ch 4 sales management
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Module 4:
Sales Organization Structure and Salesforce Deployment
Ingram LaForge Avila
Schwepker Jr. Williams
Sales Management:
Analysis and Decision Making
Sales Organization Structure
and Salesforce Deployment
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Module 4:
Sales Organization Structure and Salesforce Deployment
Ingram LaForge Avila
Schwepker Jr. Williams
Sales Management:
Analysis and Decision Making
Learning Objectives
1. Define the concepts of specialization, centralization,
span of control versus management levels, and line
versus staff positions.
2. Describe the ways salesforces might be specialized.
3. Evaluate the advantages and disadvantages of sales
organization structures.
4. Name the important considerations in organizing
strategic account management programs.
5. Explain how to determine the appropriate sales
organization structure for a given selling situation.
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Module 4:
Sales Organization Structure and Salesforce Deployment
Ingram LaForge Avila
Schwepker Jr. Williams
Sales Management:
Analysis and Decision Making
Learning Objectives
6. Discuss salesforce deployment.
7. Explain three analytical approaches for determining
allocation of selling effort.
8. Describe three methods for calculating sales force
size.
9. Explain the importance of sales territories and list
the steps in the territory design process.
10. Discuss the important people considerations in
salesforce deployment.
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Module 4:
Sales Organization Structure and Salesforce Deployment
Ingram LaForge Avila
Schwepker Jr. Williams
Sales Management:
Analysis and Decision Making
Sales Organization Concepts
The degree to which individuals perform some of the required tasks to the exclusion of others.
Individuals can become experts on certain tasks, leading to better performance for the entire organization.
Specialization
The degree two which important decisions and tasks performed at higher levels in the management hierarchy.
Centralized structures place authority and responsibility at higher management levels.
Centralization
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Module 4:
Sales Organization Structure and Salesforce Deployment
Ingram LaForge Avila
Schwepker Jr. Williams
Sales Management:
Analysis and Decision Making
Sales Force Specialization Continuum
Some specialization
of selling activities,
products, and/or
customers
All selling activities
and all products to
all customers
Generalists Certain selling
activities for certain
products for certain
customers
Specialists
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Module 4:
Sales Organization Structure and Salesforce Deployment
Ingram LaForge Avila
Schwepker Jr. Williams
Sales Management:
Analysis and Decision Making
Flat Sales Organization
Span of Control
Ma
na
ge
me
nt L
eve
ls
National
Sales
Manager
District
Sales
Manager
District
Sales
Manager
District
Sales
Manager
District
Sales
Manager
District
Sales
Manager
Span of Control vs. Management Levels
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Module 4:
Sales Organization Structure and Salesforce Deployment
Ingram LaForge Avila
Schwepker Jr. Williams
Sales Management:
Analysis and Decision Making
Tall Sales Organization
National Sales
Manager
Span of Control
Ma
na
ge
me
nt L
eve
ls
District
Sales
Manager
District
Sales
Manager
District
Sales
Manager
District
Sales
Manager
District
Sales
Manager
District
Sales
Manager
Regional Sales
Manager
Regional Sales
Manager
Span of Control vs. Management Levels
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Module 4:
Sales Organization Structure and Salesforce Deployment
Ingram LaForge Avila
Schwepker Jr. Williams
Sales Management:
Analysis and Decision Making
National Sales Manager
Regional Sales Managers
District Sales Managers
Sales Training Manager
Sales Training Manager
Salespeople
Staff Position
Line Position
Line vs. Staff Positions
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Module 4:
Sales Organization Structure and Salesforce Deployment
Ingram LaForge Avila
Schwepker Jr. Williams
Sales Management:
Analysis and Decision Making
Selling-Situation Factors and
Organizational Structure
Organizational
Structure
Environmental
Characteristics
Task
Performance
Performance
Objective
Specialization
High
Environmental
Uncertainty
Nonroutine Adaptiveness
Centralization
Low
Environmental
Uncertainty
Repetitive Effectiveness
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Module 4:
Sales Organization Structure and Salesforce Deployment
Ingram LaForge Avila
Schwepker Jr. Williams
Sales Management:
Analysis and Decision Making
Customer and Product Determinants
of Sales Force Specialization
Customer Needs Different
Customer Needs Similar
Simple
Product
Offering
Complex
Range of
Products
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Module 4:
Sales Organization Structure and Salesforce Deployment
Ingram LaForge Avila
Schwepker Jr. Williams
Sales Management:
Analysis and Decision Making
Geographic Sales Organization
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Module 4:
Sales Organization Structure and Salesforce Deployment
Ingram LaForge Avila
Schwepker Jr. Williams
Sales Management:
Analysis and Decision Making
Product Sales Organization
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Module 4:
Sales Organization Structure and Salesforce Deployment
Ingram LaForge Avila
Schwepker Jr. Williams
Sales Management:
Analysis and Decision Making
Market Sales Organization
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Module 4:
Sales Organization Structure and Salesforce Deployment
Ingram LaForge Avila
Schwepker Jr. Williams
Sales Management:
Analysis and Decision Making
Functional Sales Organization
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Module 4:
Sales Organization Structure and Salesforce Deployment
Ingram LaForge Avila
Schwepker Jr. Williams
Sales Management:
Analysis and Decision Making
Large
Small
Complexity of Account
Siz
e o
f A
cco
un
t
Large
Account
Simple Complex
Strategic
Account
Regular
Account
Complex
Account
Identifying Strategic Accounts
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Module 4:
Sales Organization Structure and Salesforce Deployment
Ingram LaForge Avila
Schwepker Jr. Williams
Sales Management:
Analysis and Decision Making
Strategic Accounts Options
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Module 4:
Sales Organization Structure and Salesforce Deployment
Ingram LaForge Avila
Schwepker Jr. Williams
Sales Management:
Analysis and Decision Making
Comparison of Sales Organization Structures
Organizational
Structure Advantages Disadvantages
Geographic
Low Cost
No geographic duplication
No customer duplication
Fewer management levels
Limited specialization
Lack of management
control over product or
customer emphasis
Product
Salespeople become experts
in product attributes &
applications
Management control over
selling effort
High cost
Geographic duplication
Customer duplication
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Module 4:
Sales Organization Structure and Salesforce Deployment
Ingram LaForge Avila
Schwepker Jr. Williams
Sales Management:
Analysis and Decision Making
Comparison of Sales Organization Structures
Organizational
Structure Advantages Disadvantages
Market
Salespeople develop better
understanding of unique
customer needs
Management control over
selling allocated to different
markets
High cost
Geographic duplication
Functional Efficiency in performing
selling activities
Geographic duplication
Customer duplication
Need for coordination
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Module 4:
Sales Organization Structure and Salesforce Deployment
Ingram LaForge Avila
Schwepker Jr. Williams
Sales Management:
Analysis and Decision Making
Hybrid Sales Organization Structure
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Module 4:
Sales Organization Structure and Salesforce Deployment
Ingram LaForge Avila
Schwepker Jr. Williams
Sales Management:
Analysis and Decision Making
Salesforce Deployment
Salesforce deployment decisions can be viewed as
providing answers to three interrelated questions.
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Module 4:
Sales Organization Structure and Salesforce Deployment
Ingram LaForge Avila
Schwepker Jr. Williams
Sales Management:
Analysis and Decision Making
Interrelatedness of
Salesforce Deployment Decisions
How 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 to ensure proper
coverage of accounts and to provide each
salesperson with a reasonable opportunity for
success?
Allocation of
Selling Effort
Salesforce
Size
Territory
Design
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Module 4:
Sales Organization Structure and Salesforce Deployment
Ingram LaForge Avila
Schwepker Jr. Williams
Sales Management:
Analysis and Decision Making
Interrelatedness of
Salesforce Deployment Decisions
2,000 accounts x 25 sales calls/account = 50,000
sales calls required to cover accounts
50,000 sales calls required 1,250 sales calls/
salesperson = 40 salespeople needed
40 territories needed to provide each salesperson with
opportunity for success and to ensure proper
coverage of accounts (e.g. 50 accounts per territory)
Allocation of
Selling Effort
Salesforce
Size
Territory
Design
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Module 4:
Sales Organization Structure and Salesforce Deployment
Ingram LaForge Avila
Schwepker Jr. Williams
Sales Management:
Analysis and Decision Making
Analytical Approaches to
Allocation of Selling Effort
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Module 4:
Sales Organization Structure and Salesforce Deployment
Ingram LaForge Avila
Schwepker Jr. Williams
Sales Management:
Analysis and Decision Making
Single Factor Models
Easy to develop and use; low analytical rigor
Accounts classified into categories based on one factor, such as market potential
All accounts in the same category are assigned the same number of sales calls
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Module 4:
Sales Organization Structure and Salesforce Deployment
Ingram LaForge Avila
Schwepker Jr. Williams
Sales Management:
Analysis and Decision Making
Single Factor Model Example
Market Potential
Categories
Average Sales Calls to
an Account Last Year
Average Sales Calls to
an Account Next Year
A 25 32
B 23 24
C 20 16
D 16 8
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Module 4:
Sales Organization Structure and Salesforce Deployment
Ingram LaForge Avila
Schwepker Jr. Williams
Sales Management:
Analysis and Decision Making
Portfolio Models
Account Opportunity - an accounts need for
and ability to purchase the firms products
Competitive Position - the strength of the
relationship between the firm and an
account
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Module 4:
Sales Organization Structure and Salesforce Deployment
Ingram LaForge Avila
Schwepker Jr. Williams
Sales Management:
Analysis and Decision Making
Portfolio Model Segments and Strategies
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Module 4:
Sales Organization Structure and Salesforce Deployment
Ingram LaForge Avila
Schwepker Jr. Williams
Sales Management:
Analysis and Decision Making
Decision Models
Simple Basic Concept - to allocate sales calls
to accounts that promise the highest sales
return from the sales calls
Optimal number of calls in terms of sales or
profit maximization
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Module 4:
Sales Organization Structure and Salesforce Deployment
Ingram LaForge Avila
Schwepker Jr. Williams
Sales Management:
Analysis and Decision Making
Sales Force Size: Key Considerations
Sales Productivity Ration of Outputs to Inputs
Sales Growth as a Result of Adding Salespeople is Curvilinear
Diminishing Marginal Returns
Salesforce Turnover Usually Very Costly
Should be Anticipated and Managed
Organizational Strategy
Growth Targets
Selling Costs
Market Share
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Module 4:
Sales Organization Structure and Salesforce Deployment
Ingram LaForge Avila
Schwepker Jr. Williams
Sales Management:
Analysis and Decision Making
Salesforce Size Decisions
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Module 4:
Sales Organization Structure and Salesforce Deployment
Ingram LaForge Avila
Schwepker Jr. Williams
Sales Management:
Analysis and Decision Making
Analytical Tools: Breakdown Approach
Uses sales forecast to determine salesforce size
Easy to use and understand
Conceptually weak - assumes sales drives the
need for salespeople
Best suited in stable selling environments
Salesforce size = Forecasted sales / Average sales per salesperson
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Module 4:
Sales Organization Structure and Salesforce Deployment
Ingram LaForge Avila
Schwepker Jr. Williams
Sales Management:
Analysis and Decision Making
Analytical Tools: Workload Approach
Estimation of selling effort needed is used to
determine salesforce size
Estimating selling effort needed may be simple
or complex
Conceptually sound
Number of salespeople = Total selling effort needed
Average selling effort per
salesperson
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Module 4:
Sales Organization Structure and Salesforce Deployment
Ingram LaForge Avila
Schwepker Jr. Williams
Sales Management:
Analysis and Decision Making
Analytical Tools: Incremental Approach
Uses Marginal Profit Contribution and Marginal
Costs to Determine Salesforce Size
Quantifies Important Relationships Between
Salesforce Size, Sales, and Costs,
Most Rigorous Method and Difficult to Develop
Not appropriate for New Salesforces
# of Salespeople Marginal Contribution Marginal Cost
100
101
102
103
$85,000
$80,000
$75,000
$70,000
$75,000
$75,000
$75,000
$75,000
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Module 4:
Sales Organization Structure and Salesforce Deployment
Ingram LaForge Avila
Schwepker Jr. Williams
Sales Management:
Analysis and Decision Making
Salesforce Size: Other Considerations
Turnover
Salesforce Size Calculations Should Incorporate
Turnover Rates
Example: Desired Size is 100; Annual Turnover is
20%; Recruiting, Selecting, and Training Should be
Based on Salesforce Size of 120.
Outsourcing the Salesforce
Need salesforce quickly and/or for short period
Flexible
Contractual arrangements vary
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Module 4:
Sales Organization Structure and Salesforce Deployment
Ingram LaForge Avila
Schwepker Jr. Williams
Sales Management:
Analysis and Decision Making
Calculating Turnover
For any given time frame (e.g., month quarter,
year), divide the number of salespeople leaving
their jobs (e.g., terminated, quit, promoted) by
the total number of salespeople employed at the
mid-point of the time frame.
Example: Time Frame 1 Year
Separations 50 Salespeople
# of Salespeople at Mid-Point 200
Salesforce Turnover = 25%
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Module 4:
Sales Organization Structure and Salesforce Deployment
Ingram LaForge Avila
Schwepker Jr. Williams
Sales Management:
Analysis and Decision Making
Designing Territories
Territories consist of whatever specific accounts are assigned to a specific salesperson. The territory can be viewed as the work unit for a salesperson.
Territory Considerations Trading areas
Present effort
Recommended effort
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Module 4:
Sales Organization Structure and Salesforce Deployment
Ingram LaForge Avila
Schwepker Jr. Williams
Sales Management:
Analysis and Decision Making
Territory Design Procedure
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Module 4:
Sales Organization Structure and Salesforce Deployment
Ingram LaForge Avila
Schwepker Jr. Williams
Sales Management:
Analysis and Decision Making
Territory Design: Using Technology
Software Optimizes Territory Design Using
Multiple User-Defined Criteria
Compare Multiple Methods Quickly and Easily
Examples
Sales Territory Configurator
Tactician
TerrAlign
Alignstar
http://www.rochestergroup.com/http://www.rochestergroup.com/http://www.tactician.com/http://www.terralign.com/http://www.alignstar.com/
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Module 4:
Sales Organization Structure and Salesforce Deployment
Ingram LaForge Avila
Schwepker Jr. Williams
Sales Management:
Analysis and Decision Making
People Considerations
Analytical models dont account for people
considerations
Individual differences in buyers and accounts
Salesperson intuition
Sales managers should temper the analytical results with
people considerations before making final deployment
decisions.
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Module 4:
Sales Organization Structure and Salesforce Deployment
Ingram LaForge Avila
Schwepker Jr. Williams
Sales Management:
Analysis and Decision Making
Developing Forecasts
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Module 4:
Sales Organization Structure and Salesforce Deployment
Ingram LaForge Avila
Schwepker Jr. Williams
Sales Management:
Analysis and Decision Making
Why Forecast?
Determining Sales Force Size
Designing Territories
Establishing Sales Quotas and Selling Budgets
Determining Sales Compensation Levels
Evaluating Salesperson Performance
Evaluating Prospective Accounts
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Module 4:
Sales Organization Structure and Salesforce Deployment
Ingram LaForge Avila
Schwepker Jr. Williams
Sales Management:
Analysis and Decision Making
Types of Forecasts
Market Potential
Sales Potential
Market Potential
Sales Potential
Industry Level
Firm Level
Best
Possible Results
Expected Results
for Given Strategy
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Module 4:
Sales Organization Structure and Salesforce Deployment
Ingram LaForge Avila
Schwepker Jr. Williams
Sales Management:
Analysis and Decision Making
Top-Down vs. Bottom-Up Forecasting
Forecast made at the front-line level and then aggregated up the levels of the organization
Bottom Up
Forecast made at the business unit level then broken down by zone, region, district, territory, and account forecast.
Top Down
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Module 4:
Sales Organization Structure and Salesforce Deployment
Ingram LaForge Avila
Schwepker Jr. Williams
Sales Management:
Analysis and Decision Making
Top-Down Approach
-
Module 4:
Sales Organization Structure and Salesforce Deployment
Ingram LaForge Avila
Schwepker Jr. Williams
Sales Management:
Analysis and Decision Making
Bottom-Up Approach
Company Sales Forecast
Combined into district, region,
and zone forecasts
Combined into territory forecasts
Salespersons forecasts
of accounts
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Module 4:
Sales Organization Structure and Salesforce Deployment
Ingram LaForge Avila
Schwepker Jr. Williams
Sales Management:
Analysis and Decision Making
Company Forecasting Methods
Moving Averages Uses historical averages to forecast future sales
Averages are calculated using a predetermined number of previous periods (e.g., two-year moving average; four-year moving average)
Exponential Smoothing Weighted moving average
Usually most recent period is weighted heavier
Decomposition Methods Breakdown historical sales data into four components (trend,
cycle, seasonal, erratic)
Evaluate the components and then reincorporate to create forecast
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Module 4:
Sales Organization Structure and Salesforce Deployment
Ingram LaForge Avila
Schwepker Jr. Williams
Sales Management:
Analysis and Decision Making
Moving Averages Forecast Example
Year Actual Sales Two-Year Four-Year
2002 $8,400,000
2003 $8,820,000
2004 $8,644,000 $8,610,000
2005 $8,212,000 $8,732,000
2006 $8,622,000 $8,428,000 $8,520,000
2007 $9,484,000 $8,418,000 $8,574,000
2008 $9,674,000 $9,054,000 $8,740,000
2009 $10,060,000 $9,579,000 $8,998,000
2010 ? $9,868,000 $9,460,000
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Module 4:
Sales Organization Structure and Salesforce Deployment
Ingram LaForge Avila
Schwepker Jr. Williams
Sales Management:
Analysis and Decision Making
Exponential Smoothing Forecast Example
Year Actual Sales = 0.2 = 0.5 = 0.8
2002 $8,400,000
2003 $8,820,000 $8,400,000 $8,400,000 $8,400,000
2004 $8,644,000 $8,484,000 $861,000 $8,736,000
2005 $8,212,000 $8,516,000 $8,627,000 $8,662,000
2006 $8,622,000 $8,455,000 $8,420,000 $8,302,000
2007 $9,484,000 $8,488,000 $8,521,000 $8,558,000
2008 $9,674,000 $8,687,000 $9,003,000 $9,299,000
2009 $10,060,000 $8,884,000 $9,339,000 $9,599,000
2010 ? $9,119,000 $9,700,000 $9,968,000
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Module 4:
Sales Organization Structure and Salesforce Deployment
Ingram LaForge Avila
Schwepker Jr. Williams
Sales Management:
Analysis and Decision Making
Moving Averages Forecast Example
$6,000,000
$7,000,000
$8,000,000
$9,000,000
$10,000,000
$11,000,000
2002 2003 2004 2005 2006 2007 2008 2009 2010
Actual Sales Two-Year Four-Year Exp. Smoothing
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Module 4:
Sales Organization Structure and Salesforce Deployment
Ingram LaForge Avila
Schwepker Jr. Williams
Sales Management:
Analysis and Decision Making
Breakdown Methods
Use factors influencing sales at
the region, district, and territory
levels to adjust forecasts made at
the business unit level (top-down
method).
Buying Power Index (BPI) is often
used to adjust forecasts.
Factors should be continuously
evaluated.
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Module 4:
Sales Organization Structure and Salesforce Deployment
Ingram LaForge Avila
Schwepker Jr. Williams
Sales Management:
Analysis and Decision Making
Even Allocation vs. Breakdown Methods
Company Sales Forecast = $1,000,000
Region A Portion= .33 Forecast = $333,333
Region B Portion = .33 Forecast = $333,333
Region C Portion = .34 Forecast = $333,334
Company Sales Forecast = $1,000,000
Region A Breakdown Factor = .20
Forecast = $200,000
Region B Breakdown Factor = .30
Forecast = $300,000
Region C Breakdown Factor = .50
Forecast = $500,000
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Module 4:
Sales Organization Structure and Salesforce Deployment
Ingram LaForge Avila
Schwepker Jr. Williams
Sales Management:
Analysis and Decision Making
Bottom-Up Approach Methods
Survey buyer intentions
Survey buyers purchasing intentions
Aggregate
Jury of executive opinion
Executives or other experts estimate sales at the account level
Estimates are averaged or otherwise agreed upon to generate forecast
Delphi (A form of jury of executive opinion)
jury is anonymous and estimates are redistributed for revision
jury review and revise estimates until consensus is reached
Sales force composite
Salespeople create forecasts for the accounts and territories
Forecasts are aggregated
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Module 4:
Sales Organization Structure and Salesforce Deployment
Ingram LaForge Avila
Schwepker Jr. Williams
Sales Management:
Analysis and Decision Making
Forecasting with Regression Analysis
Statistical technique using predictor variables
(factors) to forecast sales
May be complex
Requires collection of
predictor variable data
Analysis may be
linear or logarithmic
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