Sales Management 6 Sales Organization

Purpose of Sales Organization Divide and coordinate activities so that the group can accomplish objectives better than if acting as individuals. Divide and coordinate activities so that the group can accomplish objectives better than if acting as individuals. –Specialization of Labor –Stability and Continuity –Coordination and Integration Goals  Structure Goals  Structure

Specialization of Labor Concentrate: Become more proficient at one thing. Concentrate: Become more proficient at one thing. Assign tasks according to ability. Assign tasks according to ability. Line/Staff organization is most common. Line/Staff organization is most common.

Stability and Continuity You can organize around activities, not around individuals. You can organize around activities, not around individuals. The organization survives the individuals within it. The organization survives the individuals within it.

Coordination and Integration Activities of the sales force must be integrated with customer needs and concerns. Activities of the sales force must be integrated with customer needs and concerns. Selling activities must be coordinated with other departments: production, product development, logistics, finance. Selling activities must be coordinated with other departments: production, product development, logistics, finance. Selling tasks among specialists must be coordinated. Selling tasks among specialists must be coordinated.

Internal: Horizontal Structure Geography : States/Regions, Downtown/Suburban Geography : States/Regions, Downtown/Suburban Product Type : Yard Equipment vs. Power Tools Product Type : Yard Equipment vs. Power Tools Customer Type : Industrial/Consumer, Hospitals/Schools, Wholesalers/Retailers Customer Type : Industrial/Consumer, Hospitals/Schools, Wholesalers/Retailers Selling Function : Prospecting, presenting, servicing Selling Function : Prospecting, presenting, servicing

Geography: Urban/Suburban; City/Region/State

Product Type: Lawn Equipment/Power Tools

Customer Type: Industrial/Consumer; Institutions; Wholesale/Retail

Selling Function: Prospecting, Presenting, Closing

Geographic Organization Simplest and most common form Simplest and most common form Each salesperson handles all sales functions in the territory. Each salesperson handles all sales functions in the territory. Advantages: Advantages: –Cheaper: travel, management –One point of contact for customer Disadvantages: Disadvantages: –No division/specialization of labor –Salespeople focus on products/customers that benefits themselves.

Product Orientation Used primarily by firms with large and diverse product lines, and firms with highly technical products. Used primarily by firms with large and diverse product lines, and firms with highly technical products. Advantages : Advantages : –Familiarity with technology and applications –Can lead to closer coordination with production –Better control: can allocate across company lines. Disadvantages : Disadvantages : –Duplication of effort  higher selling costs –Need more coordination –Multiple contact people for customers

Customer/Market Organization Advantages : Advantages : –Better understanding of customers’ needs –Can be trained to sell to particular customers (e.g. Hospitals vs. Schools) –Can gain insight into product applications, innovations, new products –Managers can vary sales force size to market Disadvantages : Disadvantages : –Higher selling expenses –Large customers can have multiple sales contacts

Selling Function Organization Acquiring new customers (development specialists) vs. maintaining and servicing existing customers Acquiring new customers (development specialists) vs. maintaining and servicing existing customers Telemarketing: Inside/Outside Sales Telemarketing: Inside/Outside Sales –Prospecting/Qualifying: turn leads over –Servicing problems quickly: hotlines –Seeking repeat sales: especially small & remote customers –Quicker communication on noteworthy developments (new products, promotions, etc.) –Feed-in via targeted advertising, direct mail, toll-free lines, web pages

National/Key Accounts I Rules of Thumb: 10% of customers can lead to 50% of sales; 20% can lead to 80%. Salesperson must be a business manager: Salesperson must be a business manager: –Be able to customize products/services –Knowledgeable about strategic objectives –Can build and implement a business plan

National/Key Accounts II Major account management has dual goals: Major account management has dual goals: –Making sales –Developing long term relationships with major customers Larger share of customer leads to larger profit. Larger share of customer leads to larger profit. But: But: –Major accounts often need detailed and sophisticated treatment. –Need more experienced, expert salespeople with greater authority. Commission may lead to conflict.

National/Key Accounts III Assign key accounts to top sales executives Assign key accounts to top sales executives Create separate corporate division Create separate corporate division Create separate sales force Create separate sales force

National/Key Accounts IV Smaller firms don’t have resources for separate division or sales forces. Smaller firms don’t have resources for separate division or sales forces. They have relatively few major accounts They have relatively few major accounts Salesperson must be high enough in the organization to make/influence decisions. Salesperson must be high enough in the organization to make/influence decisions. Takes time from managerial responsibilities. Takes time from managerial responsibilities.

National/Key Accounts V When few customers account for a large percentage of sales: can coordinate manufacturing, logistics, marketing and sales. When few customers account for a large percentage of sales: can coordinate manufacturing, logistics, marketing and sales. But there is often a duplication of efforts and added sales expenses. But there is often a duplication of efforts and added sales expenses.

National/Key Accounts VI Treat major account executives like: Treat major account executives like: –Regional sales managers –District managers –Vice presidents Advantages : Advantages : –Know customer better, can service better –Often viewed as promotion, can assign best people Disadvantages : Disadvantages : –Duplication of effort –Expense

Team Selling Response to more complex relationship with customer: Stronger knowledge, better service Response to more complex relationship with customer: Stronger knowledge, better service Get different expertise from multiple organizational functions Get different expertise from multiple organizational functions High costs: time and personnel High costs: time and personnel Complicated: coordination, motivation, compensation Complicated: coordination, motivation, compensation

Multi-level Selling Teams call on corresponding management levels at the customer’s office. Teams call on corresponding management levels at the customer’s office. –VP to VP –Engineer to Engineer –Technician to Technician

Co-Marketing Alliances Teams from multiple organizations work together to sell complex products or systems. Teams from multiple organizations work together to sell complex products or systems. Capitalize on each member’s competencies (technical knowledge, sales force) Capitalize on each member’s competencies (technical knowledge, sales force)

Starbuck’s Board of Directors Howard Schultz Starbucks Corporation chairman Jim Donald Starbucks Corporation president and chief executive officer Barbara Bass Gerson Bakar Foundation president Howard Behar Starbucks Corporation director William (Bill) Bradley Allen & Company LLC managing director Mellody Hobson Ariel Capital Management, LLC Ariel Mutual Funds president Olden Lee PepsiCo, Inc. retired executive James Shennan, Jr. Trinity Ventures general partner emeritus Javier Teruel Colgate - Palmolive Company vice chairman Myron Ullman, III J.C. Penney Company, Inc. chairman and chief executive officer Craig Weatherup Pepsi-Cola Company retired chief executive officer

Logistical Alliances and Computerized Ordering Direct and often automatic reordering (e.g. EDI) Direct and often automatic reordering (e.g. EDI) Easier for customer Easier for customer Creates structurally tied relationship Creates structurally tied relationship Frees sales force up to sell to new customers, or new products to existing customers. Frees sales force up to sell to new customers, or new products to existing customers.

Global Sales Structure Same basic issues: Same basic issues: –Own sales force vs. agent –If own people, what structure? Decision factors more complicated due to distance, customs, legal/political considerations. Decision factors more complicated due to distance, customs, legal/political considerations.

Vertical Structure I Should Sales be integrated within the Marketing Department as it seems to be in over ¾ of companies responding to survey? Should Sales be integrated within the Marketing Department as it seems to be in over ¾ of companies responding to survey? Should it be a separate unit as it is in about 20% of the responding companies? Should it be a separate unit as it is in about 20% of the responding companies?

Vertical Structure II Number of Management Levels vs. Span of Control Number of Management Levels vs. Span of Control –How many levels to have? –How many people should each manager supervise? –Fewer levels »Facilitates communication »Lowers administrative costs »Lowers quality: less effectiveness and productivity

Vertical Structure III Reduce span of control if: Reduce span of control if: –Sales task is complex –Profit impact of each salesperson’s performance is high –Salespeople are well paid and professional

Vertical Structure IV Where should authority reside? Where should authority reside? –Hiring, Firing, Evaluation Selling and Managerial Responsibilities? Selling and Managerial Responsibilities? –Most spend about 1/3 of time on sales (vs. mgmt) –They want commission rewards –Usually needed on key accounts, especially for their sales ability Should Sales Manager control sales-related activities? Should Sales Manager control sales-related activities? –Installation, maintenance, order processing, delivery –Usually not credit: conflict and awkward

Vertical Structure V Technology may change sales management issues as much as it has sales person issues. Cell phones, computers, etc. Technology may change sales management issues as much as it has sales person issues. Cell phones, computers, etc. Quality time? Staff Support vs. Outsourcing Staff Support vs. Outsourcing –Specialized knowledge –Most common: recruiting, training, sales analysis (Research?)