Chap 7 Tanner - Organizing The Sales Force & Reporting Relationships 080217

Part Four: Designing and Developing
the Sales Force
7-1
Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall.
Sales Management: Shaping Future Sales Leaders
Designing and Organizing

the Sales Force
Chapter 7
7-2
How a Firm’s Goals Affect the Design
of Its Sales Force
 Organization of sales force is driven by strategic goals
 Organizational sales structures serve a number of
purposes that include
 Serving buyers effectively in ways they want to be served
 Operating efficiently as measured by cost and customer
satisfaction
 Best way to design a sales structure is to
 Determine sales activities that must be performed to reach
goals
 Create sales structure that affords highest levels of service to
buyers at lowest overall cost
 Select, train and manage reps and managers to become
experts in their assigned duties
7-4
Areas Impacted by a Firm’s Sales
Force Structure
7-5
Organizing the Members of

the Firm’s Sales Force
7-6
The Size of the Sales Force
 Breakdown method
 Divide forecasted sales revenue by average sales dollars per
salesperson
 Workload method
1.Compute total sales call workload
2.Determine amount of work performed by each rep
3.Factor in additional work responsibilities
7-7
Workload Method
7-8
Specialists vs. Generalists
 Generalist force: sells the firm’s entire product line to
a group of customers that use the product(s) similarly
 Karl Strauss Brewing Company of San Diego
 Specialist force: specializes in one product or
product line
 Computer manufacturers organize forces by consumer, B2B,
education markets because each market purchases and utilizes
products differently
 Specialized sales structure offers expertise advantages
over generalist sales force
 Coordinated to address buyers’ needs
 Integrated with other organizational functions
7-9
Geographical, Product,
and Market Structures
 Depends on physical boundaries to organize sales

Geographical force with customer accounts
Sales Structure  Interacts with buyers as generalists
 Sales activities organized around related product

Product lines or manufacturing divisions
Sales Structure  Interacts with buyers as specialists
 Reps assigned to customers based on markets or

Market how product is sold
Sales Structure  Reps learn more about customer’s specific
business needs and offers customized solutions
7-10



7-11
Geographical Sales Structure
PROs CONs
 Relatively easy to design  Work best when product line is
simple
 Minimizes duplication of effort
 Can be inefficient
 Ensures a specific salesperson is
assigned to each customer
 Sales calls more efficiently
scheduled
 Territory can be divided or
combined to respond to market
conditions
7-12
Geographic-Based Structure
7-13



7-14
Product Sales Structure
 Limitation: can be confusing for buyer
 Example: Xerox has 3 separate sales forces
1. Called on same accounts
2. Had little knowledge of each other’s products
3. Confused buyers who had genuine need for Xerox
products
4. Did not cooperate by providing leads and info to each
another
 Sales rose with combined force, but rep turnover
increased
 Some reps not interested in or able to learn and sell three
separate product lines
7-15
Product-Based Structure
7-16



7-17
Market-Based Structure
PROs CONs
 Effective strategy when a seller  Selling expenses are higher than
wants to penetrate a new market for geographic-based structure
 Allows selling firm to vary  Multiple reps calling on same
allocation of sales efforts to client
specific industries by adding to or
reducing the number of  Buyer confusion
salespersons slotted in one area  Duplication of effort
to another
 Higher expenses
 Permits firm to offer specialized
training and develop individualized
sales approaches and applications
by industry
7-18
Market-Based Structure
7-19
Functional and Combination
Sales Structures
Functional Combination
 Selling process divided into two or  Sales force organized based on mix of
more steps performed by specialists product, market, and geographical
factors
 Example: grocery
 Work best when market is large,
 Establish account product mix complex, and customers
 Manage inventory & orders require different applications
 Merchandising
CONs CONs
 Coordinating multiple specialists  Expensive
 Ensuring smooth transition from  Can result in duplicate sales efforts
account establishment to management
7-20
Pros and Cons of Various Structures
7-21
Should You Specialize Your Sales
Force?
 Sales specialization improves performance
 However:
 Specialization is expensive
 Must produce results that are greater than investment
 Sales specialization is more difficult to manage
 Requires greater oversight to align with firm’s strategy
 Changing sales assignments are challenging:
 Must modify job content and account assignments
 This requires substantial planning and investment
7-22
Common Forms of Sales Specialization
 Size
 Current and potential sales or profits
 Large firms moved from geographical to major account
 Product
 One type of product; deep product knowledge
 Industry or market
 SPs maximize industry-specific application knowledge
 Purchasing status
 “Hunters” go after new, while “farmers” serve existing
customers
Based on: David J. Cichelli, “Specialize Your Sales Force,” Sales & Marketing Management,
September/October 2008, 15.
7-23
Key Accounts
 Key Accounts: customers that are large in
terms of sales revenue and profitability and
strategically important for the future of the firm
 80/20 Rule: 80% of a firm’s total business and
profits are derived from 20% of its customers
 Large, strategic accounts require higher levels of
service and deeper buyer-seller relationships
7-24
Key Account Structures
Use Existing Force Assign Execs Create Separate
 Sales force structure is  Assigning sales and  Create separate sales
simplified marketing executives to structures to serve most
 All accounts are manage key accounts important customers
managed under a single makes sense for smaller  Integrates marketing and
organizational structure firms that cannot afford sales for key accounts
separate sales effort under one organizational
structure
CONs CONs CONs

 Reps may take short-  Can take a lot of time,  Establishing distinct sales
term view leaving less time for channels for major acc’ts
 Reps may not other duties, like is more costly
understand broader, managing sales force  Duplication of effort
overall needs of key acc’t  Financial viability if key
acc’ts lost
7-25
Reporting Relationships
within a Firm’s Sales Force
7-26
Ways to Construct Sales Force
Reporting Structure
Line Organization Line and Staff Structure

 All salespeople, from highest to lowest  Using a line structure for core sales
levels, report to a single manager functions and placing support activities
(sales training, customer service) into
Advantages centers or departments outside of the
 Chain of command is clear line structure
 Actions can be implemented quickly
and easily through firm’s line structure  Geographical, product, and market
sales force structures are examples of
Disadvantages Line and Staff Sales Structure
 As firms adopt customer relationship
strategies, reps need greater authority
to make quick decisions to keep
customers satisfied
 To make quicker decisions sales
organization must be flattened
7-27
Span of Control
 Span of control: number of individuals that report directly to a
sales manager
Span of Control Ratios (Rep:Manager)
 Customized customer solutions result in narrower spans of

control (fewer employees reporting to sales manager)
 Routine trade sales and telemarketing activities allow broader
span of control (larger numbers of employees reporting to
sales manager)
7-28
Adding Independent Sales Reps
to the Sales Structure
 Sell on behalf of mfgs or other sellers in territories

Clients where no company sales force is present
 Receive commission for all sales they make within

Commission an assigned geographical territory
Ownership  Do not take ownership of the product
Inventory  Do not maintain an inventory
 Traditionally sells several related, noncompeting

Sales product lines
7-29
Relationship Between Company Sales
Managers and Agents
 Selling firm can contract with mfg’s agent or
wholesaler’s sales force to manage accounts in
geographical regions
 Example: company sales force manages larger, more
profitable territories and also contract with agents to
service less developed, less profitable geographical
territories (insurance companies)
 Company sales mgr has little direct control over agents
other than dissolving the agency relationship
 Sales mgr must motivate agents by appealing to self-interests
7-30
Use of Sales Agents
 Common for manufacturers to use
sales agents when entering new
territories with low or unknown sales
volumes
 Selling costs (commissions) incurred only
when product or service is sold
 Advantages
 An “in-place” or existing sales force
 Established buyer relationships
 Little (or no) fixed costs
 Experienced sales personnel
 Lower costs per sales call
 Long-term stability in the territory
7-31
Use of Sales Agents
 Tendency for mfgs to take credit for positive
sales outcomes and assign blame for negative
outcomes
 Disadvantages
 Seller may not receive equal time for their products
 Agents blamed for shifting sales call focus to another
product line when buyer’s need is not easily identified
 Agents criticized for not opening new accounts, not
following up on leads, representing too many mfgs, and
communicating poorly with the firms they represent
7-32
Sources of Conflict Between Firm and
Selling Agent
7-33
Company Salesperson or Sales Agent?
 Break-even analysis: compares fixed and variable costs
associated with the two types of reps
7-34
Company Salesperson or Sales Agent?
 Salesperson  Sales agent
 When it’s important to  When potential sales
control sales effort, product revenue is low in a territory
or related technology is  When revenue will take
new, buyers need high years to become
level of service substantial
 Company exerts greater  When qualified sales
control over sales force agents already operate in
efforts the area
 Greater control over who is  When it’s not feasible for
hired company sales force to
cover entire market (e.g.,
National Semiconductor,
Advanced Micro Systems)
7-35
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a retrieval system, or transmitted, in any form or by any means, electronic,
mechanical, photocopying, recording, or otherwise, without the prior written
permission of the publisher. Printed in the United States of America.

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Part Four: Designing and Developing

the Sales Force

Designing and Organizing

Organizing the Members of

 Depends on physical boundaries to organize sales

 Sales activities organized around related product

 Reps assigned to customers based on markets or

 Depends on physical boundaries to organize sales

 Sales activities organized around related product

 Reps assigned to customers based on markets or

 Depends on physical boundaries to organize sales

 Sales activities organized around related product

 Reps assigned to customers based on markets or

 Depends on physical boundaries to organize sales

 Sales activities organized around related product

 Reps assigned to customers based on markets or

CONs CONs CONs

Line Organization Line and Staff Structure

 Customized customer solutions result in narrower spans of

 Sell on behalf of mfgs or other sellers in territories

 Receive commission for all sales they make within

Ownership  Do not take ownership of the product

Inventory  Do not maintain an inventory

 Traditionally sells several related, noncompeting

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