4 Organizing the Sales Effort McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.

Organize Around Customers Historical Product-centered Expertise in features and functions Today Customer-centered Expertise in business issues Sales resources deployed to provide best service to best customers Source: HR Chally Group (2007), The Chally World Class Excellence Research Report: The Route to the Summit. Dayton, OH: HR Chally Group.

Identify purposes of sales organization Understand different horizontal organizational structures of a sales force. Outline major issues in key account and team selling. Discuss key vertical structure issues in sales organizations. Identify important issues in starting a new sales force from the ground up.

Purposes of Sales Organization Divide and arrange activities so the firm can benefit from specialization of labor Provide for stability and continuity in firm’s selling efforts Provide for coordination of activities assigned to sales force and to departments in the firm

Division and Specialization of Labor Increase productivity - specialists can become proficient at assigned tasks Divide required selling activities to gain maximum benefits within the sales force

Division and Specialization of Labor Line organization Vertical Chain of command runs from chief sales executive down through levels of subordinates Each subordinate responsible to one person

Division and Specialization of Labor Line and staff organization Vertical (most common) Several sales management activities assigned to separate specialists

Stability and Continuity Organize activities without regard to talents of current employees People can be trained to fill positions Same activities will be carried out even if designated individuals receive promotions or leave

Sales Organization Structure Horizontal – divides selling activities among sales force Vertical – assigns authority for specific sales management activities

Horizontal Structure Options Outside Agents OR Company Sales Force Geographic Product Market/ Customer Type Team Selling Selling Function Note to instructor – mouse-over a shape then click on it to link to the slide with relevant details. A “back arrow” appears on each detail slide allowing you to return to this overview slide. Co-Marketing Nat’l Key Accounts Selling Centers Telemarketing Matrix Organizations 4-10

Outsourcing the Sales Force Types of agents Manufacturer’s representatives Sell part of the output of their principals Take neither ownership nor physical possession of goods Cover specific territory and specialize in limited range of complementary products Selling agents Do not take title or possession of the goods they sell Compensated by commissions Broad authority to modify prices and terms of sale Actively shape manufacturer’s promotional and sales programs Horizontal Structure Options

Compatible territories Compatible customers Credibility of the rep Compatible lines Compatible territories Compatible customers Credibility of the rep Capabilities Credits 4.1 Six C’s of finding the right rep Horizontal Structure Options Source: Dan Hanover, “Independents Day,” Sales & Marketing Management, April 2000, pp. 65–68.

Outsourcing Considerations Economic Criteria Control Transactions costs Strategic Flexibility Horizontal Structure Options

Geographic Organization Simplest and most common method Individual salespeople assigned to separate geographic territories Responsible for performing all activities necessary to sell all products Horizontal Structure Options

Geographic Organization Lowest costs Travel time and expenses minimized Sales administration and overhead costs kept low Does not provide benefits associated with specialization of labor Horizontal Structure Options

Geographic sales organization Horizontal Structure Options 4.3

Product Organization Separate sales force for each product (or category) in the line Salespeople master effective selling methods for single or related products Closer alignment of sales and production Sales management controls allocation of selling effort across the line Duplication of effort Horizontal Structure Options

4.4 Sales force organized by product type Horizontal Structure Options

Customer Type/Market Organization Natural extension of marketing concept and strategy of market segmentation Better understanding of customer needs Increased familiarity with certain businesses Increased control over allocation of selling effort Possible higher selling and administrative costs Duplication of effort Horizontal Structure Options

4.5 Sales force organized by customer type Horizontal Structure Options 4.5

Selling Function Organization Salespeople specialize in performing different selling functions – e.g. prospecting and developing new accounts versus maintaining and servicing existing customers Skills matched to sales function Developmental salespeople often a successful alternative Customer objections to switch to maintenance salesperson Feelings of rivalry between the sales force Horizontal Structure Options

Telemarketing Form of organization by selling function Qualifying potential new accounts Servicing existing accounts quickly Seeking repeat purchases from existing accounts that cannot be covered efficiently in person Providing quick communication of newsworthy developments Horizontal Structure Options

4.2 Database Capabilities and Telemarketing Prequalifies prospects, can transfer to salesperson to close sale Collects/provides information Database Database Analysis Software Telemarketing Customized Direct Mail Formulates prospecting solutions – matches homeowners against other data to qualify customers, predict interest; generates prospect universe Note to instructor – click on each box to display relevant detail information Follows-up with prospects not ready to buy, provides response vehicles (web address, toll-free #) Horizontal Structure Options Source: KenSpralling, “Centex Houses Ranks Highest in Customer Satisfaction in 10 major: U.S. Markets, According to Independent Study,” www.investors.com, September 14, 2005; Alicia Orr, “Predicting a Need,” Target Marketing, February 2001, pp. 62–64.

National and Key Accounts Separate corporate division/sales force Deliver high-level customer service to attract and maintain large and important customers Key account sales execs Business managers capable of managing key accounts Customize products and services Plan and implement key account business plans Horizontal Structure Options

Team Selling Integrates functional specialists with customer relationship specialists ID team structure that meets customer needs Benefits Customer questions answered faster Customers can speak directly with desired specialist Horizontal Structure Options

Other Team Selling Structures Selling center brings together individuals from around the organization to help salesperson Matrix organization employs direct-reporting salespeople who support internal consultants with specialized expertise Multi level selling – sales team consists of personnel from various managerial levels who call on their counterparts in the buying organization Horizontal Structure Options

Co-Marketing Alliances Develop marketing and sales programs to sell integrated systems directly to the ultimate customer Horizontal Structure Options

Logistical Alliances and Computerized Ordering Customer point of view - Convenient Flexible Less time consuming How will computerized reorder systems change the role of the sales force? Horizontal Structure Options

Vertical Structure Issues Span of Control Managerial Levels 4-29

Larger Span of Control Greater control/ responsiveness due to fewer management layers Lower admin costs Reduced one-to-one communication due to larger # of subordinates Managements may be less effective, negating cost savings

Span of Control Reduce span of control when: Sales task is complex Profit impact of each salesperson’s performance is high Salespeople are well paid and professional Also, at higher levels in the organization

Managerial Decision Levels How much, where should the managerial authority lie? Hiring, firing, evaluation

Managerial Decision Levels Importance of decision = Managerial decision level Sales force pay = Managerial decision level Complex selling tasks = Managerial decision level 4-33

Managerial Selling Responsibilities Managers often active in sales to key accounts Organizations value their selling skills Managers value commissions, contact with marketplace Drawback – some managers neglect managerial responsibilities

Line and staff sales organization 4.6 Line and staff sales organization 4.6