Organizing the Modern Sales Force

Sales & Distribution Management Marketing 3345

Importance of Sales Organization Decisions

Organizing the activities and management of the sales force forms a major part of strategic sales planning Managers are becoming more proactive in restructuring A strong corporate vision and effective strategic market planning are closely linked with how the organization is structured and how it interacts with its customers

Purposes of Sales Organization

Activities should be divided and arranged in such a way the firm can benefit from the specialization of labor. The organizational structures should provide for stability and continuity in the firms selling efforts. The structure should provide for the coordination of activities assigned to different persons in the sales force and different departments in the firm.

Division and Specialization of Labor

Increase productivity - each specialist can concentrate efforts and become more proficient at the assigned task Divide required selling activities to gain maximum benefits of specialization within the sales force Line organization - vertical organization, chain of command runs from the chief sales executive down through levels of subordinates

Division and Specialization of Labor Line

and staff most common design Concerns

What specific functions should be assigned to staff? How can staff activities be integrated with line sales manager activities? Should staff activities be performed in-house inor outsourced to independent contractors?

Organize for Stability and Continuity

Organize activities without regard to the talents or preferences of current employees. People can be trained or recruited to fill positions. The same activities will be carried out at the same positions within the firm even if designated individuals receive promotions or leave.

Coordination and Integration

The more an organization divides tasks among specialists, the more difficult integrating those tasks becomes. Issues:

Sales force activities must be integrated with customer needs. Selling activities must be coordinated with other departments. Tasks must be integrated.

Selling Agent Decision and Product Life CycleDisengagement Decision Re-engagement DecisionManufacturer Re-employs Rep firm to lower fixed sales costs

Decline

Introduction

Outsourcing the Sales Force Manufacturers

Representatives

intermediaries who sell part of the output of their principals. Take neither ownership nor physical possession of the goods they sell. Cover a specific territory and specialize in a limited range of complementary products.

Outsourcing the Sales Force Advantages

of Manufacturers Reps

Many established contacts and prospects Familiarity with the technical nature and applications of specialized products The ability to keep expenses low by spreading selling costs They appear as a variable cost item on their principals income statement

Outsourcing the Sales Force

Six Cs of finding the right Mnfr Rep Compatible lines Compatible territories Compatible customers Credibility of the rep Capabilities Credits

Outsourcing the Sales Force Selling

Agents

Intermediaries who do not take title or possession of the goods they sell Compensated by commissions from their principals Have broad authority by their principals to modify prices and terms of sale Actively shape the manufacturers promotional and sales programs

Considerations for Outsourcing the Sales Force Economic Control Transactions

Criteria

costs Strategic Flexibility

Considerations for Outsourcing: BreakBreak-even

Common Bases for Structuring the Sales Effort Geographic

organization Product organization Organization by customer type or markets Organization by selling function

Geographic Organization

Simplest and most common method Individual salespeople assigned to separate geographic territories Each salesperson is responsible for performing all activities necessary to sell all the products

Geographic Organization

Advantages Tends to achieve lowest costs Travel time and expenses are minimized. Sales administration and overhead costs are kept low.

Disadvantages It does not provide any benefits associated with the specialization of labor.

Geographic Organization

Product OrganizationA separate sales force for each product (or category) in the line.

Advantages Individual salespeople master effective selling methods for single or related products. Closer alignment of sales and production possible. Sales management controls the allocation of the selling effort across the line.

Disadvantages Duplication of effort.

Product Organization

Organizing by Customer Type or MarketsOrganizing a sales force by customer type is a natural extension of the marketing concept and a strategy of market segmentation.

Advantages Better understanding of customer needs Increased familiarity with certain businesses Increased control over the allocation of the selling effort

Disadvantages Possible higher selling and administrative costs Duplication of effort

Organizing by Customer Type or Markets

Organizing by Selling Function

Different salespeople specialize in performing different selling functions e.g. prospecting and developing new accounts versus maintaining and servicing existing customers.

Role of Telemarketing

Prospecting for and qualifying potential new accounts Servicing existing accounts quickly when unexpected problems arise Seeking repeat purchases from existing accounts that cannot be covered efficiently in person Gaining quicker communication of newsworthy developments

Doing the Math on Account ManagementField Rep

Telemarketing 25 1624 6500 1.2 $15 $117,000

Sales calls per day Sales calls per quarter Sales calls per year Salespeople required Cost per sales call Cost per year

5 325 1300 6.5 $250 $1,998,750

EVOLUTION OF SELLING METHODS - OLDStage in Selling ProcessProspect/ QualifyFace-toFace Selling (FTF)

Present/ Close

Service/ Reorder

Large

FTF

FTF

Account Size

Medium

FTF

FTF

FTF

Small

FTF

FTF

TM

EVOLUTION OF SELLING METHODS - NEWStage in Selling ProcessProspect/ QualifyNational Account Management (NAM)

Present/ Close

Service/ Reorder

Large

NAM

NAM

Account Size

Medium

Telemarketing (TM)

FTF

FTF & TM

Small

TM

TM

TM

National and Key Accounts Organizational

approach to deliver customer service necessary to attract and maintain large and important customers. execs must be able to . . .

Sales

be business managers capable of managing key accounts customize products and services plan and implement key account business plans

Organizing for National and Key Accounts

Assign key accounts to top sales executives Create separate corporate division Create a separate sales force to handle major accounts

Team Selling Team

selling integrates functional specialists with customer relationship specialists. Benefits include:

Questions answered faster People with similar interests speak directly with one another

Team SellingA

selling center brings together individuals from around the organization matrix organization employs directdirectreporting salespeople who support internal consultants with specialized expertise

A

Alternative Organizations

Multi level selling sales team consists of personnel from various managerial levels who call on their counterparts in the buying organization CoCo-Marketing Alliances develop marketing and sales programs to sell integrated systems directly to the ultimate customer

Logistical Alliances and Computerized Ordering From

the customer point of view, computerized ordering isConvenient, Flexible and Less time consuming

How

will computerized reorder systems change the role of the sales force?

Vertical Structure of Sales Organizations

Key questions: How many levels of sales managers should there be?

How many people should each manager supervise? (span of control)

Vertical Sales Organization Generally,

span of control should be smaller and number of levels of managers larger when:

The sales task is complex The profit impact of each salespersons performance is high The salespeople in the organization are well paid and professional

Vertical Sales Organization

Span of control should be smaller at higher levels in the sales organization Other issues: How much authority should each manager be given? At what level of sales management should authority for different decisions lay?

Building Blocks for New Sales Force Startup

Start with a strategy Appoint an expansion team Leverage existing strengths Go to the press Avoid compensation snafus Provide support Sales managers assigned to create a new sales force should employ best practices

Key Terms

division and specialization of labor line organization line and staff organization outsourcing the sales force manufacturers representatives selling agents transaction cost analysis (TCA) geographic organization product organization organization by customer type

organization

by selling

function telemarketing national or key accounts team selling selling center matrix organization multilevel selling co-marketing alliances logistical alliances span of control