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Module Four

Sales Organization Structure & Sales Force Deployment

Sales Organization Structure

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

Span of Control vs. Management Levels


Flat Sales Organization
National Sales Manager Management Levels

District Sales Manager

District Sales Manager

District Sales Manager

District Sales Manager

District Sales Manager

Span of Control

Span of Control vs. Management Levels


Tall Sales Organization
National Sales Manager

Management Levels

Regional Sales Manager

Regional Sales Manager

District Sales Manager

District Sales Manager

District Sales Manager

District Sales Manager

District Sales Manager

District Sales Manager

Span of Control

Line vs. Staff Positions


National Sales Manager Sales Training Manager Regional Sales Managers Sales Training Manager District Sales Managers

Staff Position
Salespeople Line Position

Selling Situations
Selling-Situation Factors & Organizational Options
Organizational Structure Specialization Environmental Characteristics Dynamic sales environment
Relatively stable sales environment

Task Performance Performance Objective Nonroutine Adaptiveness

Centralization

Repetitive

Effectiveness

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)

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)

Market Sales Organization


National Sales Manager
Commercial Accounts Sales Manager Sales Training Manager Zone Sales Managers (4) District Sales Managers (25) Salespeople (150) District Sales Managers (5) Salespeople (50) Government Accounts Sales Manager

Functional Sales Organization


National Sales Manager

Field Sales Manager Regional Sales Managers (4) District Sales Managers (16) Salespeople (160)

Telemarketing Sales Manager District Sales Managers (2) Salespeople (40)

Sales Organization Structures Major Accounts Options


Develop Major Account Salesforce

Assign Major Accounts to Sales Managers

Assign Major Accounts to Salespeople along with Other Accounts

Comparison of Sales Organization Structures


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

Geographic

Product

Salespeople become experts High cost in product attr. & applications Geographic duplication Management control over Customer duplication selling effort

Comparison of Sales Organization Structures


Organizational Structure Advantages Salespeople develop better understanding of unique customer needs Management control over selling allocated to different markets Disadvantages

Market

High cost Geographic duplication

Functional

Efficiency in performing selling activities

Geographic duplication Customer duplication Need for coordination

Hybrid Sales Organization Structure


National Sales Manager

Commercial Accounts Sales Manager

Government Accounts Sales Manager

Major Accounts Sales Manager

Regular Accounts Sales Manager

Office Equipment Sales Manager

Office Supplies Sales Manager

Field Sales Manager

Telemarketing Sales Manager

Western Sales Manager

Eastern Sales Manager

Sales Force 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 of Selling Effort Sales Force Size Territory Design
How much selling effort is needed to cover accounts and prospects adequately so that sales and profit objectives will be achieved?

How many salespeople are required to provide the desired amount of selling effort? 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?

Allocation of Selling Effort


Analytical Approaches
Easy to Develop and Use Single Factor Models Low Analytical Rigor High Analytical Rigor

Portfolio Models

Decision Models Difficult to Develop and Use

Allocation of Selling Effort:

Single Factor Models


Accounts classified into categories based on one factor, such as volume 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

Allocation of Selling Effort


Single Factor Model Example

Market Potential Categories

Average Sales Calls to an Account Last Year

Average Sales Calls to an Account Next Year

A B C D

25 23 20 16

32 24 16 8

Allocation of Selling Effort

Portfolio Models
Accounts are grouped by specific criteria to determine their value to the firm ie.
Account (Growth) Opportunity - an accounts need for and ability to purchase the firms products Competitive (Advantage) Position - the strength of the relationship between the firm and an account

Allocation of Selling Effort:

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 Volume Growth
Anticipated increases The ratio of sales to selling costs Should be anticipated

Sales Productivity Sales Force Turnover

Sales Force Size: Analytical Tools


The Breakdown Approach

Is used to determine the number of salespeople needed to generate a forecasted level of sales. It is weak conceptually. The concept underlying the calculations is that sales determine the number of salespeople needed putting the cart before the horse.
Salesforce size = Forecasted sales / Average sales / 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.
Total selling effort needed
Average selling effort per salesperson

Number of salespeople =

Sales Force Size: Analytical Tools


The Incremental Approach

Its basic concept is to compare the marginal profits and marginal costs associated with each incremental salesperson. The major advantage of this approach is that it quantifies the important relationships between salesforce size, sales, and costs. However, the incremental method is difficult to develop, and it cannot be used for new sales forces where historical data and accurate judgments are not possible.

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

DESIGNING TERRITORIES
EXTREMELY RARE Most often territories evolve with market development & volume, And are revised / adjusted on an ongoing basis.

DESIGN GOALS
EQUALITY OF SALES
WORKLOAD GROWTH POTENTIAL

SIX DESIGN STEPS


1. Select a control element for territory boundaries / size. 2. Determine location & potential of customers. 3. Determine basic territories 4. Assign sales people to territories. 5. Establish territorial coverage plans for sales reps. 6. Monitor sales & cost of sales on an ongoing basis.

STEP ONE
TERRITORIAL SIZE (miles covered) Boundaries (usually political or geographical):
BASED ON:
REGION (WESTERN CANADA) PROVINCE (BC) CITY / COUNTRY (PRINCE GEORGE / VANDERHOOF, QUESNEL, ETC.)

STEP TWO
Determine the location of potential customers from: phone book Mailing lists route riding

STEP THREE
TO DETERMINE BASIC TERRITORIES USE EITHER:

BUILD UP METHOD:
Establish individual performance parameters (workload capacity: # of calls per day x # of days), frequency / miles, account types a, b or c, length of call. Draw out individual territory boundaries Adjust as needed

STEP THREE
BREAKDOWN METHOD: Determine total market sales potential Establish individual territories: Can use a market index x total sales potential, should use hands on territory analysis as territories are rarely sufficiently uniform Estimate sales volume per person and draw boundaries. Adjust as needed

STEP FOUR
Assigning sales people to territories Need to match personality of the SR to the personality of the territory (ie. miles, account type, culture, etc.) Can be a management tool
Beginner territories Penal territories Plum territories

Territory adjustment need is ongoing

STEP FOUR

continued

Set performance norms that flag when the need becomes critical. Territory can boom & far out pace sales (Alberta) / can shrink / dry up (Nfld.) Claim jumping ~ territory / account overlap Consequence of revising territories
People dont like change: it means more work / less return. The change needs to be sold Compensation format may need adjustment

STEP FIVE
Territory coverage The plan of how the territory is to be serviced Call sequence / frequency, routing Sales management should only do the initial set up Assigned rep should submit modifications with as their territory knowledge develops. Managements role is to set performance standards e.G. Calls per day, etc. Need to factor in account merchandising, prospecting.

STEP SIX
Monitor sales Cost of sales on an ongoing basis.

Sales Organization Structure & Sales Force Deployment

A dynamic management undertaking that must be constantly assessed and fine tuned to ensure the ideal balance between profitability and the development of continued sales growth.