Part Four: Designing and Developing the Sales Force Copyright © 2009 Pearson Education, Inc....

Part Four: Designing and Developing the Sales Force

Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall.7-1

Sales Management: Shaping Future Sales Leaders

Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall.7-2Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall.

Designing and Organizing the Sales Force

Chapter 7


Learning Objectives

Explain how a firm’s goals affect the organization of its sales force

Understand that a sales force can be organized in multiple ways that match the way customers want to buy

Explain the advantages and disadvantages of different sales force organizational structures

Describe the various reporting relationships sales forces typically have

Understand the advantages and disadvantages of outsourcing a firm’s sales force


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


Areas Impacted by a Firm’s Sales Force Structure



Organizing the Members of the Firm’s Sales Force


The Size of the Sales Force

Breakdown method Divide forecasted sales revenue by average sales dollars per

salesperson

Workload method1.Compute total sales call workload2.Determine amount of work performed by each rep3.Factor in additional work responsibilities


Workload Method


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


Geographical, Product, and Market Structures

MarketSales Structure

Reps assigned to customers based on markets or how product is sold

Reps learn more about customer’s specific business needs and offers customized solutions

ProductSales Structure

Sales activities organized around related product lines or manufacturing divisions

Interacts with buyers as specialists

GeographicalSales Structure

Depends on physical boundaries to organize sales force with customer accounts

Interacts with buyers as generalists


Geographical Sales Structure

PROs

Relatively easy to design

Minimizes duplication of effort

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

CONs

Work best when product line is simple

Can be inefficient


Geographic-Based Structure


Product Sales Structure

Limitation: can be confusing for buyer

Example: Xerox has 3 separate sales forces1. Called on same accounts2. Had little knowledge of each other’s products3. Confused buyers who had genuine need for Xerox

products4. 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


Product-Based Structure


Market-Based Structure

PROs

Effective strategy when a seller wants to penetrate a new market

Allows selling firm to vary allocation of sales efforts to specific industries by adding to or reducing the number of salespersons slotted in one area to another

Permits firm to offer specialized training and develop individualized sales approaches and applications by industry

CONs

Selling expenses are higher than for geographic-based structure

Multiple reps calling on same client

Buyer confusion

Duplication of effort

Higher expenses


Market-Based Structure


Functional and Combination Sales Structures

Functional

Selling process divided into two or more steps performed by specialists

Example: grocery

Establish account

Manage inventory & orders

Merchandising

CONs

Coordinating multiple specialists

Ensuring smooth transition from account establishment to management

Combination

Sales force organized based on mix of product, market, and geographical factors

Work best when market is large, product mix complex, and customers require different applications

CONs

Expensive

Can result in duplicate sales efforts


Pros and Cons of Various Structures

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


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.

S o u th A tlan tic O ce an S o u th P ac if ic O cean

N o rth P ac ific O cean

N o rth A tlan tic O ce an

In d ia n O c ean

A rc tic O ce an A rc tic O ce an A rc tic O ce an

N o rth P ac ific O cean

U n ited S ta te s o f A m erica

U .S .A .

C an a d a

M e x ic o

B raz il

U . S . A .

F re n c h P o ly n e s ia (F r.)

A rg e n tin a U ru g u a y

P a ra g u a y

C h ile

B o liv ia

P e ru

E c u a d o r

C o lo m b ia

Ve n e z u e la F re n c h G u ia n a (F r.)

S u rin a m e G u y a n a

T h e B a h am a s

C u b a D o m in ica n R e p u b lic

P a n a m a C o s ta R ic a

N ica ra g u a

H o n d u ra s G u ate m a la

E l S a lv a d o r

T rin id a d a n d To b ag o

Ja m . H a iti P u e rto R ic o (U S )

G re e n la n d (D e n .)

Ic e la n d

M a d a g a sc a r

S o u th A fr ic a L e so th o

S w a z ila n d

M o z a m b iq u e

Ta n z a n ia

B o tsw a n a N a m ib ia Z im b a b w e

A n g o la

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Z a m b ia

M a la w i

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S u d a n

D jib o u ti

B e liz e

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T u n is ia

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B u rk in a F a so B a rb a d o s

D o m in ica

C ô te D ’Iv o ire

L ib e ria

S ie rra L e o n e

G u in e a G u in e a -B issa u

S e n e g a l T h e G a m b ia

M a u rita n ia

W es te rn S ah a ra (M o r.)

M o ro c c o

F in la n d

N o rw a y

S w e d e n E sto n ia L a tv ia

L ith u a n ia

P o lan d

R o m a n ia

B u lg a r ia

T u rk e y G re e c e

C z ec h .

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P o rtu g a l

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M y a n m a r (B u rm a ) B a n g .

A n d a m a n Is la n d s (In d ia )

T h ai la n d

In d o n e s ia

M a la y s ia

B ru n e i

P h ilip p in e s

Ta iw a n

C a m b o d ia

V ie tn a m

L a o s

A u stra lia

P a p u a N ew G u in e a

N e w Z e a la n d

F ij i

N e w C a led o n ia

S o lo m o n Is la n d s

K ir ib a ti

M a rs h a ll Is lan d s F e d e ra te d S ta te s o f M ic ro n es ia

G u am (U S A )

Ja p a n

N . K o re a

S . K o rea

K u ri l Is la n d s

W ra n g e l Is la n d

A leu tian Is lan d s (U S A )

N e w S ib e r ia n Is la n d s

S e v e rn a y a Z e m ly a

N o v a y a Z e m ly a

F ra n z Jo se f L a n d S v a lb a rd (N o r.)

Ja n M a y en (N o r.) B a n k s Is lan d

Vic to r ia Is la n d B a ffin Is la n d

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Is lan d o f N e w fo u n d lan d

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F a lk la n d Is la n d s (Is la s M a lv in a s) (a d m . b y U K , c la im e d b y A rg e n tin a )

K u w a it C a n a ry Is la n d s (S p .)

S a o To m e & P rin c ip e

S in g a p o re E q . G u in e a

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K a z a k h s ta n

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H aw a iian Is lan d s

G a la p ag o s Is la n d s (E cu a d o r)

M a u rit iu s

S e y c h e lle s

6 0 °


Global Sales Management:Sales Structures in Global Markets

Country’s cultural context greatly influences the type of organizational sales force structure used Low-context: Germany High-context: Japan, China

Firms often employ geographical territories to structure overseas sales forces

Might use cultures, including languages, to organize sales force Examples: Belgium, Austria + Germany

Sources: Based on Samli, A. C., R. Still, and J. S. Hill (1993). International Marketing, New York:MacMillan; Axtell, Roger E. (1990). Do’s and Taboos Around the World, New York: John Wiley & Sons.


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


Key Account Structures

Use Existing Force

Sales force structure is simplified

All accounts are managed under a single organizational structure

CONs

Reps may take short-term view

Reps may not understand broader, overall needs of key acc’t

Assign Execs

Assigning sales and marketing executives to manage key accounts makes sense for smaller firms that cannot afford separate sales effort

CONs

Can take a lot of time, leaving less time for other duties, like managing sales force

Create Separate

Create separate sales structures to serve most important customers

Integrates marketing and sales for key accounts under one organizational structure

CONs

Establishing distinct sales channels for major acc’ts is more costly

Duplication of effort Financial viability if key

acc’ts lost

Discussion Questions

What are the three principal ways to manage national or key accounts?

What is the best approach for a smaller company?

What about a large, multi-divisional sales firm?

What concerns would you have about allowing your regular sales force to manage key or national accounts?



Telemarketing and Computerized Sales Structures

Telemarketing

Incoming: firm employs advertising and promo messages to end-users to “pull” or create buyer demand to call an 800 number and consult with in-house rep

Outgoing: pushing a firm’s product line by calling current or potential customers to try to uncover needs and close the sale

Computerized

Generated via Internet and telephone

Internet sales process varies greatly

Telemarketing is legal, but unwanted and intrusive telemarketing calls are likely to negatively impact an existing or potential business relationship


The Sales Process in a Hybrid Selling Structure


Global Sales Management: Some Offshore Call Centers Go Back Home

Offshoring call centers was a cost-cutting measure

Global phenomenon

Buyers complained Miscommunications, cultural gaffes, lack of

professionalism and product knowledge and ability to solve their problems

Perception is that lower-cost offshore centers equate to lower-quality service

Offshore firms respond Spend time, money training Purchase better equipment and software for

communicationSources: Based on Ali, Sarmad. 2006. “If You Want to Scream, Press . . . ,” The Wall Street Journal, October 30, R4; Thelen, Shawn, Tanya Thelen, Vincent P. Magnini, and Earl D. Honeycutt, Jr., An Introduction to the Offshore Service Ethnocentrism Construct. 2008. Services Marketing Quarterly, In Press.



Reporting Relationships within a Firm’s Sales Force


Ways to Construct Sales Force Reporting Structure

Line Organization

All salespeople, from highest to lowest levels, report to a single manager

Advantages Chain of command is clear Actions can be implemented quickly

and easily through firm’s line structure

Disadvantages As firms adopt customer relationship

strategies, reps need greater authority to make quick decisions to keep customers satisfied

To make quicker decisions sales organization must be flattened

Line and Staff Structure

Using a line structure for core sales functions and placing support activities (sales training, customer service) into centers or departments outside of the line structure

Geographical, product, and market sales force structures are examples of Line and Staff Sales Structure


Span of Control

Span of control: number of individuals that report directly to a sales manager

Customized customer solutions result in narrower spans of control (fewer employees reporting to sales manager)

Routine trade sales and telemarketing activities allow broader span of control (larger numbers of employees reporting to sales manager)

Span of Control Ratios (Rep:Manager)


Adding Independent Sales Reps to the Sales Structure

Ownership Do not take ownership of the product

Commission Receive commission for all sales they make within

an assigned geographical territory

Clients Sell on behalf of mfgs or other sellers in territories

where no company sales force is present

Inventory Do not maintain an inventory

Sales Traditionally sells several related, noncompeting

product lines


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


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


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


Sources of Conflict Between Firm and Selling Agent

Discussion Questions

What are the advantages/disadvantages of using an independent sales agency?

What are the advantages/disadvantages of employing a company sales force?

Do you believe “sources of conflict” would be greater or less with an independent sales agency structure? Why?

Give examples of possible “sources of conflict” between a large manufacturer and their independent sales agents



Ethics in Sales Management:Ethical Dilemmas with Partners

Wiles & Associates represents Exitron as mfg rep in California Sales have been phenomenal

Exitron decides to implement company sales force (25% cost savings)

Exitron attorney advises to send notification exactly 90 days from termination date

Exitron nat’l sales mgr wants to meet with Wiles and offer to split commission for following year Attorney advises would set bad precedent and impact $$

Epilogue: meets with Wiles, offers phase-out of commissions Well received by Wiles, will be able to partner in future if necessary


Company Salesperson or Sales Agent?

Break-even analysis: compares fixed and variable costs associated with the two types of reps


Company Salesperson or Sales Agent?

Salesperson When it’s important to

control sales effort, product or related technology is new, buyers need high level of service

Company exerts greater control over sales force efforts

Greater control over who is hired

Sales agent When potential sales

revenue is low in a territory When revenue will take

years to become substantial

When qualified sales agents already operate in the area

When it’s not feasible for company sales force to cover entire market (e.g., National Semiconductor, Advanced Micro Systems)


Role Play: Structuring the Sales Effort at Green River Software (GRS)

RC Associates has been mfg rep for GRS for 10 yrs

~1 yr ago, GRS adopted relationship marketing approach for its best customers

RCA agents also sell hardware and computer peripheral equipment made by other companies to GRS customers

Receive 8% commission, last year sales revenues for GRS were $200 million

GRS feels relationships it has with its best customers are not deepening because of the current arrangement with RCA


Role Play (continued): Assignment

Characters Janet Jackson, Sales Manager at Green River Software Ron Childress, Owner and Principal of RC Associates

Break into groups of 2, Janet and Ron Work individually to list advantages of each option for

organizing GRS sales force

Have a meeting where each presents what they believe are costs and benefits of current relationship At conclusion of meeting, Janet and Ron need to agree about

changes that should be made to meet GRS’s new strategy Alternatively, Janet recommends and justifies that the contract

be terminated and new sales structure established


Caselet 7.1: Jefferson Pilot Reorganizes Its Sales Force

Jefferson Pilot sells insurance via company reps Reps work for commission Annual turnover 50% Cost of hiring, training, licensing new reps =

$5 million annually

Considering partnering with independent sales agents Located in all current sales areas, have market

knowledge, similar goals and values JP sales mgrs would need to sell agents on benefits of

partnering with JP JP reps unhappy because agents compete with them


Caselet 7.1 (continued): Questions

1. What are the benefits of partnering with independent reps, as opposed to a company sales force? Can a case be made for finding a way to retain JP’s current salespeople instead of hiring sales agents to replace them?

2. Why would the turnover rate be significantly lower for JP if it hired sales agents?

3. What type of resistance might JP encounter from its current sales reps if it hired sales agents?

4. How might JP integrate an independent rep strategy with its existing company sales force?


Caselet 7.2: IMC Considers Offshoring Its Call Center

IMC produces high-quality electronic components for OEMs

Costs IMC ~$4 million / yr to operate customer service center for dealers and distributors worldwide

Competitors opening call centers in India, Philippines, remote parts of Canada

IMC sales manager Jones being pressured to lower costs Contacts NCS International, which provides global site selection

services for call center industry Can lower cost / call by 75% by offshoring Concerned about negatives: caller satisfaction, repeat purchases

dropping off


Caselet 7.2 (continued): Questions

1. Even though IMC’s cost per call would decrease, what other costs should Jones consider when making her decision?

2. Do you think some of the countries Jones was thinking about offshoring to would result in potentially less caller dissatisfaction than others?

3. What criteria would you recommend that Jones consider when selecting a potential offshore location?

4. What other factors should Jones weigh as she ponders this major shift in customer service responsibilities?

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Part Four: Designing and Developing the Sales Force Copyright © 2009 Pearson Education, Inc....

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