Part III SALES FORCE ACTIVITIES Chapter 6: Sales Force Organization

XEROX Reorganization Story

Learning Objectives: Explain the various ways to organize sales force. Explain what a strategic accounts management program means. State the reasons for the growth in telemarketing. Tell why and when sales agents are utilized. Describe evolving trends in sales force organization.

Chapter Outline: Sales Force Organization. Strategic Account Management Program. Telemarketing. Independent Sales Agents. Emerging Sales Force Organization.

Structure Sales Force Organization: Impact Compensation Sales Management Role Performance Evaluation Recruiting/ Selection Training Program Figure 6-1: Decisions Affected by Sales Force Organization

Sales Force Organization: Topics Generalists Specialization Strategic Account Management Telemarketing Emerging Issues

Sales Force Organization: Generalist Structure. Product Specialization. Customer Specialization. Functional Specialization.

Strategic Account Programs: Survey Results Today In Five Years 49% 45% 24% 20% 18% 17% 16% 11% Customer Generalist Product Lines Functional Figure 6-2: How Sales Forces are Organized

Sales Force Organization: Generalist (Geographic Organization)

Figure 6-3: Geographical Sales Organization Sales Force Organization: Generalist National Sales Manager Central Regional Sales Manager Eastern Regional Sales Manager Western Regional Sales Manager Northeast District Sales Manager Mid-Atlantic District Sales Manager Southern District Sales Manager Connecticut Rhode Island Maine New Jersey Pennsy-lvania North Carolina South Carolina Vermont New York Delaware District of Columbia Georgia Alabama Massachusetts New York Virginia Maryland Mississippi Florida Figure 6-3: Geographical Sales Organization

General Structure Organization: Analysis Advantages Best for homogenous group of buyers. In-depth knowledge of the local culture, economic, and competitive conditions. Disadvantages Less knowledge of the product. Inability to create solutions for the customers problems. Focus on the easy to sell customers. 3

Figure 6-4: Product Specialized Sales Force Sales Force Organization: Product Specialists National Sales Manager Eastern Regional Sales Manager Northeast District Sales Manager Mid-Atlantic District Sales Manager Southern District Sales Manager Printer Equipment Salesperson Server Salesperson Minicomputer Salesperson Programmable Calculator Salesperson Copier Salesperson Large Computer Salesperson Figure 6-4: Product Specialized Sales Force 1

Product Specialist Organization: Analysis Advantages Allows focusing of sales effort Expertise developed in limited number of products Disadvantages More expensive to operate May result in duplication of sales calls to clients 3

Figure 6-5: Customer Specialized Sales Force Sales Force Organization: Customer Specialists National Sales Manager National Accounts Manager Eastern Regional Sales Manager Manager of Export Sales Northeast District Sales Manager Mid-Atlantic District Sales Manager Southern District Sales Manager Salesperson For Educational Institutions Salesperson for Retail Customers Salesperson for Government Agencies Salesperson for Bank Customers Salesperson for Manufacturers Salesperson for Wholesale Customers Figure 6-5: Customer Specialized Sales Force 1

Customer Specialist Organization: Analysis Advantages Consistent with market driven strategy Salespeople become customer experts Customer segments receive appropriate resources Disadvantages May conflict with marketing organization Product expertise may be lacking More expensive 4

Figure 6-6: Functional Specialization Sales Force Organization: Functional Specialists Division Marketing Manager Industry Sales Manager Systems Manager Administrative Manager Account Executives (Salespeople) System Reps (Technical Support) Market Administrative (Training & Installation) Figure 6-6: Functional Specialization 1

Functional Specialists: Alternatives Companies New Customers American Express Gillette Retention Browning-Ferris Industries End-Users Lexmark International Sales Engineers 3M AT&T Service Consultants IBM McKesson Corporation 5

Functional Specialists: Analysis Advantages More functional focused. Ability to provide problem solutions. Disadvantages May conflict with marketing organization More expensive 4

Strategic Account Management Program What is a SAMP? How to select strategic accounts? How to organize sales people?

Who are Strategic Accounts? When a customer purchases a significant volume and exhibits one or a combination of the following: Multiple people are involved in the buying process Purchasing is centralized The customer desires a long-term, cooperative working relationship The customer expects specialized attention and service

Strategic Accounts: Common Problems with Account Selection Too many “strategic accounts” “We see them as strategic, but they don’t even see us on their radar.” Too much organizational effort directed towards big name accounts Not thinking enough about return on relationship investment No common process across the organization No tracking and reviewing of strategic account selection 8

Alternative Organization Models Strategic Accounts: Alternative Organization Models Existing Sales Force Low risk; little change Management Sell National Accounts Keeps management close to customer Separate Sales Force More aggressive; more expensive; alternative to sales management for promotion for sales staff Sales Teams Use when selling process is complex 8

Strategic Accounts: Alternative Organization Model Effectiveness Existing Sales Force Least effective Lowest market performance Sales Management Somewhat more effective Slightly better market performance Separate Sales Force Fairly effective Good Market Performance Cross-Functional Sales Teams Most effective Best Market Performance Table 6-1: Doing the Math on Account Management 8

Strategic Accounts Programs: Benefits Increased sale to national accounts Increased profits from national accounts Increased market share Improved customer communications coordination 91% 83% 74% 74% 30%

Strategic Accounts Programs: Insights from Strategic Account Executives “Until the customer tell us we’re a strategic supplier, I can’t believe that they are in fact a strategic account for us.” “Strategic accounts bring the opportunities to you, instead of you always having to try to push the ideas on them.” “If our products and services aren’t critical to our customer’s performance and results, it is silly to call them ‘strategic accounts’.”

Strategic Account Programs: Survey Results How do you measure the success of a strategic account program? Sales Volume 80% Customer Satisfaction 53% Profitability 45% Volume of Recurring Revenue Stream 29% Incremental Orders from Existing Accounts 22% Number of Customer with Strategic Account Agreements 11% Number of Transactions/Orders 6% Number of Products Shipped

TELEMARKETING What is Telemarketing? What are the advantages and challenges of telemarketing?

Sales Force Organization: Telemarketing Advantages and Challenges Advantages Low cost per sales call Profitably serve small to medium customers Speed/time saving of telephone ordering Challenges Acceptance by field salespeople Management Role of the Internet 10

Figure 6-8: The Scope of Telemarketing Activities Sales Force Organization: Scope of Telemarketing Activity Description Customer Service Companies provide customers provide customers with a number they can call if they have questions. Prospecting and Lead Qualification Firms are taking a proactive approach to prospecting by having telemarketers call prospects or qualify them for face-to-face selling. Account Management Selling secondary product lines or service small customers by phone, thereby freeing their salespeople to concentrate on larger customers and strategic product lines. Promotion Support Develop newspaper and magazine ads that feature either a local or an 800 number to get additional product information or place an order. Figure 6-8: The Scope of Telemarketing Activities

Independent Sales Agents What is a Sales Agent? When to use a Sales Agent? How to Select a Sales Agent?

Independent Sales Agents The Sales Agent is an independent business given an exclusive contracts to perform the selling functions within a specified geographic areas. They take neither ownership nor physical possession of the product they sell. They always compensated by commission.

Selecting a Sales Agent Three issues to consider before selecting the sales agent: Economic Consequences. Level of Control. Market Conditions.

Figure 6-9: Total Costs of Independent Agents vs. Own Sales Force Selecting a Sales Agent Economic Consequences: Independent Agents Total Selling Costs Own Sales Force Break-Even Sales Sales Volume Figure 6-9: Total Costs of Independent Agents vs. Own Sales Force

Selecting a Sales Agent Level of Control: Control of Sales Force VS. Control of Sales Agent.

Selecting a Sales Agent Market Conditions Favoring Sales Agents The market is fragmented and customers are difficult to find or understand. Buying is decentralized. Local knowledge and local distribution is important. The company is selling only a few products. There is a good potential sales agency who has significant marketing expertise in the industry. The company is not well known and has little equity in the market. The products are easily understood commodities that have been around for a long time. The selling cycle is short and orders are typically small. It is not necessary to tightly control the selling effort. Ongoing support activities are not important and the company does not need customer information. Figure 6-10: Market Factors Favoring the Use of Sales Agents

Selecting A Sales Agents Selecting a Sales Agency 1. Define the ideal market focus. 2. Identify compatible principles. 3. Specify the necessary technical background. LOCATING AGENTS: Rep. Directories Customer References Compatible Manufactures References from Current Agents Trade Shows

Emerging Sales Force Organization Issues Centralization Versus Decentralization. Cross- Functional Coordination. Global Account Organization. Sales Teams. Selling Partners.

Global Account Success Keys The company’s value proposition must be right. Global account teams must be cross- functional Account teams must be driven from the top. A mindset of constant improvement is key.

Sales Force Organization: Evaluating Organizational Structure Financial performance -- must consider BOTH costs and revenues Adaptability Integration -- subunits of sales organization must work in harmony External Internal New competitors Changing technology Modification to channel systems Industry life cycle Company goals Management philosophy Production capabilities Technical resources