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
District
Sales
Manager
District
Sales
Manager
District
Sales
Manager
District
Sales
Manager
Span of Control
District
Sales
Manager
Management Levels
National
Sales
Manager
Span of Control vs. Management Levels
Tall Sales Organization
National Sales
Manager
District
Sales
Manager
District
Sales
Manager
District
Sales
Manager
Span of Control
Regional Sales
Manager
District
Sales
Manager
District
Sales
Manager
District
Sales
Manager
Management Levels
Regional Sales
Manager
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
Centralization
Environmental
Characteristics
Dynamic
sales
environment
Relatively stable
sales environment
Task
Performance
Performance Objective
Nonroutine
Adaptiveness
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
Government Accounts
Sales Manager
Sales Training
Manager
Zone Sales Managers (4)
District Sales Managers (5)
District Sales Managers (25)
Salespeople (50)
Salespeople (150)
Functional Sales Organization
National Sales Manager
Field Sales Manager
Telemarketing Sales Manager
Regional Sales Managers (4)
District Sales Managers (2)
District Sales Managers (16)
Salespeople (40)
Salespeople (160)
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
Geographic
Product
Advantages
• Low Cost
• No geographic duplication
• No customer duplication
• Fewer management levels
Disadvantages
• Limited specialization
• Lack of management
control over product or
customer emphasis
• 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
Disadvantages
Market
• Salespeople develop
better understanding of
unique customer needs
• Management control over
selling allocated to different
markets
• 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
Major Accounts
Sales Manager
Regular Accounts
Sales Manager
Field Sales
Manager
Western
Sales Manager
Government Accounts
Sales Manager
Office Equipment
Sales Manager
Telemarketing
Sales Manager
Eastern
Sales Manager
Office Supplies
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
How much selling effort is needed to cover
accounts and prospects adequately so that sales
and profit objectives will be achieved?
Sales Force
Size
How many salespeople are required to provide the
desired amount of selling effort?
Territory
Design
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 account’s
need for and ability to purchase the firm’s
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
–
•
Sales Productivity
–
•
Anticipated increases
The ratio of sales to selling costs
Sales Force Turnover
–
Should be anticipated
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 firm’s 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.
Number of salespeople =
Total selling effort needed
Average selling effort per
salesperson
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 don’t 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.