Types of Sales Organization

Anoop Kumar Gupta MAIT

by

Sales Organization Concepts

Specialization
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.

Module 4: Sales Organization Structure and Sales Force Deployment

Sales Force Specialization Continuum

Generalists
All selling activities and all products to all customers

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

Specialists
Certain selling activities for certain products for certain customers

Module 4: Sales Organization Structure and Sales Force Deployment

Span of Control vs. Management Levels

Flat Sales Organization

National Sales Manager

Management Levels

District Sales Manager

District Sales Manager

District Sales Manager

District Sales Manager

District Sales Manager

Span of Control

Module 4: Sales Organization Structure and Sales Force Deployment

Span of Control vs. Management Levels

Tall Sales Organization
National Sales Manager

Management Levels

Regional Sales Manager

Regional Sales Manager

District Sales Manager

District Sales Manager

District Sales Manager

District Sales Manager

District Sales Manager

District Sales Manage r

Span of Control
Module 4: Sales Organization Structure and Sales Force Deployment

Line vs. Staff Positions

National Sales Manager Sales Training Manager Regional Sales Managers Sales Training Manager District Sales Managers Staff Position Salespeople
Module 4: Sales Organization Structure and Sales Force Deployment

Line Position

Selling-Situation Factors and Organizational Structure

Organizational Structure
Specialization

Environmental Characteristics
High Envir. uncertainty

Task Performance Performance Objective

Nonroutine Adaptiveness

Centralization

Low Envir. Uncertainty

Repetitive

Effectiveness

Module 4: Sales Organization Structure and Sales Force Deployment

Customer and Product Determinants of Sales Force Specialization

Customer Needs Different
MarketDriven Specialization GeographyDriven Specialization Product/MarketDriven Specialization ProductDriven Specialization

Simple Product Offering

Complex Range of Products

Customer Needs Similar

Module 4: Sales Organization Structure and Sales Force Deployment

Geographical Structure

Module 4: Sales Organization Structure and Sales Force Deployment

Geographical Structure
An advantage of this form of organization is its simplicity. Each salesperson is assigned a territory over which to have sole responsibility for sales achievement. Their close geographical proximity to customers encourages the development of personal friendships which aids sales effectiveness. Also, compared with other organizational forms, e.g. product or market specialization, travelling expenses are likely to be lower.
Module 4: Sales Organization Structure and Sales Force Deployment

Geographical Structure
This is the least specialized and most generalized type of sales-force.

Module 4: Sales Organization Structure and Sales Force Deployment

Geographical Structure
A potential weakness of the geographical structure is that the salesperson is required to sell the full range of the companys products. They may be very different technically and sell into a number of diverse markets. In such a situation it may be unreasonable to expect the salesperson to have the required depth of technical knowledge for each product and be conversant with the full range of potential applications within each market. This expertise can only be developed if the salesperson is given a more specialized role.
Module 4: Sales Organization Structure and Sales Force Deployment

Geographic 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)

Module 4: Sales Organization Structure and Sales Force Deployment

Product Specialization Structure

Module 4: Sales Organization Structure and Sales Force Deployment

Product Specialization Structure One method of specialization is along product lines. Conditions that are conducive to this form of organization are where the company sells a wide range of technically complex and diverse products and key members of the decision-making unit of the buying organizations are different for each product group.
Module 4: Sales Organization Structure and Sales Force Deployment

Product Specialization Structure If the companys products sell essentially to the same customers, problems of route duplication (and hence higher travel costs) and customer annoyance can arise. Inappropriate use of this method can lead to a customer being called upon by different salespeople representing the same company on the same day.
Module 4: Sales Organization Structure and Sales Force Deployment

Product Sales Organization

National Sales Manager

Office Equipment Sales Manager

Office Supplies Sales Manager

District Sales Managers (10)

District Sales Managers (10)

Salespeople (100)

Salespeople (100)

Module 4: Sales Organization Structure and Sales Force Deployment

Strength & Weakness

Module 4: Sales Organization Structure and Sales Force Deployment

Customer-based structures (Industry-Based Structure)

Module 4: Sales Organization Structure and Sales Force Deployment

Market Sales Organization

National Sales Manager
Commercial Accounts Sales Manager Sales Training Manager Zone Sales Managers (4) District Sales Managers (25) Salespeople (150)
Module 4: Sales Organization Structure and Sales Force Deployment

Government Accounts Sales Manager

District Sales Managers (5) Salespeople (50)

Customer-based structures
The problem of the same customer being served by product divisions of the same supplier, the complexity of buyer behavior, which requires not only input from the sales function but from other functional groups (such as engineering, finance, logistics and marketing), centralization of purchasing, and the immense value of some customers have led many suppliers to rethink how they organize their sales-force. Companies are increasingly organizing around customers and shifting resources from product or regional divisions to customer-focused business units.
Module 4: Sales Organization Structure and Sales Force Deployment

Customer-based structures (Market-centered structure)

Another method of specialization is by the type of market served. Often in industrial selling the market is defined by industry type. Thus, although the range of products sold is essentially the same, it might be sensible for a computer firm to allocate its salespeople on the basis of the industry served, e.g. banking, manufacturing companies and retailers, given that different industry groups have widely varying needs, problems and potential applications. Specialization by market served allows salespeople to gain greater insights into these factors for their particular industry, as well as to monitor changes and trends within the industry that might affect demand for their products. The cost of increased customer knowledge is increased travel expenses compared with geographically determined territories.
Module 4: Sales Organization Structure and Sales Force Deployment

Customer-based structures (Account-size Structure)

Module 4: Sales Organization Structure and Sales Force Deployment

Customer-based structures (Account-size Structure)

Some companies structure their sales-force by account size. The importance of a few large customers in many trade and industrial markets has given rise to the establishment of a key or major account salesforce. The team comprises senior salespeople who specialize in dealing with large customers that may have different buying habits and demand more sophisticated sales arguments than smaller companies. The team will be conversant with negotiation skills since they are likely to be given a certain amount of discretion in terms of discounts, credit terms, etc., in order to secure large orders.
Module 4: Sales Organization Structure and Sales Force Deployment

Customer-based structures (Account-size Structure)

The range of selling skills required is therefore wider than for the rest of the sales-force, who deal with the smaller accounts. Some organizations adopt a three-tier system, with senior salespeople negotiating with key accounts, ordinary salespeople selling to medium-sized accounts, and a telemarketing team dealing with small accounts.

Module 4: Sales Organization Structure and Sales Force Deployment

Identifying Major Accounts

Large Size of Account Large Account Major Account

Regular Small Account

Complex Account

Simple Complex Complexity of Account

Module 4: Sales Organization Structure and Sales Force Deployment

Major Accounts Options

Develop Major Account Salesforce

Assign Major Accounts to Sales Managers

Assign Major Accounts to Salespeople along with Other Accounts

Module 4: Sales Organization Structure and Sales Force Deployment

Customer-based structures (New/Existing account structure)

A further method of sales organization is to create two teams of salespeople. The first team services existing accounts, while the second concentrates on seeking new accounts. This structure recognizes the following: Gaining new customers is a specialized activity demanding prospecting skills, patience, ability to accept higher rejection rates than when calling upon existing customers, and the time to cultivate new relationships. Placing this function in the hands of the regular sales-force may result in its neglect since the salespeople may view it as time which could be better spent with existing customers. Salespeople may prefer to call upon long-established customers whom they know, rather than prospects where they might face rejection and unpleasantness.
Module 4: Sales Organization Structure and Sales Force Deployment

Customer-based structures

Module 4: Sales Organization Structure and Sales Force Deployment

Functional Sales Organization The work is organized according to the functions e.g. 1.Sales 2.Telemarketing 3.Promotion 4.After Sales Service

Module 4: Sales Organization Structure and Sales Force Deployment

Functional Sales Organization

National Sales Manager

Field Sales Manager Regional Sales Managers (4) District Sales Managers (16) Salespeople (160)

Telemarketing Sales Manager District Sales Managers (2) Salespeople (40)

Module 4: Sales Organization Structure and Sales Force Deployment

Mixed organization
In practice a combination of various sales organizational structures may be used. Like many selling decisions, the choice of sales organization is not a black and white affair, which is why many sales forces are a blend of general territory representatives and specialists. Many companies use all forms of selling simultaneously: for very big accounts they use key account specialists; for the balance of small and medium accounts they use general territory representatives, perhaps supplemented by product application specialists who help generalists across several territories.
Module 4: Sales Organization Structure and Sales Force Deployment

MULTIPLE DESIGN FACTORS

P F u n c t i o V n i ac le P r o d g r a p h i cU M M r e s i d e n t

P r eV s i i cd e e nP t r eV s i i cd e e nP t r e s i d e n u c t M i o an r k e t i En gn g i n e e r i n g

e o

. S . I n t e r n a t i o n a r k e t iM n g a r k e t i n g a n a g eM r a n a g e r

a l

s t o

e rC G M

s u m I n e dr u s t r i a l o o d s G o o d s a n a g eM r s a n a g e r s

I n t e r n a t i o S a l e s M a n a g e r

a l

r o

d S uo c a D i v M a

tp o P P o a dp u e cr t Ps F r o d ud c P t s r o r E i s i o Dn a i lv i s i o nD a i l v i s i o n a D a n a g e r n a g eM r a n a g e M r

d u c Lt s a t u r o p e a l A m i v i s i o n D i v

i n A s i a n a n n e r Ai c fa r n i c a n i s iD o ni v i s i o n

E a s t e Cr n e n t r Wa l e s t e r n S a l e s S a l e s S a l e s D i v i s i D o ni v i s iD o ni v i s i o n

Hybrid Sales Organization Structure

National Sales Manager

Commercial Accounts Sales Manager

Government Accounts Sales Manager

Major Accounts Sales Manager

Regular Accounts Office Equipment Sales Manager Sales Manager

Office Supplies Sales Manager

Field Sales Manager

Telemarketing Sales Manager

Western Sales Manager

Eastern Sales Manager

Module 4: Sales Organization Structure and Sales Force Deployment

Comparison of Sales Organization Structures

Organizational Structure Advantages
Low Cost No geographic duplication No customer duplication Fewer management levels

Disadvantages
Limited specialization Lack of management control over product or customer emphasis

Geographic

Product

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

Module 4: Sales Organization Structure and Sales Force Deployment

Comparison of Sales Organization Structures

Organizational Structure Advantages
Salespeople develop better understanding of unique customer needs Management control over selling allocated to different markets

Disadvantages

Market

High cost Geographic duplication

Functional

Efficiency in performing selling activities

Geographic duplication Customer duplication Need for coordination

Module 4: Sales Organization Structure and Sales Force Deployment

ORGANIZING FOR SELLING TO MAJOR CUSTOMERS Companies use four basic organizational methods.
1. A separate division to deal with major accounts. 2. Select members of the current sales force. 3. Sales managers. 4. A combination of 1, 2, and 3.
Module 4: Sales Organization Structure and Sales Force Deployment

NEW FORMS OF ORGANIZATIONS

STRATEGIC ALLIANCES
A strategic alliance is a formal relationship created with the purpose of joint pursuit of mutual goals.

Module 4: Sales Organization Structure and Sales Force Deployment

CROSS-FUNCTIONAL SELLING TEAM

s t o

e r

a l e s M

T e c h n i c a l a r k e t i n g M a n S u p p o r t

f a c t u

l i e r

e l l i n

e a m

Module 4: Sales Organization Structure and Sales Force Deployment

TEAM-BASED ORGANIZATIONS
Many organizations are more responsive to their environment because they use work teams as their basic building blocks.

Module 4: Sales Organization Structure and Sales Force Deployment