Chapter 7

Designing and Organizing the

Sales Force

SALES MANAGEMENT:
SHARPING FUTURE SALES LEADERS
Tanner, Honeycutt, and Erffmeyer,
2e Wesser 2014.

Copyright © 2014 Wesser Publiser

Objectives

Explain relationship b/w firm’s goals and the

structure of sales force.
Explain the advantages and disadvantages of
different sales force organizations structures.
Understand the pros and cons of outsourcing a
sales force.
Firm goals and the Sales structure.

Organization of sales force is driven by strategic goals.

In each period, firm’ strategic goals may be setup in
difference of order priority .
Therefore, Sales force also organized appropriately
with these goals.
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

7-3
Calculate the Sales Force Size

Breakdown method

Workload method

Incremental method

Others…..
The Size of the Sales Force

 Breakdown method
• Divide forecasted sales revenue by average sales dollars per
salesperson

Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall.

7-5
 Workload Method

.
7-6
The Size of the Sales Force
 Incremental method
1.Its compares the marginal profits and marginal costs
associated with each incremental salesperson
2.is difficult to develop, and it cannot be used for new sales
forces where historical data and accurate judgments are not
possible.

# of Salespeople Marginal Contribution Marginal Cost

100 $85,000 $75,000

101 $80,000 $75,000
102 $75,000 $75,000
103 $70,000 $75,000
Sales Organization Structures

Geographical
Sales Structure

Product
n be
e ca Sales Structure
f o rc ased s
ales ed b w ay
S
a n iz rent Market
org r diffe Sales Structure
e
oth
Functional
Sales Structure

Combinational
Sales Structure 7-8
Geographic-Based Structure

 Depends on physical boundaries to organize sales force

with customer accounts.
 Each salesman serves all customers in specific areas.
7-9
Geographical Sales Structure

PROs CONs

 Relatively easy to design  Work best when product line

is simple.
 Minimizes duplication of
activities between salespeople.
 Ensures a specific salesperson
is assigned to each customer
 Sales calls more efficiently
scheduled, save traveling cost.

7-10
Product-Based Structure

 Sales activities organized around related product lines or

manufacturing divisions
7-11
 Product-Based Structure
PROs
 Specialization in each product
line.
 Sales service is better
 Be useful in case of different
complex products in the firm
CONs
 Call upon the same accounts
 Little knowledge of others
 some customers confused
 Lack of communication b/w
divisions within the sales firm
 Costs higher than geographic-
based structure
7-12
Market -Based Structure

 Reps assigned to customers based on segments or

how product is sold
7-13
 Market -Based Structure

PROs CONs

 Allows sales efforts to specific  Similar to product structure

industries/ channels/ customers
 Allow satisfying customer
demands in specialization.
 Be an effective strategy when
entering new markets.

7-14
Functional Sales Structure

Sales Manager

Sales division Technicians Customer care

 Selling process divided into two or more steps

performed by varied specialists
Functional Sales Structures

PROs CONs

 Specialist in each step of  Coordinating multiple

selling process. specialists
 Salespeople can learn more  Ensuring smooth transition
about customers’ specific from account establishment to
business needs, and offer management
customized solution.

7-16
Combination Sales Structures
P r e s id e n t

F u n c t io n a l V ic e P r e s id e n t V ic e P r e s id e n t V ic e P r e s id e n t
P r o d u c t io n M a r k e t in g E n g in e e r in g

G e o g r a p h ic U .S . I n t e r n a t io n a l
M a r k e t in g M a r k e t in g
M an ager M an ager

C u sto m e r C o n su m er I n d u s t r ia l I n t e r n a t io n a l
G oods G oods S a le s
M an agers M an agers M an ager

P ro d u ct S o ap P ro d u c ts P a p e r P ro d u c ts F o o d P ro d u c ts L a t in A s ia n a n d
E u ro p ean
D iv is io n a l D iv is io n a l D iv is io n a l A m e r ic a n A f r ic a n
D iv is io n
M an ager M an ager M an ager D iv is io n D iv is io n

E a ste rn C en tral W estern

S a le s S a le s S a le s
D iv is io n D iv is io n D iv is io n
Combination Sales Structures

PROs CONs

 Sales force organized based  Complicated in management.

on mix of product, market, and
geographical factors  Can result in duplicate sales
efforts
 Work best when market is
large, product mix complex,
and customers require different
applications

7-18
 Comparison of sales Structures
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
Product in product attr. & applications • Geographic duplication
• Management control over • Customer duplication
selling effort
• Understand of customer needs
Market • Management control over • High cost
selling allocated to different • Geographic duplication
markets
• Geographic duplication
• Efficiency in performing • Customer duplication
Functional
selling activities • Need for coordination
Multichannel sales

-22
 Types of Outsourced Salespeople

Manufacturer’s Rep/  Independent contractor who does not take

Independent Agent ownership of product and does not maintain an
inventory

 Sells for many manufacturers and take

Distributor ownership of products, sell them on consignment,
or otherwise maintain an inventory

 Represents either buyer or seller and sometimes

Broker both, carries an inventory of products but does
not take ownership of them

.
Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall.
Outsourcing Independent Sales Reps

 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

7-25
 Company Salesperson or Sales Agent?

Salesperson Sales agent

• When it’s important to control sales
• When
effort,potential
productsales
or related
technology is new, buyers need highrevenue
level of
is service
low in a territory
• Company exerts greater control• over
Whensales
revenue
force efforts
will take years
• Greater control over who is hired to become substantial
• When qualified sales agents
already operate in the area
• When it’s not feasible for
company sales force to cover
entire market.

Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall.

7-26
Use of Sales Agents
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
Disadvantages
 Seller may not focus efforts for
their products.
 Shifting customer’ orders to
another product line
 Agents criticized for not
opening new accounts, not
following up on leads
 Representing too many mfgs,
and communicating poorly with
the firms they represent
7-27
 Company Salesperson or Sales Agent?

.
7-28
 Exercise # 3
1/ What type of sales structures within the sales department do you
recommend in each of the following companies?
a) Manufacturer of high – quality women’s sportswear with 100 salespeople selling to
department stores and specialty stores national wide.
b) Plumbing wholesaler covering the southern of Vietnam with 50 salespeople, their
customers are varied in demands.
c) Manufacturer of chemicals used in fertilizers with 30 salespeople selling to 500 accounts
throughout the country.
d) Manufacturer of office machine with 50 salesperson in HCM city, the product lines are
photocopy, printing, office equipments and its accessories
2/ A regional hardware wholesaler in HCM employed 20 salespeople, each
of whom sold the full line of products. It became apparent that the list of
products was simply too long for one person to sell effectively. The
company felt it had a choice of
e) Reorganizing the sales force by product lines, or
f) Adding more reps, reducing each person territory, but still having each carry the full line.
What do you recommend?
7-29
All rights reserved. No part of this publication may be reproduced, stored in
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.