1 Sales & Distribution Management (2005) Martin Khan Instructor Abdel Fatah Afifi MA&T, MBA, BA, ACPA, CPT 1 st Semester 2009/2010

2 Chapter 11 Sales Organization

3  Once a plan has been formulated, the next logical step is to organize a sales force to achieve the objectives of the enterprise.  Decisions must be made as to the type of sales tasks required to be performed and how the sales people are to be grouped together to exercise efficiency and effectiveness.  The scope of their sales responsibility, line authority and accountability also should be defined so that their activities can be well coordinated.

4 What does sales organization mean?  Sales organization is a group of people working together to achieve the objective of sales – which is to capture a certain share of market while satisfying the customer.  A sales organization is both an orienting point for cooperative Endeavour and a structure of human relationships.  It is a group of individuals striving jointly to reach qualitative and quantitative objectives and bearing formal and informal relations to one another.

5 Needs to build organization  A sales organization bridges the gap between the market and the productive capacity of the firm.  If market changes by size, also trends, competition or other environmental factors, sales functions have to be adjusted.  The role of an organization can be compared to the skeleton of the human body. It provides a framework within which functions take place.

6 Purpose of organization 1. Defines lines of authority 2. Developing the sales organization

7 Purpose of organization Defines lines of authority  Defines people in the organization in terms of authority, responsibility and accountability and identifies flow of authority.  It enables the sales person to identify whether their authority is line, staff, or functional. 1. Line authority 2. Staff authority 3. Functional authority

8 Purpose of organization Defines lines of authority 1. Line authority: carries the power to requires by those lower in the organizational hierarchy and make decisions on the need, place and time of action over a wide range of matters. 2. Staff authority: is the power to suggest to those holding line authority the method for implementation of an order. 3. Functional authority: enables specialists in particular areas such as in technical product service to enforce their directives within a specific and limited field. 1. Ensures that all necessary activities are assigned and performed 2. Establishes basis of communication 3. Provides for coordination and balance 4. Provides for coordination and Balance 5. Provides insight into avenues of advancement 6. Economizes on executive time

9 Purpose of organization Developing the sales organization The setting up of an organization or the sales organization development takes place in a series of steps. These steps are as follows: 1. Defining the sales organization's objectives. 2. Defining the various activities that need to be performed to achieve these objectives and estimating the cost and volume of each of these. 3. Grouping of the activities and positions. 4. Assignment of personnel to positions 5. Control and coordination by formal and informal means.

10 Steps in Sales Organization Development 1. Step 1: 1. Define sales objectives (quantitative and qualitative) by considering what the company wants in terms of: 2. Growth / survival 3. Market share 4. Market leadership 5. Customer relations 2. Step 2: 1. Define various activities that need to be performed to achieve these objectives. 2. Define cost and volume of each activity.

11 Steps in Sales Organization Development 3. Step 3: 1. Grouping of activities: 2. Identifying position for assigning the activities. 3. Classify and group closely related activities. 4. Decide on the hierarchy of the activities and the level of each activity which will be performed. 4. Step 4: 1. Assignment of personnel to positions: 2. Define relationship between positions. 3. Define nature of authority. 4. Assign personnel to position.

12 Steps in Sales Organization Development 5. Step 5: 1. Coordination and control of position. 2. Check the organization structure to ensure: 3. Provision of coordination and control. 4. Provision of growth. 5. Provision of flexibility and control.

13 Centralization / Decentralization in sales organization In centralized system: Recruiting, Training, Compensation, and Evaluation are all managed from the central head quarter. In decentralized system: The field sales manager take up most of these functions. It also depends on: 1. Size of operation, 2. Cross effectiveness, and 3. Competitive necessities.

14 Centralization / Decentralization in sales organization Advantages of decentralized sales force management: 1. The sales volume increases to cover the fixed cost. 2. There is intensive cultivation of the market. 3. Due to effective control of sales personnel there is a comparatively better provision for improvement of customer services. 4. Travelling expenses and allowances given get reduced considerably. 5. A well managed channel structure offers a good training ground as the shortcoming are well known to the executives. 6. The motivation and moral of the sales force increases. 7. It provides effective control, improves supervision and increases sales productivity.

15 Basic types of organizational structures  The sales department's structure evolves from the needs of the business. Different companies have different organizational structure depending upon their needs. The organizational structure is affected by company size, practices of competitors, marketing channels, customers and the personalities and abilities of personnel.

16 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.

17 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.

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

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

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

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

22 Organizational Structure Environmental Characteristics Task Performance Objective Specialization High Envir. uncertainty NonroutineAdaptiveness Centralization Low Envir. Uncertainty RepetitiveEffectiveness Selling-Situation Factors and Organizational Structure

23 Simple Product Offering Complex Range of Products Customer Needs Different Customer Needs Similar Market- Driven Specialization Product/Market- Driven Specialization Geography- Driven Specialization Product- Driven Specialization Customer and Product Determinants of Sales Force Specialization

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

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

26 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 Manager Sales Training Manager Salespeople (50)

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

28 Large Small Complexity of Account Size of Account Large Account Simple Complex Major Account Regular Account Complex Account Identifying Major Accounts

29 Develop Major Account Salesforce Assign Major Accounts to Sales Managers Assign Major Accounts to Salespeople along with Other Accounts Major Accounts Options

30 Comparison of Sales Organization Structures Comparison of Sales Organization Structures Organizational Structure AdvantagesDisadvantages 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

31 Comparison of Sales Organization Structures Comparison of Sales Organization Structures Organizational Structure AdvantagesDisadvantages 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

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

33 Salesforce Deployment 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? Sales Force deployment decisions can be viewed as providing answers to three interrelated questions.

34 Interrelatedness of Sales Force Deployment Decisions 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 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 Allocation of Selling Effort Sales Force Size Sales Force Size Territory Design Territory Design

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