1/6/2015

Objectives

MKF 5391
Lecture 2
Organisational Strategies and The
sales Function

Define different strategy levels for multibusiness

Business strategy decisions
Advantages
d a tages a
and
dd
disadvantages
sad a tages o
of pe
personal
so a se
selling
g
Effective integrated marketing communication strategies
Concepts of specialization
Describe the different ways that sales forces might be
specialized
Advantages and disadvantages of different
organizational structures
Deployment of the sales force

Lecturer: Kimble Montagu

Definition of Strategic Business Units (SBUs)

Organizational Strategy Levels

Strategy
Level

An SBU is a single product or brand, a line of

products,, or a mix of related products
p
p
that
meets a common market need or a group of
related needs, and the unit's management is
responsible for all (or most) of the basic
business functions."

Key
Decision Areas

Key
Decision Makers

Corporate
Strategy

Corporate Mission
SBU Definition
SBU Objectives

Corporate
Management

Sales
Strategy

Strategy Types
Strategy Execution

SBU
Management

Cravens (2004)

Organizational Strategy Levels

Strategy
Level
Marketing
Strategy

Key
Decision Areas

SBU Objectives and the Sales Organization

Key
Decision Makers

Target Market Selection

I t
Integrated
t d Mkt Comm.
C

Corporate
Management

Marketing Mix Dev.

Business
Strategy

Account Targeting Strategy

Sales Channel Strategy
Relationship Strategy

SBU
Management

Market Share
Objectives

Build

Sales
Organization
Objectives
Build sales vol.
Secure distrib.

Primary Sales
Tasks
Prospective and
new accounts
Provide high
service levels
particularly presales service
Product/market
feedback

Compensation
System
Salary plus
incentive

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SBU Objectives and the Sales Organization

Market Share
Objectives

Hold

Sales
Organization
Objectives

Primary Sales
Tasks

Maintain sales vol. Call on targeted

current accounts
Consolidate
Incr. service levels to
market position
current accounts
through
concentration on
Call on new accounts
targeted segments
Secure additional
outlets

Compensation
System
Salary plus
commission or
bonus

SBU Objectives and the Sales Organization

Market Share
Objectives
Divest or
Liquidate

Sales
Organization
Objectives
Minimize selling
costs and clear
out inventory

Primary Sales
Tasks
Dump inventory
Eli i
Eliminate
service
i

SBU Objectives and the Sales Organization

Market Share
Objectives
Harvest

Sales
Organization
Objectives

Reduce selling
Service most
profitable accounts
costs
Target profitable eliminate
unprofitable
accounts
accounts
Reduce service
levels
Reduce inventories
levels

Compensation
System
Salary
plus bonus

Business Strategy and the Sales Function

Compensation
System
Salary

Primary Sales
Tasks

Low-cost supplier

Pursue large customers

Minimize cost
Compete on price
Seek customers who are
low price shoppers

Business Strategy and the Sales Function

Low-cost supplier
Differentiation

Compete on nonnon-price
benefits
Provide high quality
customer service
Seek customers who are
not low price shoppers

Business Strategy and the Sales Function

Low-cost supplier
Differentiation
Niche

Serve a distinct target

market not served well by
others
Provide high quality
customer service
Seek customers who are
not low price shoppers

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Marketing Strategy and the Sales Function

Advantages
+ Only promotional tool that consists of personal
communication between seller and buyer

+ More credible and has more impact

p
+ Better timing of message delivery
+ Ability to tailor message to buyer
+ Allows for sale to be closed

Personal Selling-Driven vs. Advertising-Driven

Marketing Communications Strategies
Personal Selling When Message Flexibility is Important
When Message Timing is Important
When Reaction Speed is Important
When Message Credibility is Important
When Trying to Close the Sale
When Low Cost per Contact is Important
When Repetitive Contact is Important
When Control of Message is Important
When Audience is Large

Disadvantage
High cost per contact
Advertising

Target Market Situations and Personal Selling

Integrated Marketing Communications

Target Market:
A definition of the specific market segment to be served

Personal Selling-Driven
Selling Driven Promotional Strategies are
appropriate when:
The market consists of only a few buyers that tend to be
concentrated in location
The buyer needs a great deal of information
The purchase is important
The product is complex
Service after the sale is important

The Sales Strategy Framework

Buying
Situation

Account
Targeting
Strategy

Buying
Center

Relationship
Strategy

Organizational
Buyer Behavior

Account

Salesperson

Sales
Strategy

Buying
Process

Sales Channel
Strategy

Buying
Needs

Selling
Strategy

The strategic integration of multiple

marketing communications tools
communicating a consistent message
in the most effective and efficient
manner.

Organizational Buyer Behavior: Types of Organizations

Major Category

Types
Users: purchase products
Users:
and services to produce
other products and services

Business or
Industrial
Organizations

Original Equipment
Manufacturers (OEM):
(OEM):
purchase products to
incorporate into products
Resellers: purchase
Resellers:
products to sell

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Organizational Buyer Behavior: Types of Organizations

Major Category

Types

Government
Organizations

Federal, State, and

Local Government
Agencies

Organizational Buyer Behavior: Buying Situations

Straight Rebuy Buying Situation

Routinized Response
p
Behavior

Modified Rebuy Buying Situation

Limited Problem Solving

New Task Buying Situation

Public and
Private Institutions

Institutions

Extensive Problem Solving

Organizational Buyer Behavior: Buying Process

Organizational Buyer Behavior: Buying Center

Initiators
Users
Gatekeepers
Influencers
Deciders
Purchasers

Personal and Organizational Needs

Personal Goals
Want a Feeling of Power
Seek Personal Pleasure
Desire Job Security
Want to be Well Liked
Want Respect

Phase 1: Recognize Problem/Need

Phase 2: Determine Item Specs/Quantity Needed
Phase 3: Specify Item Specs/Quantity Needed
Phase 4: Identify and Qualify Potential Sources
Phase 5: Acquire and Analyze Proposals
Phase 6: Evaluate Proposals/Select Suppliers
Phase 7: Selection of Order Routine
Phase 8: Performance Feedback/Evaluation

Sales Strategy: Account-Targeting Strategy

Organizational Goals
Control Cost in Product
Use Situation
Few Breakdowns of Product
Dependable Delivery for
Repeat Purchases
Adequate Supply of
Products
Cost within Budget Limits

The classification of accounts

within
a target market into categories for
the purpose of developing
strategic approaches for selling to
each account or account group.

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Sales Strategy: Relationship Strategy

Characteristics of Relationship Strategies

Transaction

A determination of the
type of relationship to be
developed with different
account groups.

Solutions

Partnership

Goal Sell Products

Add Value

Time
Short
Frame

Long
Customized

Offering Standardized
Number of
Many
Customers

Sales Strategy: Selling Strategy

Collaborative

Few

Matching Selling and Relationship Strategies

High
Collaborative

Ensuring
E
i
that
th t accounts
t
receive selling effort
coverage in an effective
and efficient manner.

Cost
to
Serve

Partnership
Solutions
Transaction
Commitment

Low

Sales Strategy: Sales Channel Strategy

The planned selling approach for
each relationship strategy.
The Internet
Industrial Distributors
Independent Representatives
Team Selling
Telemarketing
Trade Shows

High

Sales Strategy: The Internet

Increase Reach
Gather Information about Customers
Showcase New Products
Conduct Surveys
Enhance Corporate Image
Obtain Feedback
Service Existing Customers

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Sales Channel Strategy: Industrial Distributors

Have Their Own Sales Force

May Represent One Manufacturer; Several
Non-competing Manufacturers; Several
Competing Manufacturers
Normally Carry Inventory

Sales Strategy: Team Selling

Three Selling Situations
New Task Selling
Modified Resell Selling Situation
Routine Resell Selling Situation

Two Types of Team Selling

Multilevel Selling
Major Account Selling

Sales Strategy: Trade Shows

Sales Strategy: Independent or Manufacturers Reps

Sell complimentary products from noncompeting manufacturers

manufacturers.
Do Not Normally Carry Inventory
Paid for Performance
Reduced Control over Selling Effort
Reduced Access to Customer Information

Sales Strategy: Telemarketing

May replace field sales force for certain

accounts
When integrated with field sales force,
activities include:
Prospecting, Qualifying Leads, Conducting Surveys
Taking Orders, Checking on Order Status, Handling Order
Problems
Following Up for Repeat Business

Sales Organization Concepts

Specialization

Generate Leads
Test Market New Products
Introduce New Products
Close Sales
Gather Competitive Information
Service Existing Customers
Enhance Corporate Image

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.

Centralization
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.

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Span of Control vs. Management Levels

Sales Force Specialization Continuum

Flat Sales Organization

Generalists

Some specialization
of selling activities,
products, and/or
customers

All selling activities

and all products to
all customers

Specialists
Certain selling
activities for certain
products for certain
customers

District
Sales
Manager

District
Sales
Manager

District
Sales
Manager

District
Sales
Manager

District
Sales
Manager

Manage
ement Levels

National
Sales
Manager

Span of Control

Span of Control vs. Management Levels

Line vs. Staff Positions

Tall Sales Organization

National Sales Manager

National Sales
Manager

District
Sales
Manager

District
Sales
Manager

District
Sales
Manager

Regional Sales
Manager

District
Sales
Manager

District
Sales
Manager

District
Sales
Manager

Management Levels

Regional Sales
Manager

Sales Training Manager

Regional Sales Managers
Sales Training Manager
District Sales Managers
Staff Position
Line Position

Salespeople

Span of Control

Selling Situation Contingencies

Selling-Situation Factors and Organizational Structure
Organizational
Structure

Environmental
Characteristics

Selling Situation Contingencies

Customer and Product Determinants
of Sales Force Specialization

Task
Performance
Performance Objective

Customer Needs Different

Specialization

Centralization

Hi h E
High
Envir.
i
uncertainty

Low Envir.
Uncertainty

Nonroutine

Repetitive

Adaptiveness

Effectiveness

Simple
Product
Offering

Market-Market
Driven
Specialization

Product/MarketProduct/MarketDriven
Specialization

GeographyGeographyDriven
Specialization

ProductProductDriven
Specialization

Complex
Range of
Products

Customer Needs Similar

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Geographic Sales Organization

National Sales Manager

Product Sales Organization

National Sales Manager

Sales Training Manager

Eastern Region Sales Manager

Western Region Sales Manager

Zone Sales Managers (4)

Zone Sales Managers (4)

District Sales Managers (20)

District Sales Managers (20)

Salespeople (100)

Salespeople (100)

Market Sales
Organization

National Sales Manager

Commercial Accounts
Sales Manager

Office Equipment
q p
Sales Manager
g

Office Supplies
pp
Sales Manager
g

District Sales Managers (10)

District Sales Managers (10)

Salespeople (100)

Salespeople (100)

Functional Sales Organization

National Sales Manager

Government Accounts
Sales Manager

S l T
Sales
Training
i i
Manager
Zone Sales Managers (4)

District Sales Managers (5)

District Sales Managers (25)

Salespeople (50)

Field Sales Manager

Telemarketing Sales Manager

Regional Sales Managers (4)

District Sales Managers (2)

District Sales Managers (16)

Salespeople (40)

Salespeople (160)
Salespeople (150)

Sales Organization Structures:

Identifying Major Accounts
Size of Acco
ount

Large

Large
Account

Major
Account

Sales Organization Structures:

Major Accounts Options
Develop Major Account Salesforce

Assign Major Accounts to

Sales Managers
Regular
Small Account

Complex
Account

Simple
Complex
Complexity of Account

Assign Major Accounts to Salespeople

along with Other Accounts

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Comparison of
Sales Organization Structures
Organizational
Structure

Geographic

Advantages

Disadvantages

Low Cost
geographic
g p
duplication
p
No g
No customer duplication
Fewer management levels

Limited specialization
Lack of management
control over product or
customer emphasis

Salespeople become experts

High cost
in product attr. & applications
Geographic duplication
Management control over
Customer duplication
selling effort

Product

Major Accounts
Sales Manager

Government Accounts
Sales Manager

Regular Accounts
Sales Manager

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

Salesforce Deployment

National Sales Manager

Commercial Accounts
Sales Manager

Comparison of
Sales Organization Structures

Office Equipment
Sales Manager

Office Supplies
Sales Manager

Sales Force deployment decisions can be viewed as

providing answers to three interrelated questions.
1. How much selling effort is needed to cover accounts and
prospects adequately so that sales and profit objectives will
b achieved?
be
hi
d?
2. How many salespeople are required to provide the desired
amount of selling effort?

Field Sales
Manager

Western
Sales Manager

Telemarketing
Sales Manager

Eastern
Sales Manager

Hybrid Sales
Organization
Structure

Interrelatedness of
Sales Force Deployment Decisions
Allocation of
Selling Effort

How much selling effort is needed to cover

accounts and prospects adequately so that sales
and profit objectives will be achieved?

Sales Force
Size

How many salespeople are required to provide the

desired amount of selling effort?

Territory
Design

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?

3. 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:

Analytical Approaches to Allocation of Selling Effort
Easy to Develop and Use

Single Factor
Models
Low
Analytical
Rigor

High
Analytical
Rigor

Portfolio
Models

Decision
Models
Difficult to Develop and Use

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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
Effort allocation decisions are based on the analysis of
only one factor and differences among accounts in the
same category are not considered in assigning sales call
coverage

Allocation of Selling Effort:

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

Allocation of Selling Effort:

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

Allocation of Selling Effort:

Single Factor Model Example
Market Potential
Categories

Average Sales Calls to

an Account Last Year

Average Sales Calls to

an Account Next Year

A
B
C
D

25
23
20
16

32
24
16
8

Allocation of Selling Effort:

Portfolio Model Segments and Strategies
Competitive Position
Strong

Weak

Hig
gh

Easy to develop and use/low analytical rigor

Segment
g
1

Segment
g
2

Low

Single Factor Models

Account Opportun
nity

Allocation of Selling Effort:

Segment 3

Segment 4

Sales Force Size: Key Considerations

Sales Productivity - the ratio of sales generated
to selling effort used
In early stages, the addition of salespeople increases sales
considerably more than the selling costs. As salespeople
continue
ti
tto be
b added,
dd d sales
l iincreases ttend
d tto d
decline
li until
til a point
i t
is reached when the costs to add a salesperson are more than
the revenues that salesperson can generate.

Salesforce Turnover
Is very costly
Should be anticipated

10

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Sales Force Size: Analytical Tools

Sales Force Size: Analytical Tools

The Breakdown Approach is used to determine the
number of salespeople needed to generate a forecasted
level of sales. This approach is easy to develop.
However it is weak conceptually
However,
conceptually. The concept underlying
the calculations is that sales determine the number of
salespeople needed
neededputting the cart before the horse.
Salesforce size = Forecasted sales / Average sales per person

Sales Force Size: Analytical Tools

The Incremental Approach is the most rigorous for
calculating salesforce size. Its basic concept is to
compare the marginal profits and marginal costs
associated with each incremental salesperson. The major
advantage of this approach is that it quantifies the
important relationships between salesforce size, sales,
and costs. However, the incremental method is difficult to
develop, and it cannot be used for new sales forces where
historical data and accurate judgments are not possible.

The Workload Approach determines how much selling

effort is needed to adequately cover the firms market.
Then the number of salespeople required to provide this
amount of selling effort is calculated. This approach
relatively simple to develop and is sound conceptually
conceptually.

Number of salespeople =

Total selling effort needed

Average selling effort per
salesperson

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

Territory Design Procedure

Select
Pl
Planning
i and
d
Control Unit

Analyze
Planning and
Control Unit
Opportunity

Form Initial
Territories

Assess
T it
Territory
Workload

Finalize
T it
Territory
Design

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