sales organization structure & sales force deployment module four

Sales Organization Structure Sales Organization Structure &&

Sales Force DeploymentSales Force Deployment

Module FourModule Four

Sales Organization Structure Sales Organization Structure

Sales Organization ConceptsSales Organization Concepts

SpecializationSpecializationThe degree to which individuals perform some The degree to which individuals perform some

of the required tasks to the exclusion of of the required tasks to the exclusion of others. Individuals can become experts on others. Individuals can become experts on

certain tasks, leading to better performance certain tasks, leading to better performance for the entire organization.for the entire organization.

CentralizationCentralizationThe degree two which important decisions and The degree two which important decisions and

tasks performed at higher levels in the tasks performed at higher levels in the management hierarchy. Centralized management hierarchy. Centralized

structures place authority and responsibility structures place authority and responsibility at higher management levels.at higher management levels.

Sales Force Specialization Sales Force Specialization ContinuumContinuum

SpecialistsSpecialistsCertain selling Certain selling activities for certain activities for certain products for certain products for certain customerscustomers

GeneralistsGeneralistsAll selling activitiesAll selling activitiesand all products toand all products toall customersall customers

Some specializationSome specializationof selling activities,of selling activities,

products, and/orproducts, and/orcustomerscustomers

Flat Sales OrganizationFlat Sales Organization

Span of ControlSpan of Control

Ma

na

ge

men

t Lev

els

Ma

na

ge

men

t Lev

els

National National Sales Sales

ManagerManager

District District Sales Sales

ManagerManager


ManagerManager


ManagerManager


ManagerManager


ManagerManager

Span of Control vs. Span of Control vs. Management LevelsManagement Levels

TallTall Sales Organization

National Sales National Sales ManagerManager

Span of ControlSpan of Control

Managem

ent LevelsM

anagement Levels


ManagerManager


ManagerManager


ManagerManager


ManagerManager


ManagerManager


ManagerManager

Regional Sales Regional Sales ManagerManager

Regional Sales Regional Sales ManagerManager

Span of Control vs. Management Span of Control vs. Management LevelsLevels

National Sales ManagerNational Sales Manager

Regional Sales ManagersRegional Sales Managers

District Sales ManagersDistrict Sales Managers

Sales Training ManagerSales Training Manager


SalespeopleSalespeople

Staff PositionStaff Position

Line PositionLine Position

Line vs. StaffLine vs. Staff Positions Positions

OrganizationalStructure

EnvironmentalCharacteristics

TaskPerformance

PerformanceObjective

SpecializationSpecialization Dynamic Dynamic sales sales

environmentenvironment

NonroutineNonroutine AdaptivenessAdaptiveness

CentralizationCentralizationRelatively stable Relatively stable

sales environmentsales environment RepetitiveRepetitive EffectivenessEffectiveness

Selling-Situation Factors & Organizational Options

Selling SituationsSelling Situations

GeographicGeographic Sales Sales OrganizationOrganization


Zone Sales Managers (4)Zone Sales Managers (4) Zone Sales Managers (4)Zone Sales Managers (4)

District Sales Managers (20)District Sales Managers (20)

Salespeople (100)Salespeople (100) Salespeople (100)Salespeople (100)


Eastern Region Sales ManagerEastern Region Sales Manager Western Region Sales ManagerWestern Region Sales Manager


ProductProduct Sales Sales OrganizationOrganizationNational Sales ManagerNational Sales Manager

Office Equipment Sales ManagerOffice Equipment Sales Manager Office Supplies Sales ManagerOffice Supplies Sales Manager


Salespeople (100)Salespeople (100) Salespeople (100)Salespeople (100)


MarketMarket Sales Sales OrganizationOrganization


Zone Sales Managers (4)Zone Sales Managers (4)


Salespeople (150)Salespeople (150)


Commercial AccountsCommercial AccountsSales ManagerSales Manager

Government AccountsGovernment AccountsSales ManagerSales Manager

Sales Training Sales Training ManagerManager


FunctionalFunctional Sales Sales OrganizationOrganization


Field Sales ManagerField Sales Manager Telemarketing Sales ManagerTelemarketing Sales Manager

Regional Sales Managers (4)Regional Sales Managers (4)





Develop Major Account SalesforceDevelop Major Account Salesforce

Assign Major Accounts to Assign Major Accounts to Sales ManagersSales Managers

Assign Major Accounts to Salespeople Assign Major Accounts to Salespeople along with Other Accountsalong with Other Accounts

Sales Organization Sales Organization StructuresStructures

Major Accounts OptionsMajor Accounts Options

Comparison of Comparison of Sales Organization StructuresSales Organization Structures

OrganizationalOrganizationalStructureStructure AdvantagesAdvantages DisadvantagesDisadvantages

GeographicGeographic

• Low CostLow Cost• No geographic duplicationNo geographic duplication• No customer duplicationNo customer duplication• Fewer management levelsFewer management levels

• Limited Limited specializationspecialization• Lack of Lack of management management control over product control over product or or customer emphasiscustomer emphasis

ProducProductt

• Salespeople become Salespeople become expertsexperts in product attr. & in product attr. & applicationsapplications• Management control overManagement control over selling effortselling effort

• High costHigh cost• Geographic Geographic duplicationduplication• Customer duplicationCustomer duplication

Comparison of Comparison of Sales Organization StructuresSales Organization Structures

MarketMarket

• Salespeople developSalespeople develop better understanding ofbetter understanding of unique customer needsunique customer needs• Management control overManagement control over selling allocated to differentselling allocated to different marketsmarkets

• High costHigh cost• Geographic Geographic duplicationduplication

FunctionFunctionalal

• Efficiency in performingEfficiency in performing selling activitiesselling activities

• Geographic Geographic duplicationduplication• Customer duplicationCustomer duplication• Need for coordinationNeed for coordination

OrganizationalOrganizationalStructureStructure AdvantagesAdvantages DisadvantagesDisadvantages

HybridHybrid Sales Organization Sales Organization StructureStructure


Major Accounts Major Accounts Sales ManagerSales Manager

Regular Accounts Regular Accounts Sales ManagerSales Manager

Office Equipment Office Equipment Sales ManagerSales Manager

Office Supplies Office Supplies Sales ManagerSales Manager

Field SalesField SalesManagerManager

TelemarketingTelemarketingSales ManagerSales Manager

Commercial Accounts Commercial Accounts Sales ManagerSales Manager

Government Accounts Government Accounts Sales ManagerSales Manager

WesternWesternSales ManagerSales Manager

EasternEasternSales ManagerSales Manager

1.1. How much selling effortHow much selling effort is needed to cover accounts and is needed to cover accounts and prospects adequately so that sales and profit objectives will prospects adequately so that sales and profit objectives will be achieved?be achieved?

2.2. How many salespeopleHow many salespeople are required to provide the desired are required to provide the desired amount of selling effort?amount of selling effort?

3.3. How should How should territories be designed to ensure proper territories be designed to ensure proper coveragecoverage of accounts and to provide each salesperson with a of accounts and to provide each salesperson with a reasonable opportunity for success?reasonable opportunity for success?

Sales Force deployment decisions can be viewed as providing answers to three interrelated questions.

Interrelatedness ofInterrelatedness ofSales Force Deployment Sales Force Deployment

DecisionsDecisionsHow 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 ofAllocation ofSelling EffortSelling EffortAllocation ofAllocation ofSelling EffortSelling Effort

Sales ForceSales ForceSizeSize

Sales ForceSales ForceSizeSize

TerritoryTerritoryDesignDesign

TerritoryTerritoryDesignDesign

Single FactorSingle FactorModelsModels

Single FactorSingle FactorModelsModels

Easy to Develop and UseEasy to Develop and Use

Difficult to Develop and UseDifficult to Develop and Use

LowLowAnalyticalAnalyticalRigorRigor

HighHighAnalyticalAnalyticalRigorRigor

PortfolioPortfolioModelsModels

PortfolioPortfolioModelsModels

DecisionDecisionModelsModels

DecisionDecisionModelsModels

Allocation of Selling EffortAllocation of Selling EffortAnalytical ApproachesAnalytical Approaches

Allocation of Selling Effort:Allocation of Selling Effort:Single Factor ModelsSingle Factor Models

Accounts classified into categories Accounts classified into categories based on based on one factorone factor, such as volume potential, such as volume potential

• All accounts in the same category are All accounts in the same category are assigned the same number of sales callsassigned the same number of sales calls

• Effort allocation decisions are based on the Effort allocation decisions are based on the analysis of only analysis of only oneone factor and differences factor and differences among accounts in the same category are among accounts in the same category are notnot considered in assigning sales call coverageconsidered in assigning sales call coverage

Allocation of Selling EffortAllocation of Selling EffortSingle Factor Model ExampleSingle Factor Model Example

Market PotentialMarket PotentialCategoriesCategories

ABCD

Average Sales Calls toAverage Sales Calls toan Account Last Yearan Account Last Year

25232016

Average Sales Calls toAverage Sales Calls toan Account Next Yearan Account Next Year

3224168

Allocation of Selling EffortAllocation of Selling EffortPortfolio ModelsPortfolio Models

• Accounts are ‘grouped’ by specific Accounts are ‘grouped’ by specific criteria to determine their value to the criteria to determine their value to the firm ie.firm ie.– Account (Growth) Opportunity - an account’s Account (Growth) Opportunity - an account’s

need for and ability to purchase the firm’s need for and ability to purchase the firm’s productsproducts

– Competitive (Advantage) Position - the Competitive (Advantage) Position - the strength of the relationship between the firm strength of the relationship between the firm and an accountand an account

Allocation of Selling Effort:Allocation of Selling Effort:Decision ModelsDecision Models

• Simple Basic Concept - to allocate sales Simple Basic Concept - to allocate sales calls to accounts that promise the highest calls to accounts that promise the highest sales return from the sales callssales return from the sales calls

• Optimal number of calls in terms of sales Optimal number of calls in terms of sales or profit maximizationor profit maximization

Sales Force Size Sales Force Size

Key ConsiderationsKey Considerations

• Sales Volume GrowthSales Volume Growth– Anticipated increasesAnticipated increases

• Sales ProductivitySales Productivity – The ratio of sales to selling costs The ratio of sales to selling costs

• Sales Force TurnoverSales Force Turnover– Should be anticipatedShould be anticipated

Sales Force Size: Analytical Sales Force Size: Analytical ToolsTools

Salesforce size = Forecasted sales / Average sales / personSalesforce size = Forecasted sales / Average sales / person

The The Breakdown ApproachBreakdown Approach

• Is used to determine the number of salespeople needed Is used to determine the number of salespeople needed

to generate a forecasted level of sales. to generate a forecasted level of sales. • It is weak conceptually. It is weak conceptually. • The concept underlying the calculations is that sales The concept underlying the calculations is that sales

determine the number of salespeople needed—determine the number of salespeople needed—

putting “the cart before the horse.”putting “the cart before the horse.”


The The Workload ApproachWorkload Approach

• Determines how much selling effort is needed to Determines how much selling effort is needed to adequately cover the firm’s market. adequately cover the firm’s market. • Then the number of salespeople required to provide this Then the number of salespeople required to provide this

amount of selling effort is calculated. amount of selling effort is calculated. • This approach relatively simple to develop and is sound This approach relatively simple to develop and is sound

conceptually.conceptually.

Number of salespeople =Number of salespeople = Total selling effort neededTotal selling effort needed

Average selling effort per Average selling effort per salespersonsalesperson


The The Incremental ApproachIncremental Approach

• Its basic concept is to compare the marginal profits and Its basic concept is to compare the marginal profits and marginal costs associated with each incremental marginal costs associated with each incremental salesperson. salesperson.

• The major advantage of this approach is that it quantifies The major advantage of this approach is that it quantifies the important relationships between salesforce the important relationships between salesforce

size, sales, and costs. size, sales, and costs. • However, the incremental method is difficult to develop, However, the incremental method is difficult to develop,

and it cannot be used for new sales forces where and it cannot be used for new sales forces where historical data and accurate judgments are not historical data and accurate judgments are not

possible.possible.

Designing TerritoriesDesigning Territories

Territories consist of whatever specific accounts are Territories consist of whatever specific accounts are assigned to a specific salesperson. The territory assigned to a specific salesperson. The territory can be viewed as the work unit for a salesperson.can be viewed as the work unit for a salesperson.

Territory ConsiderationsTerritory Considerations» Trading areasTrading areas» Present effortPresent effort» Recommended effortRecommended effort

DESIGNING TERRITORIESDESIGNING TERRITORIES

EXTREMELY RAREEXTREMELY RARE

Most often territories evolve Most often territories evolve

with market development & volume, with market development & volume,

And are revised / adjusted And are revised / adjusted

on an ‘ongoing basis. on an ‘ongoing basis.

DESIGN GOALSDESIGN GOALS• EQUALITY OF SALESEQUALITY OF SALES

• WORKLOAD WORKLOAD

• GROWTH POTENTIALGROWTH POTENTIAL

SIX DESIGN STEPSSIX DESIGN STEPS

1.1. Select a control element for territory Select a control element for territory boundaries / size.boundaries / size.

2.2. Determine location & potential of customers.Determine location & potential of customers.

3.3. Determine basic territoriesDetermine basic territories

4.4. Assign sales people to territories.Assign sales people to territories.

5.5. Establish territorial coverage plans for sales Establish territorial coverage plans for sales reps.reps.

6.6. Monitor sales & cost of sales on an ‘ongoing’ Monitor sales & cost of sales on an ‘ongoing’ basis.basis.

STEP ONESTEP ONE

TERRITORIAL SIZETERRITORIAL SIZE (miles covered) (miles covered) • Boundaries (usually political or geographical): Boundaries (usually political or geographical):

– BASED ON: BASED ON: • REGION (WESTERN CANADA) REGION (WESTERN CANADA) • PROVINCE (BC) PROVINCE (BC) • CITY / COUNTRY (PRINCE GEORGE / VANDERHOOF, CITY / COUNTRY (PRINCE GEORGE / VANDERHOOF,

QUESNEL, ETC.)QUESNEL, ETC.)

STEP TWO

Determine the location of potential Determine the location of potential customers from: customers from:

• phone bookphone book

• Mailing lists Mailing lists

• route ridingroute riding

STEP THREE

TO DETERMINE BASIC TERRITORIES USE EITHER:

BUILD UP METHOD:

• Establish individual performance parameters (workload capacity: # of calls per day x # of days), frequency / miles, account types a, b or c, length of call.

• Draw out individual territory boundaries

• Adjust as needed

STEP THREE

BREAKDOWN METHODBREAKDOWN METHOD::

• Determine total market sales potentialDetermine total market sales potential• Establish individual territories: Establish individual territories: • CanCan use a market index x total sales potential, use a market index x total sales potential,

shouldshould use ‘hands on’ territory analysis as use ‘hands on’ territory analysis as territories are rarely sufficiently uniformterritories are rarely sufficiently uniform

• Estimate sales volume per person and draw Estimate sales volume per person and draw boundaries.boundaries.

• Adjust as neededAdjust as needed

STEP FOURSTEP FOUR

• Assigning sales people to territoriesAssigning sales people to territories• Need to match personality of the SR to Need to match personality of the SR to

the personality of the territory the personality of the territory (ie. miles, account type, culture, etc.)(ie. miles, account type, culture, etc.)

• Can be a management toolCan be a management tool– Beginner territoriesBeginner territories– ‘‘Penal’ territoriesPenal’ territories– ‘‘Plum’ territoriesPlum’ territories

• Territory adjustment need is ‘ongoing’Territory adjustment need is ‘ongoing’

STEP FOURSTEP FOUR continued continued

• Set performance norms that ‘flag’ when the Set performance norms that ‘flag’ when the need becomes critical.need becomes critical.

• Territory can ‘boom’ & far out pace sales Territory can ‘boom’ & far out pace sales (Alberta) / can shrink / dry up (Nfld.)(Alberta) / can shrink / dry up (Nfld.)

• Claim jumpingClaim jumping ~ territory / account overlap ~ territory / account overlap• Consequence of revising territoriesConsequence of revising territories

– People don’t like change: it means more work / People don’t like change: it means more work / less return.less return.

– The change needs to be ‘sold’The change needs to be ‘sold’– Compensation format may need adjustmentCompensation format may need adjustment

STEP FIVESTEP FIVE

• Territory coverageTerritory coverage• The plan of how the territory is to be The plan of how the territory is to be

servicedserviced• Call sequence / frequency, routingCall sequence / frequency, routing• Sales management should only ‘do’ the Sales management should only ‘do’ the

initial ‘set up’initial ‘set up’• Assigned rep should submit modifications Assigned rep should submit modifications

with as their territory knowledge develops.with as their territory knowledge develops.• Managements role is to set performance Managements role is to set performance

standards e.G. Calls per day, etc.standards e.G. Calls per day, etc.• Need to factor in account merchandising, Need to factor in account merchandising,

prospecting.prospecting.

STEP SIXSTEP SIX

• Monitor sales Monitor sales

• Cost of sales on an ‘ongoing’ basis.Cost of sales on an ‘ongoing’ basis.

Sales Organization Structure Sales Organization Structure &&


A dynamic management undertaking A dynamic management undertaking that must be constantly that must be constantly

assessed and ‘fine tuned’ assessed and ‘fine tuned’ to ensure the ideal balance to ensure the ideal balance

between profitability between profitability and the development of and the development of continued sales growth.continued sales growth.