Sales Organization

• Organization is a network that defines the essential relationships

among people, tasks and activities with an aim to optimally utilize and
coordinate resources to achieve goals.

• A sales organization entails in organizing its sales force to facilitate the

act of selling and distributing a product.

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Advantages of Sales Organization
• Gives the firm with distinct structures, roles, tasks and responsibilities.
• Defines formal authority and responsibility.
• Determines sales activities required to achieve goals.
• Divides work into smaller manageable units.
• Spells out job description and thus helps in selection pHelps in recruitment,
selection, training and supervision.
• Paves way for communication; upward and downward, horizontal and
vertical.
• Helps in evaluation and control.
• Assists in devising incentive schemes.
• Eliminates misconceptions and confusions about work activities.
• rocess.

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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.
Sales Force Specialization Continuum

Generalists Specialists
Some specialization
All selling activities Certain selling
of selling activities,
and all products to activities for certain
products, and/or
all customers products for certain
customers
customers
Centralization
Span of Control vs. Management Levels
Flat Sales Organization

National

Management Levels
Sales
Manager

District District District District District

Sales Sales Sales Sales Sales
Manager Manager Manager Manager Manager

Span of Control
Span of Control vs. Management Levels
Tall Sales Organization

National Sales
Manager

Management Levels
Regional Sales Regional Sales
Manager Manager

District District District District District District

Sales Sales Sales Sales Sales Sales
Manager Manager Manager Manager Manager Manager

Span of Control
 A line position is a position that has authority and responsibility
Line vs. Staff Positions for achieving the major goals of the organization.

A staff position is a position that primary purpose is providing

specialized expertise and assistance to line positions.
National Sales Manager

Sales Training Manager

Regional Sales Managers

Sales Training Manager

District Sales Managers

Staff Position

Salespeople Line Position

Geographic (Territorial) Sales Organization
Geographic (Territorial) Sales Force Structure
• Company allocates tasks on geographical divisions.
• Each salesperson is assigned exclusive geographical area.
• Each salesperson sells all the company’s products in that area.
• Useful when company has wide geographical dispersion of customer
base.

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Product Sales Organization
Product Sales Force Structure
• Salespersons concentrate only on a part of company’s products or
product lines.
• Results in specialization.
• Effective when company deals in number of unrelated product or
lines.

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Market (Customer) Sales Organization
Market (Customer) Sales Force Structure
• Company selling products to a selected number of customers or
customer groups.
• Salespersons sell to one particular customer/customer group.
• Helps build intimate relationships with customers

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Functional Sales Organization
Functional Sales Force Structure
• Focuses on activities required to sell.
• Some businesses may require door-to-door selling while others may
be required to provide after-sales-service.

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Hybrid Sales Organization Structure
Hybrid (Complex) Sales Force Structure
• Involves combination of other structures.
• Applicable to large organizations producing different products for
different customers spreading across large geographical areas.
• Salesperson can specialize in territory-product, territory-customer,
product-customer or all three combinations.

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Comparison of Sales Organization Structures
Organizational Advantages Disadvantages
Structure
• Low Cost • Limited specialization
• No geographic duplication • Lack of management control
Geographic • No customer duplication over product or customer
• Fewer management levels emphasis
• Salespeople become experts in • High cost
Product product attributes & applications • Geographic duplication
• Management control over selling • Customer duplication
effort

Organizational
Advantages Disadvantages
Structure
• Salespeople develop better
understanding of unique customer
Market needs • High cost
• Management control over selling • Geographic duplication
allocated to different markets
• Geographic duplication
Functional • Efficiency in performing selling • Customer duplication
activities • Need for coordination
Salesforce Deployment
How much selling effort is needed to cover accounts and prospects

1. adequately so that sales and profit objectives will be achieved?

2.
How many salespeople are required to provide the desired
amount of selling effort?
Salesforce Deployment (Placement)
Salesforce deployment decisions can be viewed as
providing answers to three interrelated questions.
Interrelatedness of
Salesforce Deployment Decisions
Allocation of How much selling effort is needed to cover
Selling Effort accounts and prospects adequately so that sales
and profit objectives will be achieved?

Salesforce How many salespeople are required to provide the

Size desired amount of selling effort?

How should territories be designed to ensure proper

Territory coverage of accounts and to provide each
Design salesperson with a reasonable opportunity for
success?
Interrelatedness of
Salesforce Deployment Decisions
Allocation of 2,000 accounts x 25 sales calls/account = 50,000
Selling Effort sales calls required to cover accounts

Salesforce 50,000 sales calls required ÷ 1,250 sales calls/

Size salesperson = 40 salespeople needed

40 territories needed to provide each salesperson

Territory with opportunity for success and to ensure proper
Design coverage of accounts (e.g. 50 accounts per territory)
Analytical Tools: Breakdown Approach
• Uses sales forecast to determine salesforce size
• Easy to use and understand
• Conceptually weak - assumes sales drives the need for salespeople
• Best suited in stable selling environments

Salesforce size = Forecasted sales / Average sales per salesperson

Analytical Tools: Workload Approach
• Estimation of selling effort needed is used to determine salesforce
size
• Estimating selling effort needed may be simple or complex
• Conceptually sound

Total selling effort needed

Number of salespeople =
Average selling effort per
salesperson
Analytical Tools: Incremental Approach
• Uses Marginal Profit Contribution and Marginal Costs to Determine
Salesforce Size
• Quantifies Important Relationships Between Salesforce Size, Sales,
and Costs,
• Most Rigorous Method and Difficult to Develop
• Not appropriate for New Salesforces
# of Salespeople Marginal Contribution Marginal Cost
100 $85,000 $75,000
101 $80,000 $75,000
102 $75,000 $75,000
103 $70,000 $75,000
Definition: Sales Territory
• Johnson (1994) defined a sales territory as a configuration of current
and potential accounts for which responsibility has been assigned to a
particular sales representative.

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Sales Territory: Forms
• A Geographical Area.
• A Group of prospective and potential clients.
• An Industry-based Territory (e.g. textile industry).
• A Market (e.g. insurance market).

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Objective of Sales Territory
• To formulate sales plans, policies and strategies around the company’s
products,
• To analyze territory sales potential and plan marketing programmes
around the company’s products/services and the key potential
customers.
• To analyze the strengths and weaknesses of competitors more
precisely and lay down strategies to subvert competition.

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Benefits of Sales Territories
• Adequate customer coverage.
• Equal workload for salespeople.
• Reduces travel time and selling costs.
• Increases length of customer interaction.
• Act as motivators to salespeople.
• Provides better control over sales force.

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Conditions for Designing Sales Territory
• Equal sales potentials
• Equal targets to achieve for salespeople.
• Equal opportunities to reach goals.
• Equal workload to salespeople.
• Supervision and control without difficulty.
• Comparable performances.

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Territory Design Procedure
Developing Forecasts
Sales Forecasting
• Stoner and Freeman (1994) defined forecasting as the process of
using past events to make systematic predictions about future
outcomes and trends.

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Why Forecast?
• Determining Sales Force Size
• Designing Territories
• Establishing Sales Quotas and Selling Budgets
• Determining Sales Compensation Levels
• Evaluating Salesperson Performance
• Evaluating Prospective Accounts
Top-Down vs. Bottom-Up Forecasting
Top – • Forecast made at the business unit
Down level then broken down by zone,
region, district, territory, and
account forecast.

• Forecast made at the “front-line”

Bottom level and then aggregated up the
levels of the organization
– Up
Top-Down Approach
Bottom-Up Approach

Company Sales Forecast

Combined into district, region,

and zone forecasts

Combined into territory forecasts

Salespersons’ forecasts
of accounts
Company Forecasting Methods
• Moving Averages
• Uses historical averages to forecast future sales
• Averages are calculated using a predetermined number of previous
periods (e.g., two-year moving average; four-year moving average)
• Exponential Smoothing
• Weighted moving average
• Usually most recent period is weighted heavier
• Decomposition Methods (Time series analytics)
• Breakdown historical sales data into four components (trend, cycle,
seasonal, erratic)
• Evaluate the components and then reincorporate to create forecast
Moving Averages Forecast Example
Year Actual Sales Two-Year Four-Year
2008 $8,400,000
2009 $8,820,000
2010 $8,644,000 $8,610,000
2011 $8,212,000 $8,732,000
2012 $8,622,000 $8,428,000 $8,520,000
2013 $9,484,000 $8,418,000 $8,574,000
2014 $9,674,000 $9,054,000 $8,740,000
2015 $10,060,000 $9,579,000 $8,998,000
2016 ? $9,868,000 $9,460,000
Exponential Smoothing Forecast Example

Year Actual Sales α = 0.2 α = 0.5 α = 0.8

2008 $8,400,000
2009 $8,820,000 $8,400,000 $8,400,000 $8,400,000
2010 $8,644,000 $8,484,000 $861,000 $8,736,000
2011 $8,212,000 $8,516,000 $8,627,000 $8,662,000
2012 $8,622,000 $8,455,000 $8,420,000 $8,302,000
2013 $9,484,000 $8,488,000 $8,521,000 $8,558,000
2014 $9,674,000 $8,687,000 $9,003,000 $9,299,000
2015 $10,060,000 $8,884,000 $9,339,000 $9,599,000
2016 ? $9,119,000 $9,700,000 $9,968,000
Forecasting with Regression Analysis
• Statistical technique using predictor variables (factors)
to forecast sales
• May be complex
• Requires collection of
predictor variable data
• Analysis may be
linear or logarithmic
Bottom-Up Approach Methods
• Survey buyer intentions
• Survey buyers purchasing intentions
• Aggregate
• Jury of executive opinion
• Executives or other experts estimate sales at the account level
• Estimates are averaged or otherwise agreed upon to generate forecast
• Delphi (A form of jury of executive opinion)
• “jury” is anonymous and estimates are redistributed for revision
• “jury” review and revise estimates until consensus is reached
• Sales force composite
• Salespeople create forecasts for the accounts and territories
• Forecasts are aggregated