1. ORGANIZATION AND COMPENSATION OF THE SALES FORCE

2. I. ORGANIZING THE SALES FORCE5

3. Generalist versus Specialist Structures
Sales force organizational structure vary from:
To generalist structures where each salesperson sells all products to all customers within a particular geographic area .
To specialist or highly specialized sales forces ,where teams of salespeople focus on specific products, markets, or functions.
Specialization presents important challenges in terms of coordination, integration, and higher expenses .

4. 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

5. 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

6. 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

7. 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

8. Organization: Customer Specialization
Advantages
Consistent with market driven strategy
Salespeople become customer experts
Disadvantages
More expensive
Product expertise may be lacking 4

9. 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

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

11. 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

12. Sales Force Organization
There is no one best way to organize the sales force , and companies are experimenting with many different forms in order to compete profitably .
A company should start by examining its customers and looking at its organization from the customer’s perspective .

13. 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

14. II. COMPENSATING THE SALES FORCE5

15. Introduction
Compensation in the global market is an extremely important managerial area
This is because the compensation plan:
Helps attract potential salespersons
Impacts a salesperson’s motivation
Is a determinant of status and value
Determines lifestyle and purchasing power

16. In Global Market
Compensation package is complex and affected by multiple forces:
A balance between company policies and country-specific elements
Total compensation package includes financial
Salary, commission, bonus, stock options, benefits
and non-financial incentives
Awards, recognition, vacation, and promotion

17. Compensation Plans
Hard to compare compensation plans because of their differences
Lower salary, but higher deferred components
Cannot simply transfer a compensation plan from one culture to another
What works in one culture will not work in another!
Compensation should motivate sales force to accomplish goals set by management
Compensation may be changed to meet firm goals

18. Three Types of Compensation Plans
Straight Salary
Straight Commission
Combination Plan

19. 1. Straight Salary
Salesperson paid a set amount of money based upon hours or days worked
Often adopted when salesperson must devote significant amounts of time to other duties
Market research, customer service, administration
Simple to administer by sales manager
But, no direct link between performance and reward!
More commonly used in Europe and may be difficult to change by global sales managers

20. Dominant market share in mature, stable industry
TYPICAL PROFILE OF A STRAIGHT SALARY COMPANY
Dominant market share in mature, stable industry
Highly defined and stable customer base
Strongly centralized and closely managed selling effort
Significant number of house accounts
Highly team-oriented sales effort
Service versus selling emphasis

21. 2. Straight Commission
Adopted by performance-oriented firms that pay salesperson for their achievements
Each person is paid a percentage of their total sales
Easy to evaluate performance
Plans encompass an element of insecurity
Not believed acceptable in some cultures, like EU
Some evidence of acceptance in Japan
Can lead salesperson to shirk duties or pressure customers to buy

22. Low barriers to entry into the job
PROFILE OF A COMMISSION PLAN COMPANY
Low barriers to entry into the job
Limited corporate cash resources
Small entrant into an emerging market or market segment
High risk reward sales force culture
Undefined market opportunity or customer base
Inability to set quotas or other performance criteria
Volume-oriented business strategy

23. 3. Combination Pay Plan The combination plan is the most popular
Employed by more than 80% of US firms
May appear in many forms:
Salary, commission, individual and group bonuses
Basic security bestowed by set salary
Motivation introduced by commission/bonus
Combination plans more time consuming for sales managers to oversee

24. Numerous types of combination salary plans exist
Numerous types of combination salary plans exist. The more popular plans are:
Salary and commission
Salary and bonus: individual or group bonus
Salary, commission, and bonus: individual or group bonus

25. PROFILE OF A COMBINATION-PAY PLAN COMPANY
Established company with growth potential, many products, and active competition
Need to direct a complex set of behaviors
Need for a variable pay component that will ensure top performers are rewarded commensurately

26. Discussion Questions
Which pay plan would work best for a software firm that is a market leader?

27. Sales Contests
Sales contests are short-term incentive programs implemented to motivate salespersons to achieve specific goals or activities
For sales contests to be successful:
Objectives must be specific and clearly defined
Contest theme must be exciting and clearly communicated
Each salespersons must believe they can win
Awards must be attractive to participants
Contest must be promoted and managed properly

28. Sales Contest Elements
Contest Objectives
To increase total and product sales most common
Sales force must be given sufficient time
All contest information and rules must be clear
Theme
Contests receive a theme to create excitement
Chance of winning
Compete against self, others, or as a team?
In U.S. salesperson has about a 40% chance of winning

29. Types of Rewards
Sales contests can offer many types of reward in the form of:
Cash, prizes, or travel
Perceived value very important as it must be of sufficient value to motivate additional effort
Promotion of contest important
Launched as a special event with handouts
Large scorecards to communicate progress
Newsletter articles or interim prizes can keep motivation up

30. Sales Contest Concerns
A number of concerns have been raised about sales contests
When not properly designed contests take a lot of managerial time to administer
Improper contests can actually de-motivate
Do sales contests generate additional sales?
Should sales force be paid twice for doing job?
If contests are for short-term, then why have a “never-ending” sales contest?

31. COMPENSATION IS MORE THAN MONEY
Any type of sales organization can reward sales performance in three fundamental and interrelated ways:
1. Direct financial rewards.
2. Career advancement and personal development opportunities.
3. Nonfinancial compensation.

32. Non-Financial Incentives
Human needs require approaches other than compensation to remain satisfied
Ability to grow
Recognition programs
Salesperson of the year, President’s Club
Opportunity to travel
Educational assistance

33. SALES FORCE EXPENSES
Expense plans have the same basic objectives as a compensation system, that is, to motivate the salesperson’s behavior in terms of membership, performance, and attendance.

34. Types of Expense Plans:
The company pays all expenses.
The salesperson pays all expenses.
The company partially pays expenses.

35. FRINGE BENEFITS
Five basic classifications of salespeople’s benefits and services are:
Benefits that are required legally
Pension and retirement programs
Nonworking time
Insurance
Miscellaneous services