The Sales Organization Variations in Selling Organizational Structure Marketing 3345 5

Fundamental Principles Sales Force Specialization Sales Force Alternatives Sales Force Size Emerging Issues

Fundamental Organization Principles Unity of Command Each person should report to only one boss. A clear and unbroken chain of command should link every person in an organization with someone a level higher. Stability and Continuity Activities should be assigned without regard for the talents and preferences of current employees. Coordination and Activities of salespeople should be Integration integrated with customer needs, coordinated with activities of other departments, and coordinated with tasks of all salespeople. Fundamental Organization Principles 1

Geographical Sales Organization National Sales Manager Central Eastern Western Regional Regional Regional Sales Manager Sales Manager Sales Manager Northeast Mid-Atlantic Southern District District District Sales Manager Sales Manager Sales Manager Connecticut New Pennsy- lvania North South Maine and Rhode Jersey Carolina Carolina Island District of Vermont New York Delaware Georgia Alabama Columbia Massach usetts New York Virginia Maryland Mississippi Florida Geographical Sales Organization

Organization: Geographical Organizations 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 specialization of labor 3

Product Specialized Sales Force National Sales Manager Eastern Regional Sales Manager Northeast Mid-Atlantic Southern District District District Sales Manager Sales Manager Sales Manager Dictation Typewriter Minicomputer Programmable Copier Large Equipment Salesperson Salesperson Calculator Salesperson Computer Salesperson Salesperson Salesperson Product Specialized Sales Force 1

Organization: Product Specialization 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

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

Organization: Customer Specialization Advantages Consistent with market driven strategy Salespeople become customer experts Disadvantages More expensive 4

Functional Specialization Division Marketing Manager Industry Sales Systems Administrative Managers Manager Manager Account Executives Systems reps Market (salespeople) (technical support) Administration (training and installation) Functional Specialization 1

Organization: Functional Specialization Focus on phases in customer relationship: Initial sales Follow-up technical support and service Promotion efforts specialist 5

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 DESRIES A LONG-TERM, COOPERATIVE WORKING RELATIONSHIP THE CUSTOMER EXPECTS SPECIALIZED ATTENTION AND SERVICE

Strategic Account Organization Alternatives 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

BENEFITS OF STRATEGIC ACCOUNT MARKETING Increased sale to national accounts Increased profits from national accounts Increased market share Improved customer communications coordination 91% 83% 74% 74% 30%

Survey Results: Strategic Account Management Are training programs for the strategic account manager different? Provide no training for strategic account managers Different training for strategic account managers No difference in training for strategic account managers or other sales staff 37% 26% 37% 37% 37% 26%

Survey Results: Strategic Account Management Do your strategic account managers carry an assigned sales quota? Yes No No Response 68% 29% 68% 29% 3% 3%

Survey Results: Strategic Account Management Do strategic account managers have formal authority over the rest of the sales organization? No formal authority over others in the sales organization Sales team reports directly to the strategic account manager May assemble temporary “virtual” sales teams that report directly to the strategic account manager No Response 47% 7% 47% 24% 24% 22% 22% 7%

Survey Results: Strategic Account Management How do you measure the success of a strategic account program? Sales volume Customer satisfaction Profitability Volume of recurring revenue stream Incremental orders from existing accounts Number of customer with strategic account agreements Number of transactions/orders Number of products shipped 80% 53% 45% 29% 22% 11% 6% 6%

Table 8-2: Ranking of Customers’ Wants 1980 1990 2000 Contact with outside salesperson 1 3 8 Frequency and speed of delivery 2 1 2 Price 3 2 4 Range of Available Products 4 5 3 Capable inside salesperson 5 4 1

SCOPE OF TELEMARKETING’S ROLE Customer Service Prospecting and Lead Qualification Sales Support Advertising and Promotion

Doing the Math on Account Management Field Rep Telemarketing Sales calls per day 5 25 Sales calls per quarter 325 1624 Sales calls per year 1300 6500 Salespeople required 6.5 1.2 Cost per sales call $250 $15 Cost per year $1,998,750 $117,000

MAJOR BENEFITS OF TELEMARKETING Percent of Respondents CUSTOMER BENEFIT 65.2% Speed of communication to customer 21.5 Timeliness of contact 14.2 Ease/Convenience to customer 10.8 Customer relations 10.2 Frequency of contact 8.5 COST EFFECTIVE 43.7 DIRECT CONTROL 1.4 MARKETING RESEARCH 4.8 PROVIDE TECHNICAL SUPPORT 1.1

Organization: Telemarketing Advantages Low cost per sales call Profitably serve small to medium customers Speed/time saving of telephone ordering Challenges Acceptance by field salespeople Hiring, motivating & retaining good telemarketers 10

PROJECTED GROWTH IN SALESPEOPLE AND TELEMARKETERS Average Number per Company Five Years Ago Today Five Years from Now 21.99 +27.9% 28.11 +29.9% 36.49 Field Salespeople Average Number per Company Five years Ago Today Five years from Now 41.64 +27.5% 53.07 +12.5% 59.66 Source: Geri Gantman, “Exclusive Survey,” Business Marketing, (September, 2007), p. 64. 353 companies in survey.

EVOLUTION OF SELLING METHODS OLD Stage in Selling Process Prospect/ Present/ Service/ Qualify Close Reorder Face-to- Face Selling (FTF) FTF TM Large Medium Small Account Size

EVOLUTION OF SELLING METHODS NEW Stage in Selling Process Prospect/ Present/ Service/ Qualify Close Reorder National Account Manage- ment (NAM) NAM Telemar- keting (TM) TM FTF & Large Medium Small Account Size

Total Costs of Independent Agents vs. Own Sales Force Total selling costs Own sales force Break- even sales Sales volume Total Costs of Independent Agents vs. Own Sales Force

HIRING INDEPENDENT AGENTS DEVELOPING THE “IDEAL” AGENT PROFILE 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

HIRING INDEPENDENT AGENTS DEVELOPING THE “IDEAL” AGENT PROFILE Six Cs of Finding the Right Mnfr Rep Compatible Lines Compatible Territories Compatible Customers Credibility of the Rep Capabilities Credit Worthiness

Agent Decision and the Product Life Cycle Manufacturer Re-employs Rep firm to lower fixed sales costs Disengagement Decision Re-engagement Decision Introduction

Evaluating Organizational Structure Re - Organization Evaluating Organizational Structure Financial performance -- must consider BOTH costs and revenues Adaptability External - Internal New competitors - Company goals Changing technology - Management philosophy Modification to channel - Production capabilities systems - Technical resources Industry life cycle Integration -- subunits of sales org must work in harmony 18