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Sales Organization

Listen to the Customer & act on what they tell youPat 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.
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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
One
Organizational
large corporation
Design 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
Owner-manager 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 ProductSpecialized 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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