Sales Organization Structure & Sales Force Deployment 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. 3

Sales Force Specialization Continuum Specialists Certain selling activities for certain products for certain customers Generalists All selling activities and all products to all customers Some specialization of selling activities, products, and/or customers 2

Span of Control vs. Management Levels Flat Sales Organization Span of Control Management Levels National Sales Manager District Sales Manager

Span of Control vs. Management Levels Tall Sales Organization National Sales Manager Span of Control Management Levels District Sales Manager Regional Sales Manager

Line vs. Staff Positions National Sales Manager Regional Sales Managers District Sales Managers Sales Training Manager Salespeople Staff Position Line Position 4

Dynamic sales environment Selling Situations Selling-Situation Factors & Organizational Options Organizational Structure Environmental Characteristics Task Performance Performance Objective Specialization Dynamic sales environment Nonroutine Adaptiveness Centralization Relatively stable sales environment Repetitive Effectiveness 5

Geographic Sales Organization National Sales Manager Zone Sales Managers (4) District Sales Managers (20) Salespeople (100) Eastern Region Sales Manager Western Region Sales Manager Sales Training Manager

Product Sales Organization National Sales Manager Office Equipment Sales Manager Office Supplies Sales Manager District Sales Managers (10) Salespeople (100)

Market Sales Organization National Sales Manager Zone Sales Managers (4) District Sales Managers (25) Salespeople (150) District Sales Managers (5) Commercial Accounts Sales Manager Government Accounts Sales Training Manager Salespeople (50)

Functional Sales Organization National Sales Manager Field Sales Manager Telemarketing Sales Manager Regional Sales Managers (4) Salespeople (160) Salespeople (40) District Sales Managers (2) District Sales Managers (16)

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

Sales Organization Structures Comparison of Sales Organization Structures Organizational Structure Advantages Disadvantages Geographic Low Cost No geographic duplication No customer duplication Fewer management levels Limited specialization Lack of management control over product or customer emphasis Product Salespeople become experts in product attr. & applications Management control over selling effort High cost Geographic duplication Customer duplication 7

Sales Organization Structures 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 7

Hybrid Sales Organization Structure National Sales Manager Major Accounts Sales Manager Regular Accounts Office Equipment Office Supplies Field Sales Manager Telemarketing Commercial Accounts Government Accounts Western Eastern

Sales Force Deployment

Sales Force deployment decisions can be viewed as providing answers to three interrelated questions. How much selling effort is needed to cover accounts and prospects adequately so that sales and profit objectives will be achieved? How many salespeople are required to provide the desired amount of selling effort? How should territories be designed to ensure proper coverage of accounts and to provide each salesperson with a reasonable opportunity for success? 3

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? 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? Territory Design 4

Allocation of Selling Effort Analytical Approaches Easy to Develop and Use Difficult to Develop and Use Low Analytical Rigor High Single Factor Models Portfolio Models Decision Models

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 5

Allocation of Selling Effort Single Factor Model Example Market Potential Categories A B C D Average Sales Calls to an Account Last Year 25 23 20 16 an Account Next Year 32 24 8 6

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 6

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 6

Sales Force Size Key Considerations Sales Volume Growth Anticipated increases Sales Productivity The ratio of sales to selling costs Sales Force Turnover Should be anticipated 15

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 16

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 16

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. 16

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 19

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 Select a control element for territory boundaries / size. Determine location & potential of customers. Determine basic territories Assign sales people to territories. Establish territorial coverage plans for sales reps. 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

TO DETERMINE BASIC TERRITORIES USE EITHER: 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.