chapter 4 - sales organization

Sales Organization

Nature of Sales Organization

• An organization is simply an arrangement—a working structure—of activities involving a group of people.

• The goal is to arrange these activities so that the people involved can act better together than they can individually.

• The trend is toward flatter organizations in which coordination across activities is more important than top-down control.

Characteristics of a Good Organization

• Organizational structure should reflect a marketing orientation

• Organization should be built around activities, not around people

• Responsibility and authority should be related properly

• Span of executive control should be reasonable• Organization should be stable but not flexible• Activities should be balanced and coordinated

Basic Types of Organization

• Most sales organizations can be classified mainly into one of four basic categories:– A line organization.– A line-and-staff organization.– A functional organization.– A horizontal organization.

Line Organisation

Nature Simplest form of organization. Authority flows from chief executive to first subordinate, then to second subordinate, and so on down.

When used In very small firms or within a small department in a larger company.

Relative merits Low-cost operation; quick decision making; highly centralized authority. Lack of managerial specialization and frequently no replacement for top executive, who is the owner of the firm.

Line-and-Staff Sales Organization

Chief Marketing Executive

Salespeople

Advertising Manager

MarketingResearchManager

GeneralSales

Manager

SalesPromotionManager

SalesAnalysisManager

Staff advisory authority

Line authority

Nature Take a line organization and add staff assistants who are specialists in various areas—advertising or marketing research, for example. The staff executive is responsible for all planning connected with the specialized activity, but has only an advisory relationship with sales managers and sales reps. The same staff executive—an advertising manager, for example—has line authority over people in the advertising department, but is in a staff-authority (advisory) relationship with the sales force.

When used Probably the most widely used basic form of organization in sales departments today. Likely to be used when any of the following conditions exist: Sales force is large. Market is regional or national. Line of products is varied. Number of customers is large.

Relative merits

Provides benefits of division of labor and executive specialization. Total cost of organization can be high, especially when staff assistants have their own departments. Decision making is slower. A potential problem: Strong staff executives may want to assume line authority instead of staying in an advisory role.

Functional Sales Organization

Chief Marketing Executive

Salespeople

Advertising Manager

MarketingResearchManager

GeneralSales

Manager

CreditManager

SalesPromotionManager

Staff advisory authority

Line authority

Nature A step beyond line-and-staff structure in that each activity specialist—advertising or sales promotion, for example—has line authority over the activity in relations with the sales force. Suppose a credit manager wants the salespeople to make collections on delinquent accounts. A staff executive can only recommend to the general manager that the reps do this job. A functional executive has line authority to order the assistant sales manager or the salespeople to do the job.

When used Large company with varied product lines and/or markets. The key is to limit the number of executives who may use the functional line authority. The more people giving orders to the sales force, for example, the more opportunity there is for trouble.

Relative Merits Advantages of specialization of labor plus the assur ances that functional executives' plans and pro grams will be carried out because the executives can order that this be done. The major drawback is that line sales executives and the salespeople may get orders from more than one person.

The Horizontal Corporation

Strategic Planning TeamVP Strategic PlanningVP Finance & InformationChief Operating OfficerHuman ResourcesAdministration

Manufacturing TeamSystems Engineering ProductionQuality Control

Customer Fulfillment TeamPricing and PromotionSalesDistribution

Product Design and Development TeamCustomer ResearchCustomer AnalysisDesign Engineering

Customer Support TeamInformationTrainingServiceResearch

Nature Eliminates both management levels and departmental boundariesA small group of senior executives at the top overseeing the support functions like human resources, finance, and long-term planning. Everyone else is a member of cross-functional teams which perform core processes such as product development and sales and fulfillment. These teams are self-managed,

When used By large and small companies seeking greater efficiencies and customer responsiveness. Firms which are establishing long-term partnering relationships with their customers are the most likely to adopt a horizontal structure. Various cross-functional teams work with customers' teams to solve problems and create opportunities for greater productivity and growth.

Relative Merits

Reduces supervision and eliminates activities that are not necessary for the process. Costs are reduced and customer responsiveness is greatly enhanced.

Specialisation within a Sales Department

Factors to make decision

• Sales Force Abilities• Market & Customer Considerations• Nature of the Product• Demands of the Selling Job

Geographic Specialisation• The most widely used system for dividing

responsibility and line authority over sales operations

• The sales force is grouped on the basis of physical territories.

Geographical Sales Organization

Chief Marketing Executive

Western RegionalSales Manager

Advertising Manager

MarketingResearchManager

GeneralSales

Manager

SalesPromotionManager

SalesAnalyst

4 AreaSales Managers

Salespeople eachwith own territory

Southern RegionalSales Manager

4 AreaSales Managers

Salespeople eachwith own territory

Benefits

• This structure usually ensures better coverage of the entire market, as well as better control over the sales force and sales operations.

• A firm can meet local competition and adjust to local conditions by having an executive responsible for a limited segment of the market.

• Local management also can act more rapidly in servicing customers and handling their problems.

Drawbacks

• There is usually no specialization of marketing activities. e.g.An ASM may have to work in advertising, sales promotion, and marketing research, in addition to managing a sales force.

Product Specialisation

• The type of product sold is used as a basis for dividing the responsibilities and activities within a sales department.

• The 2 most widely used structures featuring product specialization organization are – Product operating – Product staff organizations

Product Operating Specialisation• Product operating specialization is likely to be used when a

company is selling:– A variety of complex, technical products, as in the electronics field.

(B2B)– Many thousands of products—a hardware wholesaler, for example.– Very dissimilar, unrelated products—a rubber company may use

three sales forces to sell (MRF)• (a) Truck and auto tires• (b) Rubber footwear • (c) Industrial rubber products such as belts, bushings, and insulating

materials.

• 3M Corporation uses separate sales forces to sell its wide product lines.

Sales Organization with Product-Specialized Sales Force

Chief Marketing Executive

Sales ManagerProduct A

Advertising Manager

MarketingResearchManager

GeneralSales

Manager

SalesPromotionManager

CustomerRelationsManager

SalespeopleProduct A

Sales ManagerProduct C

SalespeopleProduct C

Sales ManagerProduct B

SalespeopleProduct B

Advantage

• The sales force can give specialized attention to each product line.

• Each line gets more executive attention because one person is responsible for a particular product group.

Drawback

• Sometimes more than one salesperson from a company calls on the same customer. Such duplication of coverage not only is expensive but also can evoke ill will from the customers.

• Product sales managers have no staff assistants in advertising, sales promotion, or other specialized marketing activities.

Product Staff Specialisation

• Commonly used when management wants to use staff assistants who specialize by product, product category or Brand.

• Each bears responsibility for planning and developing a marketing program for a separate group of products.

• These people have no line authority over the sales force or the sales force managers. They can only advise and make recommendations to the line managers.

• This specialisation is frequently used by consumer product companies such as Hindustan Unilever Ltd.

Sales Organization with Product-Managers as Staff Specialists

Chief Marketing Executive

Advertising Manager

MarketingResearchManager

GeneralSales

Manager

Manager

Brand A

Regional SalesManager

Salespeople

Manager

Brand C

Manager

Brand B

Area SalesManager

Group Product

Manager Laundry

Advantage

• A company can use this structure when it wants some of the advantages of specialization by product line at the planning level but does not need the specialization at the selling level

Disadvantage

• Not having salespeople specialize in a limited line of products.

Market Specialisation

• Divide the line authority in the sales departments on the basis of type of customer, classed either by industry or by channel of distribution.

• The sales manager in charge of each industry group is a line-operating executive with authority over one group of salespeople.

• These executives have no staff assistants under them.

• Each sales rep sells the full line of products used by the customer group.

Sales Organization Specialized by Type of Customer

Chief Marketing Executive

Sales ManagerTransportation

Industry

Advertising Manager

MarketingResearchManager

GeneralSales

Manager

SalesPromotionManager

CustomerRelationsManager

Salespeople

Sales ManagerPetroleum Industry

Salespeople

Sales ManagerSteel Industry

Salespeople

• Market specialization is consistent with the customer orientation philosophy that underlies the marketing concept.

• Among the companies that already have made the market specialization move in their sales organizations are such well known names as Bharti Airtel,SBI & Infosys.

• The reps are industry experts who sell primarily to customers within specific industries. This focus on customers is widely credited for the company's double-digit sales growth.

PRESIDENT

Community banking

Corporate banking

Govt banking

NRI Agricultural banking

SBI Customer Departmentation

Wholesalebanking

SME banking

Limitations

• It causes overlap in territorial coverage and therefore is costly.

• Also, unless separating the sales force by markets results in some product specialization, the customer-based organization may include the disadvantages of full-line selling.

Organizational Options for the 2000s

Organizational Options for the

2000s

Strategic account management

Team selling

E-commerce and telemarketing

Independentreps

1. Strategic Account Management

Buying Centers

• The buying center may be defined as all the individuals involved in the purchasing decision process.

• A buying center usually includes people who play any of the following roles:– Users of the product.– Influencers who set the product specifications.– Deciders who make the actual purchasing decision.– Gatekeepers who control the flow of purchasing

information.– Buyers (purchasing agents) who process the purchase

orders.

The Relationship Between a Sales Team and a Buying Center

Organizational selling center

Marketing

Sales

Manufacturing

R&D

Engineering

Physical Distribution

Organizational buying center

Purchasing

Manufacturing

R&D

Engineering

Marketing

Exchange Process

Purchasing Agent

Sales-person

Information

Problem Solving

Negotiation

Friendship, Trust

Product/ServicesPayment

Reciprocity

2. Team Selling

Otis,Carrier & UTC Fire & Security to work in Concert

• The market for commercial air conditioning, elevators & security systems to double from $3.2 Bn(2010) in next 5 years.

• Rapid urbanisation & upgrade of infrastructure to drive growth.

• UT wants to increase its share from 15% in 2010 to 30%.

• UT expects buy-in from architects and city planners for such integrated offerings.

• Air Conditioning,elevators and security systems are bought by real estate developers for residential & commercial buildings,airports,hotels & hospitals.

• Instead of selling each of these products separately to the developer,UT will offer all together in one solution.Surveillance equipment, for instance can detect when a conference room is unoccupied & turn the AC down automatically. Smart elevators can reduce travel time within buildings.

• For the developer,it is lesser hassle,some savings & optimisation of operating expenses.

Betting on Green• India has stringent emission targets for 2020.• Buildings account for 40% of emissions & that can be

improved by 70% by using better technologies.– Buyers of otis have the option to buy ReGen, a regenerative

elevator.When it goes down & gravity takes over,it becomes a generator and converts potential energy into electrical energy.

– Carrier offers variable speed chillers which cut operational expenditure by 40%.

– Marioff fire extinguishers use 90% less water than conventional sprinklers, & do not damage the site of the fire-they term a thin film on the surface which can just be wiped away with a piece of cloth.

• Environment friendly equipment is expensive but the payback is not more than 2-3 years.

Building Synergies• To integrate the 3 businesses,UT has formed 3 councils:• Marketing Council – It ensures that all sales pitches are

made by a team that has representatives from all 3 Co’s.The potential customer gets to see one face of UT.

• Operations Council – It looks at synergies in sourcing products like steel,services like

logistics & manpower.– Manufacturing Excellence – All UT factories across the world are

ranked gold,silver or bronze on the basis of their competitive excellence.

– New Production Capacities– Vendor Development

• HR Council – It focusses on how the 3 Co’s can share talent to grow the business.

3.Independent Sales Organizations

3.1 Independent Agents

3.2 Brokers

3.3 Wholesale Distributors

Independent versus Company Reps

Captive versus independent sales repCaptive versus independent sales rep

Rs Cost

Rs Sales

Independent rep

Captive rep

E Commerce and Telemarketing

• Identify prospective customers• Screening, qualifying leads• Sales solicitation: small customers, reorders• Order processing• Product service support• Account management• Customer relations• Competitive reporting• Expense reporting

Choosing an Independent Agent

Managing the Independent Sales Force

Organizing for International Sales