organizing the sales effort mcgraw-hill/irwin

4 Organizing theSales Effort

McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.

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Organize Around Customers

Historical Product-centered Expertise in features and functions

Today Customer-centered Expertise in business issues Sales resources deployed to provide

best service to best customers

Source: HR Chally Group (2007), The Chally World Class Excellence Research Report: The Route to the Summit. Dayton, OH: HR Chally Group.

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Identify purposes of sales organization

Understand different horizontal organizational structures of a sales force.

Outline major issues in key account and team selling.

Discuss key vertical structure issues in sales organizations.

Identify important issues in starting a new sales force from the ground up.

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Purposes of Sales Organization

Divide and arrange activities so the firm can benefit from specialization of labor

Provide for stability and continuity in firm’s selling efforts

Provide for coordination of activities assigned to sales force and to departments in the firm

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Division and Specialization of Labor

Increase productivity - specialists can become proficient at assigned tasks

Divide required selling activities to gain maximum benefits within the sales force

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Line organization Vertical Chain of command runs from

chief sales executive down through levels of subordinates

Each subordinate responsible to one person

VP Sales

Director of U.S. Sales

Regional Mgr. for NE US

District Mgr. for Massachusetts

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Line and staff organization Vertical (most common) Several sales management activities

assigned to separate specialists

VP Sales

Director of Sales Training

Director of DistributorRelations

Director of Sales Promotion

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Stability and Continuity

Organize activities without regard to talents of current employees

People can be trained to fill positions

Same activities will be carried out even if designated individuals receive promotions or leave

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Sales Organization Structure

Horizontal – divides selling activities among sales force

Vertical – assigns authority for specific sales management activities

Horizontal Structure Options

Outside Agents

Company Sales Force

Geographic

Co-Marketing

Product

Nat’l KeyAccounts

Market/Customer Type Team Selling Selling

Function

SellingCenters

MatrixOrganizations

OR

Telemarketing

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Outsourcing the Sales Force

Types of agents Manufacturer’s representatives

Sell part of the output of their principals Take neither ownership nor physical

possession of goods Cover specific territory and specialize in

limited range of complementary products Selling agents

Do not take title or possession of the goods they sell

Compensated by commissions Broad authority to modify prices and

terms of sale Actively shape manufacturer’s

promotional and sales programsHorizontalStructureOptions

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4.1Six C’s of finding theright rep

HorizontalStructureOptions

Source: Dan Hanover, “Independents Day,” Sales & Marketing Management, April 2000, pp. 65–68.

1. Compatible lines2. Compatible territories3. Compatible customers4. Credibility of the rep5. Capabilities6. Credits

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Outsourcing Considerations

Economic Criteria Control Transactions costs Strategic Flexibility


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Geographic Organization

Simplest and most common method

Individual salespeople assigned to separate geographic territories

Responsible for performing all activities necessary to sell all products


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Does not provide benefits associated with specialization of labor

Geographic Organization


Lowest costs Travel time

and expenses minimized

Sales administration and overhead costs kept low

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Geographic sales organization


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Duplication of effort

Product Organization


Salespeople master effective selling methods for single or related products

Closer alignment of sales and production

Sales management controls allocation of selling effort across the line

Separate sales force for each product (or category) in the line

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Sales force organized by product type


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Possible higher selling and administrative costs

Duplication of effort

Customer Type/Market Organization


Better understanding of customer needs

Increased familiarity with certain businesses

Increased control over allocation of selling effort

Natural extension of marketing concept and strategy of market segmentation

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Sales force organized by customer type


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Customer objections to switch to maintenance salesperson

Feelings of rivalry between the sales force

Selling Function Organization


Skills matched to sales function

Developmental salespeople often a successful alternative

Salespeople specialize in performing different selling functions – e.g. prospecting and developing new accounts versus maintaining and servicing existing customers

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Telemarketing

Form of organization by selling function

Qualifying potential new accounts Servicing existing accounts

quickly Seeking repeat purchases from

existing accounts that cannot be covered efficiently in person

Providing quick communication of newsworthy developmentsHorizontal

StructureOptions

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4.2 Database Capabilities and Telemarketing


Source: KenSpralling, “Centex Houses Ranks Highest in Customer Satisfaction in 10 major: U.S. Markets, According to Independent Study,” www.investors.com, September 14, 2005; Alicia Orr, “Predicting a Need,” Target Marketing, February 2001, pp. 62–64.

DatabaseDatabaseAnalysisSoftware

TelemarketingCustomized

DirectMail

Collects/provides information

Formulates prospecting solutions – matches homeowners against other data to qualify customers, predict interest; generates prospect universe

Prequalifies prospects, can transfer to salesperson to close sale

Follows-up with prospects not ready to buy, provides response vehicles (web address, toll-free #)

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National and Key Accounts Separate corporate

division/sales force Deliver high-level customer

service to attract and maintain large and important customers

Key account sales execs Business managers capable of

managing key accounts Customize products and services Plan and implement key account

business plansHorizontalStructureOptions

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Team Selling

Integrates functional specialists with customer relationship specialists

ID team structure that meets customer needs

Benefits Customer questions answered

faster Customers can speak directly with

desired specialistHorizontalStructureOptions

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Other Team Selling Structures

Selling center brings together individuals from around the organization to help salesperson

Matrix organization employs direct-reporting salespeople who support internal consultants with specialized expertise

Multi level selling – sales team consists of personnel from various managerial levels who call on their counterparts in the buying organization


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Co-Marketing Alliances

Develop marketing and sales programs to sell integrated systems directly to the ultimate customer


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Logistical Alliances and Computerized Ordering

Customer point of view - Convenient Flexible Less time consuming

How will computerized reorder systems change the role of the sales force?


Vertical Structure IssuesSpan of Control

Managerial Levels

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Reduced one-to-one communication due to larger # of subordinates

Managements may be less effective, negating cost savings

Larger Span of Control Greater

control/ responsiveness due to fewer management layers

Lower admin costs

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Span of Control

Reduce span of control when: Sales task is complex Profit impact of each

salesperson’s performance is high

Salespeople are well paid and professional

Also, at higher levels in the organization

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Managerial Decision Levels

How much, where should the managerial authority lie?

Hiring, firing, evaluation

Managerial Decision Levels

Importance of decision =

Managerial decision level

Sales force pay = Managerial decision level

Complex selling tasks =

Managerial decision level

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Managerial Selling Responsibilities

Managers often active in sales to key accounts

Organizations value their selling skills

Managers value commissions, contact with marketplace

Drawback – some managers neglect managerial responsibilities

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4.6

4.6Line and staff sales organization

organizing the sales effort mcgraw-hill/irwin

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