control over • Geographic duplication
selling allocated to different
markets

• Geographic duplication
• Efficiency in performing
Functional selling activities
• Customer duplication
• Need for coordination

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Sales Organization Structure and Sales Force Deployment
ORGANIZING FOR SELLING TO MAJOR
CUSTOMERS

Companies use four basic organizational

methods.
1. A separate division to deal with major
accounts.
2. Select members of the current sales
force.
3. Sales managers.
4. A combination of 1, 2, and 3.
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Sales Organization Structure and Sales Force Deployment
 NEW FORMS OF ORGANIZATIONS
STRATEGIC ALLIANCES

A strategic alliance is a formal relationship created with

the purpose of joint pursuit of mutual goals.

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Sales Organization Structure and Sales Force Deployment
 CROSS-FUNCTIONAL SELLING TEAM

C u s t o m e r

T e c h n i c a l
S a l e s M a r k e t i n g M a n u f a c t u
S u p p o r t
S u p p l i e r S e l l i n g T e a m

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Sales Organization Structure and Sales Force Deployment
TEAM-BASED ORGANIZATIONS

Many organizations are more responsive to their

environment because they use work teams as their
basic building blocks.

Module 4:
Sales Organization Structure and Sales Force Deployment