Sales Organization Structure and Sales Force Deployment: Module Four

Module Four
Sales Organization Structure and

Sales Force Deployment
Learning Objectives
1.
2.
3.
4.
Define the concepts of specialization,

centralization, span of control versus management
levels, and line versus staff positions.
Describe the ways sales forces might be
specialized.
Evaluate the advantages and disadvantages of
sales organization structures.
Name the important considerations in organizing
major account management programs.
Professional Selling:
A Trust-Based Approach
Module 4:
Sales Organization Structure and Sales Force Deployment
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Schwepker Jr. Williams
Learning Objectives
5.
6.
7.
8.
Explain how to determine the appropriate sales

organization structure for a given selling situation.
Discuss sales force deployment.
Explain three analytical approaches for
determining allocation of selling offer.
Describe three methods for calculating sales force
size.
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Learning Objectives
9.
Explain the importance of sales territories and list

the steps in the territory design process.
10. Discuss the important people considerations in
sales force deployment.
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Setting the Stage

Strategy and Sales
Organization Structure: IBM
1. What is one of the key changes IBM
made to the structure of its sales
organization?
2. What change did IBM make to the way its
salespeople and sales managers
interact?
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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.
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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
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Span of Control vs. Management Levels

Flat Sales Organization
District
Sales
Manager
District
Sales
Manager
District
Sales
Manager
District
Sales
Manager
District
Sales
Manager
Management Levels
National
Sales
Manager
Span of Control
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Span of Control vs. Management Levels

Tall Sales Organization
National Sales
Manager
District
Sales
Manager
District
Sales
Manager
District
Sales
Manager
Regional Sales
Manager
District
Sales
Manager
District
District
Sales
Sales
Manager Manager
Management Levels
Regional Sales
Manager
Span of Control
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Line vs. Staff Positions
National Sales Manager

Sales Training Manager
Regional Sales Managers
District Sales Managers
Staff Position
Salespeople
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Line Position
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Selling-Situation Factors and

Organizational Structure
Organizational
Structure
Environmental
Characteristics
Task
Performance
Performance Objective
Specialization
High Envir.
uncertainty
Nonroutine
Adaptiveness
Centralization
Low Envir.
Uncertainty
Repetitive
Effectiveness
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Customer and Product Determinants

of Sales Force Specialization
Customer Needs Different
Simple
Product
Offering
MarketDriven
Specialization
Product/MarketDriven
Specialization
GeographyDriven
Specialization
ProductDriven
Specialization
Complex
Range of
Products
Customer Needs Similar
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Geographic Sales Organization

Eastern Region Sales Manager
Western Region Sales Manager
Zone Sales Managers (4)
District Sales Managers (20)
Salespeople (100)
Salespeople (100)
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Product Sales Organization
Office Equipment Sales Manager
Office Supplies Sales Manager
Salespeople (100)
Salespeople (100)
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Market Sales Organization

Commercial Accounts
Sales Manager
Government Accounts
Sales Manager
Sales Training
Manager
Salespeople (50)
Salespeople (150)
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Functional Sales Organization

Field Sales Manager
Telemarketing Sales Manager
Regional Sales Managers (4)
Salespeople (40)
Salespeople (160)
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Identifying Major Accounts
Size of Account
Large
Large
Account
Major
Account
Regular
Small Account
Complex
Account
Simple
Complex
Complexity of Account
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Major Accounts Options
Develop Major Account Salesforce
Assign Major Accounts to

Sales Managers
Assign Major Accounts to Salespeople

along with Other Accounts
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Comparison of
Sales Organization Structures
Organizational
Structure
Geographic
Product
Advantages
Low Cost
No geographic duplication
No customer duplication
Fewer management levels
Disadvantages
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
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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
Functional
Efficiency in performing
selling activities
Customer duplication
Need for coordination
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Hybrid Sales Organization Structure

Commercial Accounts
Sales Manager
Major Accounts
Sales Manager
Regular Accounts
Sales Manager
Field Sales
Manager
Western
Sales Manager
Government Accounts
Sales Manager
Office Equipment
Sales Manager
Office Supplies
Sales Manager
Telemarketing
Sales Manager
Eastern
Sales Manager
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Salesforce Deployment
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 be achieved?
2. How many salespeople are required to provide the desired
amount of selling effort?
3. How should territories be designed to ensure proper
coverage of accounts and to provide each salesperson
with a reasonable opportunity for success?
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Interrelatedness of
Sales Force Deployment Decisions
Allocation
Allocation of
of
Selling
Selling Effort
Effort
Sales
Sales Force
Force
Size
Size
Territory
Territory
Design
Design
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 and salespeople

assigned to territories to ensure proper coverage of
accounts and to provide each salesperson with a
reasonable opportunity for success?
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Analytical Approaches to
Allocation of Selling Effort
Easy to Develop and Use
Single
Single Factor
Factor
Models
Models
Low
Analytical
Rigor
High
Analytical
Rigor
Portfolio
Portfolio
Models
Models
Decision
Decision
Models
Models
Difficult to Develop and Use
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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
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
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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
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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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Portfolio Model Segments and Strategies
High
Low
Account Opportunity
Competitive Position
Strong
Weak
Segment 1
Segment 2
Segment 3
Segment 4
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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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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 to be added, sales increases tend to decline until a
point 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
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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. The
concept underlying the calculations is that sales
determine the number of salespeople neededputting
the cart before the horse.
Salesforce size = Forecasted sales / Average sales per person
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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.
Number of salespeople =
Total selling effort needed

Average selling effort per
salesperson
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The Incremental Approach is the most rigorous for

calculating salesforce size. Its compares the marginal
profits and marginal costs associated with each
incremental salesperson. The major advantage is that it
quantifies the important relationships between salesforce
size, sales, and costs. However, this method is difficult to
develop, and it cannot be used for new sales forces where
historical data and accurate judgments are not possible.
# of Salespeople
100
101
102
103
Marginal Contribution
$85,000
$80,000
$75,000
$70,000
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Marginal Cost
$75,000
$75,000
$75,000
$75,000
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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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Territory Design Procedure
Select
Planning and
Control Unit
Analyze
Planning and
Control Unit
Opportunity
Form Initial
Territories
Finalize
Territory
Design
Assess
Territory
Workload
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Module Four

Sales Organization Structure and

Define the concepts of specialization,

Explain how to determine the appropriate sales

Explain the importance of sales territories and list

Setting the Stage

Sales Organization Concepts

Sales Force Specialization Continuum

Span of Control vs. Management Levels

Span of Control vs. Management Levels

Line vs. Staff Positions

National Sales Manager

Selling-Situation Factors and

Customer and Product Determinants

Customer Needs Similar

Geographic Sales Organization

Eastern Region Sales Manager

Western Region Sales Manager

Zone Sales Managers (4)

Zone Sales Managers (4)

District Sales Managers (20)

District Sales Managers (20)

Product Sales Organization

National Sales Manager

Office Equipment Sales Manager

Office Supplies Sales Manager

District Sales Managers (10)

District Sales Managers (10)

Market Sales Organization

District Sales Managers (5)

District Sales Managers (25)

Functional Sales Organization

Field Sales Manager

Telemarketing Sales Manager

Regional Sales Managers (4)

District Sales Managers (2)

District Sales Managers (16)

Identifying Major Accounts

Major Accounts Options

Develop Major Account Salesforce

Assign Major Accounts to

Assign Major Accounts to Salespeople

Salespeople become experts

Hybrid Sales Organization Structure

How much selling effort is needed to cover

How many salespeople are required to provide the

How should territories be designed and salespeople

Single Factor Models

Easy to develop and use/low analytical rigor

Accounts classified into categories based on one

All accounts in the same category are assigned the

Effort allocation decisions are based on the analysis

Single Factor Model Example

Average Sales Calls to

Average Sales Calls to

Account Opportunity - an accounts need

Portfolio Model Segments and Strategies

Simple Basic Concept - to allocate sales