Sales ion Structure(sales and distribution)

8/9/2019 Sales ion Structure(sales and distribution)

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Sales Organization Structure andSales Organization Structure and

Sales Force DeploymentSales Force Deployment

Module FourModule Four


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Merging Two Sales ForcesMerging Two Sales ForcesAn Experts Viewpoint:An Experts Viewpoint:

Zeneca and Astra were two independent pharmaceuticalZeneca and Astra were two independent pharmaceutical

companies that merged, forming AstraZeneca. Integratingcompanies that merged, forming AstraZeneca. Integrating

the two sales forces was a major challenge, for example,the two sales forces was a major challenge, for example,

Astra was more decentralized and Zeneca was moreAstra was more decentralized and Zeneca was more

centralized. The decision was made to develop a newcentralized. The decision was made to develop a new

sales model that blended the advantages of centralizationsales model that blended the advantages of centralization

and decentralization, and they decided to move to aand decentralization, and they decided to move to a

market-oriented sales organization structure.market-oriented sales organization structure.

ActionAction


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Merging Two Sales ForcesMerging Two Sales ForcesAn Experts Viewpoint:An Experts Viewpoint:

The new sales organization has been successful inThe new sales organization has been successful ingenerating significant sales and market share growth.generating significant sales and market share growth.

Tony Zook, vice president of sales at AstraZeneca,Tony Zook, vice president of sales at AstraZeneca,

thinks that by bringing together two winners, you canthinks that by bringing together two winners, you can

create a champion.create a champion.

ResultResult


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Sales Organization ConceptsSales Organization Concepts

SpecializationSpecialization

The degree to which individuals perform some of theThe degree to which individuals perform some of the

required tasks to the exclusion of others. Individualsrequired tasks to the exclusion of others. Individuals

can become experts on certain tasks, leading to bettercan become experts on certain tasks, leading to betterperformance for the entire organization.performance for the entire organization.

CentralizationCentralization

The degree two which important decisions and tasksThe degree two which important decisions and tasks

performed at higher levels in the managementperformed at higher levels in the management

hierarchy. Centralized structures place authority andhierarchy. Centralized structures place authority and

responsibility at higher management levels.responsibility at higher management levels.


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Sales Force Specialization ContinuumSales Force Specialization Continuum

SpecialistsSpecialistsCertain sellingCertain selling

activities for certainactivities for certain

products for certainproducts for certaincustomerscustomers

GeneralistsGeneralistsAll selling activitiesAll selling activities

and all products toand all products to

all customersall customers

Some specializationSome specialization

of selling activities,of selling activities,

products, and/orproducts, and/or

customerscustomers


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Flat Sales OrganizationFlat Sales Organization

Span of ControlSpan of Control

Manag

emen

tLev

els

Managemen

tLev

e ls

NationalNational

SalesSales

ManagerManager

DistrictDistrict

SalesSales

ManagerManager

DistrictDistrict

SalesSales

ManagerManager

DistrictDistrict

SalesSales

ManagerManager

DistrictDistrict

SalesSales

ManagerManager

DistrictDistrict

SalesSales

ManagerManager

Span of Control vs. Management LevelsSpan of Control vs. Management Levels


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Tall Sales Organization

National SalesNational Sales

ManagerManager

Span of ControlSpan of Control

M

anageme

ntLevels

M

anageme

ntLevels

DistrictDistrict

SalesSales

ManagerManager

DistrictDistrict

SalesSales

ManagerManager

DistrictDistrict

SalesSales

ManagerManager

DistrictDistrict

SalesSales

ManagerManager

DistrictDistrict

SalesSales

ManagerManager

DistrictDistrict

SalesSales

ManagerManager

Regional SalesRegional Sales

ManagerManagerRegional SalesRegional Sales

ManagerManager

Span of Control vs. Management LevelsSpan of Control vs. Management Levels


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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. Staff PositionsLine vs. Staff Positions


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Setting up sales organisationSetting up sales organisation

Define objectivesDefine objectives Quantitative and qualitativeQuantitative and qualitative

Delineate necessary activitiesDelineate necessary activities Necessary activitiesNecessary activities

Volume of performanceVolume of performance

Grouping activities into positionsGrouping activities into positions Closely related tasks assigned to same positionsClosely related tasks assigned to same positions

Assignment of personnel to positionsAssignment of personnel to positions


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Setting up .Setting up .

Provision for coordination and controlProvision for coordination and control Span of controlSpan of control

Formal or informalFormal or informal

Out put is a written job descriptionOut put is a written job description

Job descriptionJob description Reporting, objectives , duties responsibilities,Reporting, objectives , duties responsibilities,

performance measurementsperformance measurements


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Organizational

Structure

Environmental

Characteristics

Task

Performance

Performance

Objective

SpecializationSpecializationHigh Envir.High Envir.

uncertaintyuncertaintyNon routineNon routine AdaptivenessAdaptiveness

CentralizationCentralizationLow Envir.Low Envir.

UncertaintyUncertaintyRepetitiveRepetitive EffectivenessEffectiveness

Selling-Situation Factors and Organizational Structure

Selling Situation ContingenciesSelling Situation Contingencies


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Customer and Product DeterminantsCustomer and Product Determinants

of Sales Force Specializationof Sales Force Specialization

SimpleSimple

ProductProduct

OfferingOffering

ComplexComplex

Range ofRange of

ProductsProducts

Customer Needs DifferentCustomer Needs Different

Customer Needs SimilarCustomer Needs Similar

Market-Market-

DrivenDriven


Product/Market-Product/Market-

DrivenDriven


Geography-Geography-DrivenDriven


Product-Product-DrivenDriven


Selling Situation ContingenciesSelling Situation Contingencies


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Geographic Sales OrganizationGeographic Sales Organization


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



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Product Sales OrganizationProduct Sales Organization


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


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



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Market Sales OrganizationMarket Sales Organization


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


Salespeople (150)Salespeople (150)


Commercial AccountsCommercial Accounts

Sales ManagerSales ManagerGovernment AccountsGovernment Accounts

Sales ManagerSales Manager

Sales TrainingSales Training

ManagerManager



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Functional Sales OrganizationFunctional Sales Organization


Field Sales ManagerField Sales Manager Telemarketing Sales ManagerTelemarketing Sales Manager

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






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Comparison ofComparison ofSales Organization StructuresSales Organization Structures

OrganizationalOrganizational

StructureStructure AdvantagesAdvantages DisadvantagesDisadvantages

GeographicGeographic

Low CostLow Cost

No geographic duplicationNo geographic duplication No customer duplicationNo customer duplication Fewer management levelsFewer management levels

LimitedLimitedspecializationspecialization Lack ofLack of

managementmanagement

control over productcontrol over product

oror

customer emphasiscustomer emphasis

ProducProduc

tt

Salespeople becomeSalespeople becomeexpertsexperts

in product attr. &in product attr. &

applicationsapplications Management control overManagement control over

selling effortselling effort

High costHigh cost GeographicGeographic

duplicationduplication Customer duplicationCustomer duplication


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Comparison ofComparison ofSales Organization StructuresSales Organization Structures

MarketMarket

Salespeople developSalespeople develop

better understanding ofbetter understanding ofunique customer needsunique customer needs

Management control overManagement control over

selling allocated to differentselling allocated to different

marketsmarkets

High costHigh cost GeographicGeographic

duplicationduplication

FunctionFunction

alal

Efficiency in performingEfficiency in performing

selling activitiesselling activities

GeographicGeographic

duplicationduplication Customer duplicationCustomer duplication Need for coordinationNeed for coordination

OrganizationalOrganizational

StructureStructure AdvantagesAdvantages DisadvantagesDisadvantages


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Hybrid Sales Organization StructureHybrid Sales Organization Structure


Major AccountsMajor Accounts

Sales ManagerSales ManagerRegular AccountsRegular Accounts

Sales ManagerSales ManagerOffice EquipmentOffice Equipment

Sales ManagerSales ManagerOffice SuppliesOffice Supplies


Field SalesField Sales

ManagerManagerTelemarketingTelemarketing


Commercial AccountsCommercial Accounts

Sales ManagerSales ManagerGovernment AccountsGovernment Accounts


WesternWestern

Sales ManagerSales ManagerEasternEastern



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LargeLarge

SmallSmall

Complexity of AccountComplexity of Account

Sizeo

fAcc

ou

nt

SizeofAcc

ou

nt

LargeLarge

AccountAccount

SimpleSimple ComplexComplex

MajorMajor

AccountAccount

RegularRegularAccountAccount

ComplexComplexAccountAccount

Sales Organization Structures:Sales Organization Structures:

Identifying Major AccountsIdentifying Major Accounts


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Develop Major Account SalesforceDevelop Major Account Salesforce

Assign Major Accounts toAssign Major Accounts to

Sales ManagersSales Managers

Assign Major Accounts to SalespeopleAssign Major Accounts to Salespeople

along with Other Accountsalong with Other Accounts

Sales Organization Structures:Sales Organization Structures:

Major Accounts OptionsMajor Accounts Options


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Salesforce DeploymentSalesforce Deployment

1.1. How much selling effort is needed to cover accounts andHow much selling effort is needed to cover accounts and

prospects adequately so that sales and profit objectives willprospects adequately so that sales and profit objectives willbe achieved?be achieved?

2.2. How many salespeople are required to provide the desiredHow many salespeople are required to provide the desired

amount of selling effort?amount of selling effort?

3.3. How should territories be designed to ensure proper coverageHow should territories be designed to ensure proper coverage

of accounts and to provide each salesperson with aof 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.


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Interrelatedness ofInterrelatedness of

Sales Force Deployment DecisionsSales Force Deployment DecisionsHow 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 andsalespeople assigned to territories to ensure

proper coverage of accounts and to provide each

salesperson with a reasonable opportunity for

success?

Allocation ofAllocation of

Selling EffortSelling Effort

Allocation ofAllocation of

Selling EffortSelling Effort

Sales ForceSales Force

SizeSize

Sales ForceSales Force

SizeSize

TerritoryTerritory

DesignDesign

TerritoryTerritory

DesignDesign


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Single FactorSingle Factor

ModelsModels

Single FactorSingle Factor

ModelsModels

Easy to Develop and UseEasy to Develop and Use

Difficult to Develop and UseDifficult to Develop and Use

LowLowAnalyticalAnalyticalRigorRigor

HighHighAnalyticalAnalyticalRigorRigor

PortfolioPortfolio

ModelsModels

PortfolioPortfolio

ModelsModels

DecisionDecision

ModelsModels

DecisionDecision

ModelsModels

Allocation of Selling Effort:Allocation of Selling Effort:Analytical Approaches to Allocation of Selling EffortAnalytical Approaches to Allocation of Selling Effort


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

Easy to develop and use/low analytical rigorEasy to develop and use/low analytical rigor

Accounts classified into categories based on oneAccounts classified into categories based on one

factor, such as market potentialfactor, such as market potential

All accounts in the same category are assigned theAll accounts in the same category are assigned thesame number of sales callssame number of sales calls

Effort allocation decisions are based on the analysisEffort allocation decisions are based on the analysisof onlyof only oneone factor and differences among accounts infactor and differences among accounts inthe same category arethe same category are notnotconsidered in assigningconsidered in assigningsales call coveragesales call coverage


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Allocation of Selling Effort:Allocation of Selling Effort:Single Factor Model ExampleSingle Factor Model Example

Market PotentialMarket Potential

CategoriesCategories

A

B

C

D

Average Sales Calls toAverage Sales Calls to

an Account Last Yearan Account Last Year

25

23

20

16

Average Sales Calls toAverage Sales Calls to

an Account Next Yearan Account Next Year

32

24

16

8


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Allocation of Selling Effort:Allocation of Selling Effort:Portfolio ModelsPortfolio Models

Account Opportunity - an accounts need forAccount Opportunity - an accounts need for

and ability to purchase the firms productsand ability to purchase the firms products

Competitive Position - the strength of theCompetitive Position - the strength of the

relationship between the firm and an accountrelationship between the firm and an account


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Allocation of Selling Effort:Allocation of Selling Effort:Portfolio Model Segments and StrategiesPortfolio Model Segments and Strategies

Competitive PositionCompetitive Position

Segment 1Segment 1 Segment 2Segment 2

Segment 4Segment 4Segment 3Segment 3

StrongStrong WeakWeak

Low

Low

High

High

Accou n

tOpportu

nit

y

Accou n

tOpportu

nit

y


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

Simple Basic Concept - to allocate salesSimple Basic Concept - to allocate sales

calls to accounts that promise the highestcalls to accounts that promise the highest

sales return from the sales callssales return from the sales calls

Optimal number of calls in terms of salesOptimal number of calls in terms of sales

or profit maximizationor profit maximization


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Sales Force Size: Key ConsiderationsSales Force Size: Key Considerations

Sales ProductivitySales Productivity- the ratio of sales- the ratio of sales

generated to selling effort usedgenerated to selling effort used In early stages, the addition of salespeople increases salesIn early stages, the addition of salespeople increases sales

considerably more than the selling costs. As salespeopleconsiderably more than the selling costs. As salespeople

continue to be added, sales increases tend to decline until acontinue to be added, sales increases tend to decline until a

point is reached when the costs to add a salesperson arepoint is reached when the costs to add a salesperson are

more than the revenues that salesperson can generate.more than the revenues that salesperson can generate.

Salesforce TurnoverSalesforce Turnover Is very costlyIs very costly

Should be anticipatedShould be anticipated


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Sales Force Size: Analytical ToolsSales Force Size: Analytical Tools

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

TheThe Breakdown ApproachBreakdown Approach is used to determine theis used to determine the

number of salespeople needed to generate a forecastednumber of salespeople needed to generate a forecasted

level of sales. This approach is easy to develop.level of sales. This approach is easy to develop.

However, it is weak conceptually. The concept underlyingHowever, it is weak conceptually. The concept underlying

the calculations is that sales determine the number ofthe calculations is that sales determine the number of

salespeople neededputting the cart before the horse.salespeople neededputting the cart before the horse.


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TheThe Workload ApproachWorkload Approach determines how much sellingdetermines how much selling

effort is needed to adequately cover the firms market.effort is needed to adequately cover the firms market.

Then the number of salespeople required to provide thisThen the number of salespeople required to provide this

amount of selling effort is calculated. This approachamount of selling effort is calculated. This approach

relatively simple to develop and is sound conceptually.relatively simple to develop and is sound conceptually.

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

Average selling effort perAverage selling effort persalespersonsalesperson


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TheThe Incremental ApproachIncremental Approach is the most rigorous foris the most rigorous for

calculating salesforce size. Its basic concept is tocalculating salesforce size. Its basic concept is to

compare the marginal profits and marginal costscompare the marginal profits and marginal costs

associated with each incremental salesperson. The majorassociated with each incremental salesperson. The major

advantage of this approach is that it quantifies theadvantage of this approach is that it quantifies the

important relationships between salesforce size, sales,important relationships between salesforce size, sales,

and costs. However, the incremental method is difficult toand costs. However, the incremental method is difficult to

develop, and it cannot be used for new sales forces wheredevelop, and it cannot be used for new sales forces where

historical data and accurate judgments are not possible.historical data and accurate judgments are not possible.


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Designing TerritoriesDesigning Territories

Territories consist of whatever specificTerritories consist of whatever specificaccounts are assigned to a specificaccounts are assigned to a specificsalesperson. The territory can be viewedsalesperson. The territory can be viewed

as the work unit for a salesperson.as the work unit for a salesperson.

Territory ConsiderationsTerritory Considerations Trading areasTrading areas

Present effortPresent effort Recommended effortRecommended effort


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Territory Design ProcedureTerritory Design Procedure

FinalizeFinalizeTerritoryTerritory

DesignDesign

FinalizeFinalizeTerritoryTerritory

DesignDesign

AssessAssessTerritoryTerritory

WorkloadWorkload

AssessAssessTerritoryTerritory

WorkloadWorkload

Form InitialForm Initial

TerritoriesTerritories

Form InitialForm Initial

TerritoriesTerritories

AnalyzeAnalyze

Planning andPlanning and

Control UnitControl Unit

OpportunityOpportunity

AnalyzeAnalyze

Planning andPlanning and


OpportunityOpportunity

SelectSelectPlanning andPlanning and


SelectSelectPlanning andPlanning and


Sales ion Structure(sales and distribution)

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