2. Sales Organization Concepts Sales Organization Concepts Salesforce Specialization GENERALISTS All selling activities and all products to all customersSPECIALISTS Certain selling activities for certain products for certain customers Some specialization of selling activities, products, and/or customers

3. Sales Organization Concepts Sales Organization Concepts Centralization Degree to which important decisions and tasks are performed at higher levels in the management hierarchy

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

5. Line vs Staff Positions Sales Training Manager Salespeople District Sales Manager Regional Sales Manager National Sales Manager

6. Selling Situation Consideration of Specialization –Empirical support for the notion that: A generalized salesforce should be used when selling effort is more important than selling skill A specialized salesforce should be used when selling skill is more important than selling effort Consideration of Environmental Characteristics, Task Characteristics, and Performance Objectives Consideration of Customer Needs and Product Complexity

7. Internal: Horizontal Structure Geography : States/Regions, Downtown/Suburban Product Type : Equipments, consumer products Customer Type : Industrial/Consumer, Hospitals/Schools, Wholesalers/Retailers Selling Function : Prospecting, presenting, servicing

8. Geographical Sales Organization Eastern Regional Sales Manager Sales Force Organization: Geographical National Sales Manager Western Regional Sales Manager Southern Regional Sales Manager Southern District Sales Manager Eastern District Sales Manager western District Sales Manager

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

10. Product Specialized Sales Force Sales Force Organization: Product Specialists Eastern Regional Sales Manager National Sales Manager Northeast District Sales Manager Southern District Sales Manager PrinterEquipmentSalesperson Server Salesperson Minicomputer Salesperson ProgrammableCalculatorSalespersonCopierSalesperson Large Computer Salesperson Central District Sales Manager

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

12. Customer Specialized Sales Force Sales Force Organization: Customer Specialists Eastern Regional Sales Manager National Sales Manager Northeast District Sales Manager Southern District Sales Manager Salesperson For Educational Institutions Salesperson for Manufacturers Salesperson for Retail Customers Salesperson for Government Agencies Salesperson for Bank Customers Central District Sales Manager National Accounts Manager Manager of Export Sales Salesperson for Wholesale Customers

13. Customer/Market Organization 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: –Higher selling expenses –Large customers can have multiple sales contacts

14. Functional Specialization Sales Force Organization: Functional Specialists Division Marketing Manager Systems Manager Industry Sales Manager Administrative Manager System Reps (Technical Support) Account Executives (Salespeople) MarketAdministrative (Training & Installation)

15. Selling Function Organization Acquiring new customers (development specialists) vs. maintaining and servicing existing customers 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 –Feed-in via targeted advertising, direct mail, toll-free lines, web pages

16. Why do we need to motivate? –Sales people often face rejection and frustration –A good motivational program that taps the inner resources of salespeople can make the difference between getting the order and getting the brush-off (Source: Hite and Johnston)

17. Maslow’s Hierarchy of Needs… Fulfilled through: Self-development, Managerial actions: Provide/offer advanced training, assignments to special projects, more responsibility and authority. Fulfilled through: Status, recognition. Managerial actions: Recognize sales rep achievements personally and publicly through title changes, commendation letters, promotions. Fulfilled through: Affiliation, friendship, acceptance. Managerial actions: Use team selling, hold social functions, distribute employee newsletters, hold sales meetings, mentoring. Fulfilled through: Job security, safety, income security. Managerial actions: Provide safe work environment, set mutually agreed-upon performance standards, communicate job performance expectations and consequences of failure to perform. Fulfilled through: Food, shelter, clothing, health care. Managerial actions: Provide/offer adequate income and good benefits package. Safety needs Social needs Physiological needs Esteem needs Self-actualization needs challenge.

18. Hertzberg’s Dual-Factor Theory HYGIENE FACTORSMOTIVATION FACTORS pay company policies supervision conditions work recognition responsibility challenge growth opportunities

19. Career Stages Exploration –Primary concern is finding a suitable occupation –Underdeveloped skills and knowledge –Many drop out or are terminated Establishment –Primary concern is improving skills and performance –Lack of promotion may cause disengagement or quitting –New commitments make pay important –High expectancy for promotion and pay Maintenance – Primary concern is maintaining position, status, and performance –Have highest sales volumes and percentage of quota and pay promotion Disengagement –Primary concern is preparing for retirement and/or developing outside interest

20. What is the sales manager’s job when it comes to motivation? –Keeping the salesperson's morale up in the face of adversities –Helping salespeople motivate themselves to work at some level close to, if not at, potential

21. Types of Motivational Rewards Extrinsic –Financial benefits Salary Commission Bonuses Stock options Fringe benefits –Health insurance –Life insurance –Company car Intrinsic –Less tangible (Psychological rewards) Job security Relationships with: superiors Co-workers customers Challenging assignments Recognition for special achievements

22. Motivation Three elements affecting motivation can be found within the organizational environment –The individual salesperson –The sales job –The organization environment

23. Motivation The individual salesperson –Unique needs of each individual salesperson –Positive reinforcement –Once financial security is met, appeal to other needs –If time restraints make it impossible for the sales manager to learn and respond to the needs of each salesperson, then segment the sales force in clusters. Explain the job requirements and expectations

24. Motivation The individual salesperson –Train the salespeople to be professionals –Provide the incentives necessary for salespeople to want to do their best –Sales management should provide rewards that are: Simple Immediate Frequent Related to the special act –Sales management should be cognizant of the motivational value of personal visits, personal phone calls and letter, and small, intimate sales meetings

25. Motivation The sales job –Sufficient product information –Communication –Help each salesperson set reasonable goals and design plans to attain those goals, and provide feedback –Positions should be challenging, have some authority, and provide some freedom –Recognize the frequent adversities faced by the salesperson –Prevent job dissatisfaction by providing a fair basic compensation plan, helpful and constructive supervision, acceptable fringe benefits, and job security

26. Motivation The organization environment –Take an active role in developing the motivational processes –Provide a participative environment –Must communicate and maintain an open, constructive, and relaxed environment –where trust, faith, and fairness are openly practiced –Through formal and informal channels, communicate that the salespeople are mature, professional individuals involved in significant, meritorious work –Communicate clearly the relationship between performance and recognition

27. Non-monetary Motivation Once the desired level of income has been reached, salespeople typically strive to satisfy such needs as status, prestige, recognition, the need to win, and opportunity to serve, and the respect and affection of management and peers Four important aspects that unsuccessful salespeople do not have: –Positive attitude –Personal goals –Time organization –Enthusiasm Three facets of non monetary motivation: –Recognition –Awards –Special communications

28. Non-monetary motivation Recognition –Recognize everyone –Recognize publicly –Record the recognition –Involve top management –Make it personal –Don’t use negative recognition –Put the winner in the center

29. Non-monetary motivation Award- is physical evidence that the receiver can take home and show friends, family, and peers –Personal and fit the occasion –Distinctive –Show that the individual level of achievement is consistent with the organization’s goals –Can be honorary job titles

30. Non-monetary motivation Special communications –Newsletters Articles or news features about special efforts made Pictures of the top salespeople Spot for award recognition –Individual letters/special telephone calls

31. Sale force compensation The compensation plan assumes at least two prerequisites: –1) the sales manager knows what the salespeople do –2) the sales manager has some behavioral priorities or objectives in which compensation plans can play a role

32. Factors Influencing Sales Force Expenses Communication Expenses Gifts Lodging Meals Office supplies Transportation Entertainment

33. Characteristics of a Sound Expense Plan No net gain or loss Equitable treatment No curtailment of beneficial activities Simple and economical Avoidance of disputes

34. Salesperson Expense Options Method Reimbursement Advantages Disadvantages Salespeople pay None Simple, no costsReps may not spend Unlimited All legitimate Flexible and fair,Encourages excessive their own expenses enough on customers payment plan business expenses allows for territory spending differences LimitedSpecific amounts Limited and predictable Inflexible payment plan allowed expenses Possibility for $80/day - lodging switching expenses $45/day - food between categories $0.26/mile – transportation Flat allowance $700 per week Limited and predictable Inflexible expenses e.g.

35. Factors Influencing Automobile Ownership Decision: Company Owned, Company Leased, or Salesperson Owned Maintenance Special design Size of sales force Operating Control Mileage Investment Administrative problems Personal preference

36. Automobile Allowance Plans MethodExample Flat amountRs 4000 /month Fixed mileage rateRs 5.00/KM Graduate mileage rateRs4.00/KM, first 15,000 KM Rs3.50/KM, second 15,000 KM Combination flat andRs 2500/month + Rs 2.50/KM

37. Other Methods of Expense Control Training and enforcement Credit cards Expense bank account Change in nature of entertainment Telemarketing Careful travel planning

38. Objectives of a Compensation Plan Needs of the salespeople –Equitable –Stable –Provide incentive –Understandable Company needs –Attract and retain desirable salespeople –Encourage specific activities –Reward outstanding performance –Provide the optimum balance between costs and results –Develop long-term relationships with customers –Provide easy administration

39. How to Develop a Compensation Plan Major decision areas –Gross level of compensation –The compensation mix –Measurement

40. How to Develop a Compensation Plan Major decision areas –Gross level of compensation Depends on: 1) The experience, education, and ability necessary to perform the job requirements successfully 2) The income level of comparable jobs within the company 3) The competitive market demand for comparable salespeople

41. How to Develop a Compensation Plan Major decision areas –The compensation mix What is the balance between salary, commissions and bonuses A base salary will assure a minimum income level during a bad period for the sales rep

42. How to Develop a Compensation Plan Major decision areas –Measurement Should be tied directly to specific organization objectives Salary is paid for performing activities not directly measured by sales Sales manger must be able to evaluate each salesperson’s performance

43. How to Develop a Compensation Plan The process –Evaluate the job description –Establishing specific objectives –Determine levels of compensation –Develop the compensation mix –Pretest the plan –Administer the plan –Evaluate the plan

44. How to Develop a Compensation Plan The process –Evaluate the job description –Establishing specific objectives Important to reinforce behavior that will help the company and the salespeople achieve their objectives or needs –Increased profitability –Improved cash flow –Lower selling costs –Increased gross sales

45. How to Develop a Compensation Plan The process –Determine levels of compensation Create job ranking and levels of compensation for each job »Sales trainee »Salesperson »Senior salesperson Should salespeople be able to make more then their sales mangers? –Develop the compensation mix What proportion of each salesperson's total income should be earned through incentives? Should the incentive schedule be regressive or progressive

46. How to Develop a Compensation Plan Progressive- used as a means of increasing the salesperson's income Series of progressively larger commissions or bonuses as sales increase 5% commission for sales up to 110% of the quota 6% commission for sales up to 120% of the quota 7% commission for sales over 120% of the quota Regressive- used as a means of limiting the salesperson's income Series of progressively smaller commissions or bonuses as sales increase 5% commission for sales up to 110% of the quota 4% commission for sales up to 120% of the quota 3% commission for sales over 120% of the quota

47. Types of Compensation Plans Straight salary Commission Bonuses Combinations

48. Types of Compensation Plans Straight salary- a fixed amount of money for a given period of time Pros- –A greater sense of loyalty to the company is developed –The salesperson is assured a steady income –Greater flexibility –Greater control is maintained over the activities of the sales force –Simple to administer –A large part of the company’s sales costs are fixed, and thus known –May be easier to recruit when they can assure the applicants of a regular income –Salespeople on straight salary are more likely to operate in the best interests of the firm Cons- –Does not offer financial incentive –Can cause selling costs to be out of line –The least productive salespeople tend to be overpaid and the most productive underpaid –Leads to “adequate” performance

49. Types of Compensation Plans Straight Commission- an amount of compensation that varies with results, usually sales or profits Pros- –The income of salespeople is directly related to their performance –A commission plan is easy both to compute and to understand –Salespeople realize that their earnings are really limited only by themselves, by their abilities and desire to work –There are little or no sales costs when there are no sales –Large amounts of capital does not have to be tied up in salaries Cons- –Except in the rare case where the base for commissions is profits, inordinate emphasis is placed on obtaining more sales rather than profitable sales –Very little loyalty is generated toward the company –Neglect non-selling activities –In good conditions, income may be excessive –Tendency for salespeople to overload customers with unneeded products –Turnover increases when business turns bad –Salespeople are less secure –Salespeople are less flexible to change

50. Types of Compensation Plans Bonuses- a lump sum of money paid for some form of outstanding performance Pros- –Flexible (provide quick and positive behavior reinforcement when needed) –Create motivation Cons- –May not be paid fast –People may ride on the laurels and efforts of other group members Not pull their weight

51. Possible Combination Compensation Plans COMMISSION BONUS SALARY

52. Types of Compensation Plans Combinations- includes all the variations of salary, commission, and bonus plans Pros- –Can offer the advantages of both the salary and the commission plans without the accompanying disadvantages –Offers the greatest flexibility and tightest control over salespeople –Provided security plus incentive –Salespeople can be compensated for all those activities deemed important by management Cons- –Can be complex and easily misunderstood –Can be expensive –If improperly implemented can fail to meet the needs of salespeople and those of management –Incentive portion may be too small to really motivate

53. Summary Each salesperson is different The needs of salespeople change over time Compensation is a critical factor in keeping salespeople motivated Financial and non-financial incentives plans must be kept current

54. Method Advantage Disadvantage Best Used Straight salary Provides security and stability for reps Better for directing and controlling sales activities Ensures proper treatment of customers Direct incentive is easily lost if not administered properly Represents a fixed cost Requires supervision to direct, control, and evaluate Difficult to direct and supervise sales people Customers’ best interests may be ignored Sales people’s earnings may fluctuate widely Added cost May be seen as inequitable if not administered properly For products that require a lot of presale and/or post-sale service For building long-term customer relationships When supervision is available for new recruits For new territories For missionary sales Straight commission Bonus When a strong incentive is needed to attain sales For products that require little presale and/or post-sale service The sale is a one-time sale Adequate field supervision is not available Company is in a weak financial position Company uses part-time or independent sales people Provides a strong incentive Sales people have more freedom Acts as a screening method Added incentive Can be used for specific activities - flexible To encourage above-normal performance of specific activities

55. Non-Guaranteed Plan Month Draw Sales Commission Volume Earned End-of-Month Payment to Rep January 1,80040,000 4,000 2,200 (4,000 -$1,800 = 2,200) February 1,80015,000 1,500 0 (rep owes $300) March 1,80030,000 3,000 900 (computed as follows) Commission = 3,000 Less draw - 1,800 Less February debt - 300 Net 900 Guaranteed Plan Month Draw Sales Commission Volume EarnedEnd-of-Month Payment to Rep January 1,800 40,000 4,000 2,200 (4,000 - 1,800 = 2,200) February 1,800 15,000 1,500 0 (rep owes 0) March 1,800 30,000 3,000 1,200 (3,000 - 1,800 = 1,200) Drawing Account Examples

56. Product Line:EquipmentClothingTotalEquipmentClothingTotal Total sales (000)$480$720$ 1,200$220$460$ 680 Sporting goods stores320440760160320480 Ski shops16028044060140200 Total calls made700900 Sporting goods stores300500 Ski shops400 Total orders taken500600 Sporting goods stores150450 Ski shops350150 Days worked220240 Expenses$48,000$40,000 Miles traveled60,00045,000 Total market potential$2.00$4.00$6.00$1.20$2.40$ 3.60 (millions) Sporting goods stores1.602.404.000.801.602.40 Ski shops0.401.602.000.400.801.20 Sporting GoodsSkiGoodsSki StoresShopsTotalStoresShopsTotal Average order$5,087$1,257$2,400$1,067$1,333$1,133 Batting average0.5000.8750.7140.9000.3750.666 Calls per day3.183.75 Miles per call8650 Expense per sales dollar4.00%5.90% Cost per call, excluding commission$68.57$44.44 Cost per order, excluding$96.00$66.67 commission EquipmentClothingTotalEquipmentClothingTotal Total percent of market24.0%18.0%20.0%18.3%19.0% Sporting goods stores20.0%18.0%19.0%20.0% Ski shops40.0%17.5%22.0%15.0%17.5%16.7% Joe JacksonGus Dean

57. Product Line:EquipmentClothingTotalEquipmentClothingTotal Total sales (000)$240$280$ 520$940$1,460$ 2,400 Sporting goods stores1001602605809201,500 Ski shops140120260360540900 Total calls made1,1002,700 Sporting goods stores5001,300 Ski shops6001,400 Total orders taken8501,950 Sporting goods stores4001,000 Ski shops450950 Days worked230690 Expenses$36,000$124,000 Miles traveled35,000140,000 Total market potential (millions)$1.20 $ 2.40$4.40$ 7.60$ 12.00 Sporting goods stores0.720.641.363.124.647.76 Ski shops0.480.561.041.282.964.24 Sporting GoodsSkiGoods StoresShopsTotalStoresSki ShopsTotal Average order$ 650$ 578$ 612$1,500.00$947.00$1,231.00 Batting average0.8000.7500.7730.6790.7690.722 Calls per day4.83.9 Miles per call3252 Expense per sales dollar6.90%5.20% Cost per call, excluding$32.72$ 45.92 commission Cost per order, excluding$42.23$ 63.59 commission EquipmentClothingTotalEquipmentClothingTotal Total percent of market20.0%23.3%21.7%21.4%19.2%20.0% Sporting goods stores13.9%25.0%19.1%18.6%19.8%19.3% Ski shops29.2%21.4%25.0%28.1%18.2%21.2% TotalPaula Burns