Chap 7 Tanner - Organizing The Sales Force & Reporting Relationships 080217
Chap 7 Tanner - Organizing The Sales Force & Reporting Relationships 080217
Chap 7 Tanner - Organizing The Sales Force & Reporting Relationships 080217
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Sales Management: Shaping Future Sales Leaders
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How a Firm’s Goals Affect the Design
of Its Sales Force
Organization of sales force is driven by strategic goals
Organizational sales structures serve a number of
purposes that include
Serving buyers effectively in ways they want to be served
Operating efficiently as measured by cost and customer
satisfaction
Best way to design a sales structure is to
Determine sales activities that must be performed to reach
goals
Create sales structure that affords highest levels of service to
buyers at lowest overall cost
Select, train and manage reps and managers to become
experts in their assigned duties
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Areas Impacted by a Firm’s Sales
Force Structure
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Sales Management: Shaping Future Sales Leaders
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The Size of the Sales Force
Breakdown method
Divide forecasted sales revenue by average sales dollars per
salesperson
Workload method
1.Compute total sales call workload
2.Determine amount of work performed by each rep
3.Factor in additional work responsibilities
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Workload Method
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Specialists vs. Generalists
Generalist force: sells the firm’s entire product line to
a group of customers that use the product(s) similarly
Karl Strauss Brewing Company of San Diego
Specialist force: specializes in one product or
product line
Computer manufacturers organize forces by consumer, B2B,
education markets because each market purchases and utilizes
products differently
Specialized sales structure offers expertise advantages
over generalist sales force
Coordinated to address buyers’ needs
Integrated with other organizational functions
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Geographical, Product,
and Market Structures
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Geographical, Product,
and Market Structures
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Geographical Sales Structure
PROs CONs
Relatively easy to design Work best when product line is
simple
Minimizes duplication of effort
Can be inefficient
Ensures a specific salesperson is
assigned to each customer
Sales calls more efficiently
scheduled
Territory can be divided or
combined to respond to market
conditions
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Geographic-Based Structure
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Geographical, Product,
and Market Structures
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Product Sales Structure
Limitation: can be confusing for buyer
Example: Xerox has 3 separate sales forces
1. Called on same accounts
2. Had little knowledge of each other’s products
3. Confused buyers who had genuine need for Xerox
products
4. Did not cooperate by providing leads and info to each
another
Sales rose with combined force, but rep turnover
increased
Some reps not interested in or able to learn and sell three
separate product lines
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Product-Based Structure
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Geographical, Product,
and Market Structures
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Market-Based Structure
PROs CONs
Effective strategy when a seller Selling expenses are higher than
wants to penetrate a new market for geographic-based structure
Allows selling firm to vary Multiple reps calling on same
allocation of sales efforts to client
specific industries by adding to or
reducing the number of Buyer confusion
salespersons slotted in one area Duplication of effort
to another
Higher expenses
Permits firm to offer specialized
training and develop individualized
sales approaches and applications
by industry
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Market-Based Structure
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Functional and Combination
Sales Structures
Functional Combination
Selling process divided into two or Sales force organized based on mix of
more steps performed by specialists product, market, and geographical
factors
Example: grocery
Work best when market is large,
Establish account product mix complex, and customers
Manage inventory & orders require different applications
Merchandising
CONs CONs
Coordinating multiple specialists Expensive
Ensuring smooth transition from Can result in duplicate sales efforts
account establishment to management
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Pros and Cons of Various Structures
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Should You Specialize Your Sales
Force?
Sales specialization improves performance
However:
Specialization is expensive
Must produce results that are greater than investment
Sales specialization is more difficult to manage
Requires greater oversight to align with firm’s strategy
Changing sales assignments are challenging:
Must modify job content and account assignments
This requires substantial planning and investment
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Common Forms of Sales Specialization
Size
Current and potential sales or profits
Large firms moved from geographical to major account
Product
One type of product; deep product knowledge
Industry or market
SPs maximize industry-specific application knowledge
Purchasing status
“Hunters” go after new, while “farmers” serve existing
customers
Based on: David J. Cichelli, “Specialize Your Sales Force,” Sales & Marketing Management,
September/October 2008, 15.
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Key Accounts
Key Accounts: customers that are large in
terms of sales revenue and profitability and
strategically important for the future of the firm
80/20 Rule: 80% of a firm’s total business and
profits are derived from 20% of its customers
Large, strategic accounts require higher levels of
service and deeper buyer-seller relationships
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Key Account Structures
Use Existing Force Assign Execs Create Separate
Sales force structure is Assigning sales and Create separate sales
simplified marketing executives to structures to serve most
All accounts are manage key accounts important customers
managed under a single makes sense for smaller Integrates marketing and
organizational structure firms that cannot afford sales for key accounts
separate sales effort under one organizational
structure
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Sales Management: Shaping Future Sales Leaders
Reporting Relationships
within a Firm’s Sales Force
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Ways to Construct Sales Force
Reporting Structure
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Span of Control
Span of control: number of individuals that report directly to a
sales manager
Span of Control Ratios (Rep:Manager)
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Relationship Between Company Sales
Managers and Agents
Selling firm can contract with mfg’s agent or
wholesaler’s sales force to manage accounts in
geographical regions
Example: company sales force manages larger, more
profitable territories and also contract with agents to
service less developed, less profitable geographical
territories (insurance companies)
Company sales mgr has little direct control over agents
other than dissolving the agency relationship
Sales mgr must motivate agents by appealing to self-interests
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Use of Sales Agents
Common for manufacturers to use
sales agents when entering new
territories with low or unknown sales
volumes
Selling costs (commissions) incurred only
when product or service is sold
Advantages
An “in-place” or existing sales force
Established buyer relationships
Little (or no) fixed costs
Experienced sales personnel
Lower costs per sales call
Long-term stability in the territory
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Use of Sales Agents
Tendency for mfgs to take credit for positive
sales outcomes and assign blame for negative
outcomes
Disadvantages
Seller may not receive equal time for their products
Agents blamed for shifting sales call focus to another
product line when buyer’s need is not easily identified
Agents criticized for not opening new accounts, not
following up on leads, representing too many mfgs, and
communicating poorly with the firms they represent
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Sources of Conflict Between Firm and
Selling Agent
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Company Salesperson or Sales Agent?
Break-even analysis: compares fixed and variable costs
associated with the two types of reps
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Company Salesperson or Sales Agent?
Salesperson Sales agent
When it’s important to When potential sales
control sales effort, product revenue is low in a territory
or related technology is When revenue will take
new, buyers need high years to become
level of service substantial
Company exerts greater When qualified sales
control over sales force agents already operate in
efforts the area
Greater control over who is When it’s not feasible for
hired company sales force to
cover entire market (e.g.,
National Semiconductor,
Advanced Micro Systems)
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