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Sales Organization Structure Sales Organization Structure &&
Sales Force DeploymentSales Force Deployment
Module FourModule Four
Sales Organization ConceptsSales Organization Concepts
SpecializationSpecializationThe degree to which individuals perform some The degree to which individuals perform some
of the required tasks to the exclusion of of the required tasks to the exclusion of others. Individuals can become experts on others. Individuals can become experts on
certain tasks, leading to better performance certain tasks, leading to better performance for the entire organization.for the entire organization.
CentralizationCentralizationThe degree two which important decisions and The degree two which important decisions and
tasks performed at higher levels in the tasks performed at higher levels in the management hierarchy. Centralized management hierarchy. Centralized
structures place authority and responsibility structures place authority and responsibility at higher management levels.at higher management levels.
Sales Force Specialization Sales Force Specialization ContinuumContinuum
SpecialistsSpecialistsCertain selling Certain selling activities for certain activities for certain products for certain products for certain customerscustomers
GeneralistsGeneralistsAll selling activitiesAll selling activitiesand all products toand all products toall customersall customers
Some specializationSome specializationof selling activities,of selling activities,
products, and/orproducts, and/orcustomerscustomers
Flat Sales OrganizationFlat Sales Organization
Span of ControlSpan of Control
Ma
na
ge
men
t Lev
els
Ma
na
ge
men
t Lev
els
National National Sales Sales
ManagerManager
District District Sales Sales
ManagerManager
District District Sales Sales
ManagerManager
District District Sales Sales
ManagerManager
District District Sales Sales
ManagerManager
District District Sales Sales
ManagerManager
Span of Control vs. Span of Control vs. Management LevelsManagement Levels
TallTall Sales Organization
National Sales National Sales ManagerManager
Span of ControlSpan of Control
Managem
ent LevelsM
anagement Levels
District District Sales Sales
ManagerManager
District District Sales Sales
ManagerManager
District District Sales Sales
ManagerManager
District District Sales Sales
ManagerManager
District District Sales Sales
ManagerManager
District District Sales Sales
ManagerManager
Regional Sales Regional Sales ManagerManager
Regional Sales Regional Sales ManagerManager
Span of Control vs. Management Span of Control vs. Management LevelsLevels
National Sales ManagerNational Sales Manager
Regional Sales ManagersRegional Sales Managers
District Sales ManagersDistrict Sales Managers
Sales Training ManagerSales Training Manager
Sales Training ManagerSales Training Manager
SalespeopleSalespeople
Staff PositionStaff Position
Line PositionLine Position
Line vs. StaffLine vs. Staff Positions Positions
OrganizationalStructure
EnvironmentalCharacteristics
TaskPerformance
PerformanceObjective
SpecializationSpecialization Dynamic Dynamic sales sales
environmentenvironment
NonroutineNonroutine AdaptivenessAdaptiveness
CentralizationCentralizationRelatively stable Relatively stable
sales environmentsales environment RepetitiveRepetitive EffectivenessEffectiveness
Selling-Situation Factors & Organizational Options
Selling SituationsSelling Situations
GeographicGeographic Sales Sales OrganizationOrganization
National Sales ManagerNational Sales Manager
Zone Sales Managers (4)Zone Sales Managers (4) Zone Sales Managers (4)Zone Sales Managers (4)
District Sales Managers (20)District Sales Managers (20)
Salespeople (100)Salespeople (100) Salespeople (100)Salespeople (100)
District Sales Managers (20)District Sales Managers (20)
Eastern Region Sales ManagerEastern Region Sales Manager Western Region Sales ManagerWestern Region Sales Manager
Sales Training ManagerSales Training Manager
ProductProduct Sales Sales OrganizationOrganizationNational Sales ManagerNational Sales Manager
Office Equipment Sales ManagerOffice Equipment Sales Manager Office Supplies Sales ManagerOffice Supplies Sales Manager
District Sales Managers (10)District Sales Managers (10)
Salespeople (100)Salespeople (100) Salespeople (100)Salespeople (100)
District Sales Managers (10)District Sales Managers (10)
MarketMarket Sales Sales OrganizationOrganization
National Sales ManagerNational Sales Manager
Zone Sales Managers (4)Zone Sales Managers (4)
District Sales Managers (25)District Sales Managers (25)
Salespeople (150)Salespeople (150)
District Sales Managers (5)District Sales Managers (5)
Commercial AccountsCommercial AccountsSales ManagerSales Manager
Government AccountsGovernment AccountsSales ManagerSales Manager
Sales Training Sales Training ManagerManager
Salespeople (50)Salespeople (50)
FunctionalFunctional Sales Sales OrganizationOrganization
National Sales ManagerNational Sales Manager
Field Sales ManagerField Sales Manager Telemarketing Sales ManagerTelemarketing Sales Manager
Regional Sales Managers (4)Regional Sales Managers (4)
Salespeople (160)Salespeople (160)
Salespeople (40)Salespeople (40)
District Sales Managers (2)District Sales Managers (2)
District Sales Managers (16)District Sales Managers (16)
Develop Major Account SalesforceDevelop Major Account Salesforce
Assign Major Accounts to Assign Major Accounts to Sales ManagersSales Managers
Assign Major Accounts to Salespeople Assign Major Accounts to Salespeople along with Other Accountsalong with Other Accounts
Sales Organization Sales Organization StructuresStructures
Major Accounts OptionsMajor Accounts Options
Comparison of Comparison of Sales Organization StructuresSales Organization Structures
OrganizationalOrganizationalStructureStructure AdvantagesAdvantages DisadvantagesDisadvantages
GeographicGeographic
• Low CostLow Cost• No geographic duplicationNo geographic duplication• No customer duplicationNo customer duplication• Fewer management levelsFewer management levels
• Limited Limited specializationspecialization• Lack of Lack of management management control over product control over product or or customer emphasiscustomer emphasis
ProducProductt
• Salespeople become Salespeople become expertsexperts in product attr. & in product attr. & applicationsapplications• Management control overManagement control over selling effortselling effort
• High costHigh cost• Geographic Geographic duplicationduplication• Customer duplicationCustomer duplication
Comparison of Comparison of Sales Organization StructuresSales Organization Structures
MarketMarket
• Salespeople developSalespeople develop better understanding ofbetter understanding of unique customer needsunique customer needs• Management control overManagement control over selling allocated to differentselling allocated to different marketsmarkets
• High costHigh cost• Geographic Geographic duplicationduplication
FunctionFunctionalal
• Efficiency in performingEfficiency in performing selling activitiesselling activities
• Geographic Geographic duplicationduplication• Customer duplicationCustomer duplication• Need for coordinationNeed for coordination
OrganizationalOrganizationalStructureStructure AdvantagesAdvantages DisadvantagesDisadvantages
HybridHybrid Sales Organization Sales Organization StructureStructure
National Sales ManagerNational Sales Manager
Major Accounts Major Accounts Sales ManagerSales Manager
Regular Accounts Regular Accounts Sales ManagerSales Manager
Office Equipment Office Equipment Sales ManagerSales Manager
Office Supplies Office Supplies Sales ManagerSales Manager
Field SalesField SalesManagerManager
TelemarketingTelemarketingSales ManagerSales Manager
Commercial Accounts Commercial Accounts Sales ManagerSales Manager
Government Accounts Government Accounts Sales ManagerSales Manager
WesternWesternSales ManagerSales Manager
EasternEasternSales ManagerSales Manager
1.1. How much selling effortHow much selling effort is needed to cover accounts and is needed to cover accounts and prospects adequately so that sales and profit objectives will prospects adequately so that sales and profit objectives will be achieved?be achieved?
2.2. How many salespeopleHow many salespeople are required to provide the desired are required to provide the desired amount of selling effort?amount of selling effort?
3.3. How should How should territories be designed to ensure proper territories be designed to ensure proper coveragecoverage of accounts and to provide each salesperson with a of accounts and to provide each salesperson with a reasonable opportunity for success?reasonable opportunity for success?
Sales Force deployment decisions can be viewed as providing answers to three interrelated questions.
Interrelatedness ofInterrelatedness ofSales Force Deployment Sales Force Deployment
DecisionsDecisionsHow 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?
Allocation ofAllocation ofSelling EffortSelling EffortAllocation ofAllocation ofSelling EffortSelling Effort
Sales ForceSales ForceSizeSize
Sales ForceSales ForceSizeSize
TerritoryTerritoryDesignDesign
TerritoryTerritoryDesignDesign
Single FactorSingle FactorModelsModels
Single FactorSingle FactorModelsModels
Easy to Develop and UseEasy to Develop and Use
Difficult to Develop and UseDifficult to Develop and Use
LowLowAnalyticalAnalyticalRigorRigor
HighHighAnalyticalAnalyticalRigorRigor
PortfolioPortfolioModelsModels
PortfolioPortfolioModelsModels
DecisionDecisionModelsModels
DecisionDecisionModelsModels
Allocation of Selling EffortAllocation of Selling EffortAnalytical ApproachesAnalytical Approaches
Allocation of Selling Effort:Allocation of Selling Effort:Single Factor ModelsSingle Factor Models
Accounts classified into categories Accounts classified into categories based on based on one factorone factor, such as volume potential, such as volume potential
• All accounts in the same category are All accounts in the same category are assigned the same number of sales callsassigned the same number of sales calls
• Effort allocation decisions are based on the Effort allocation decisions are based on the analysis of only analysis of only oneone factor and differences factor and differences among accounts in the same category are among accounts in the same category are notnot considered in assigning sales call coverageconsidered in assigning sales call coverage
Allocation of Selling EffortAllocation of Selling EffortSingle Factor Model ExampleSingle Factor Model Example
Market PotentialMarket PotentialCategoriesCategories
ABCD
Average Sales Calls toAverage Sales Calls toan Account Last Yearan Account Last Year
25232016
Average Sales Calls toAverage Sales Calls toan Account Next Yearan Account Next Year
3224168
Allocation of Selling EffortAllocation of Selling EffortPortfolio ModelsPortfolio Models
• Accounts are ‘grouped’ by specific Accounts are ‘grouped’ by specific criteria to determine their value to the criteria to determine their value to the firm ie.firm ie.– Account (Growth) Opportunity - an account’s Account (Growth) Opportunity - an account’s
need for and ability to purchase the firm’s need for and ability to purchase the firm’s productsproducts
– Competitive (Advantage) Position - the Competitive (Advantage) Position - the strength of the relationship between the firm strength of the relationship between the firm and an accountand an account
Allocation of Selling Effort:Allocation of Selling Effort:Decision ModelsDecision Models
• Simple Basic Concept - to allocate sales Simple Basic Concept - to allocate sales calls to accounts that promise the highest calls to accounts that promise the highest sales return from the sales callssales return from the sales calls
• Optimal number of calls in terms of sales Optimal number of calls in terms of sales or profit maximizationor profit maximization
Sales Force Size Sales Force Size
Key ConsiderationsKey Considerations
• Sales Volume GrowthSales Volume Growth– Anticipated increasesAnticipated increases
• Sales ProductivitySales Productivity – The ratio of sales to selling costs The ratio of sales to selling costs
• Sales Force TurnoverSales Force Turnover– Should be anticipatedShould be anticipated
Sales Force Size: Analytical Sales Force Size: Analytical ToolsTools
Salesforce size = Forecasted sales / Average sales / personSalesforce size = Forecasted sales / Average sales / person
The The Breakdown ApproachBreakdown Approach
• Is used to determine the number of salespeople needed Is used to determine the number of salespeople needed
to generate a forecasted level of sales. to generate a forecasted level of sales. • It is weak conceptually. It is weak conceptually. • The concept underlying the calculations is that sales The concept underlying the calculations is that sales
determine the number of salespeople needed—determine the number of salespeople needed—
putting “the cart before the horse.”putting “the cart before the horse.”
Sales Force Size: Analytical Sales Force Size: Analytical ToolsTools
The The Workload ApproachWorkload Approach
• Determines how much selling effort is needed to Determines how much selling effort is needed to adequately cover the firm’s market. adequately cover the firm’s market. • Then the number of salespeople required to provide this Then the number of salespeople required to provide this
amount of selling effort is calculated. amount of selling effort is calculated. • This approach relatively simple to develop and is sound This approach relatively simple to develop and is sound
conceptually.conceptually.
Number of salespeople =Number of salespeople = Total selling effort neededTotal selling effort needed
Average selling effort per Average selling effort per salespersonsalesperson
Sales Force Size: Analytical Sales Force Size: Analytical ToolsTools
The The Incremental ApproachIncremental Approach
• Its basic concept is to compare the marginal profits and Its basic concept is to compare the marginal profits and marginal costs associated with each incremental marginal costs associated with each incremental salesperson. salesperson.
• The major advantage of this approach is that it quantifies The major advantage of this approach is that it quantifies the important relationships between salesforce the important relationships between salesforce
size, sales, and costs. size, sales, and costs. • However, the incremental method is difficult to develop, However, the incremental method is difficult to develop,
and it cannot be used for new sales forces where and it cannot be used for new sales forces where historical data and accurate judgments are not historical data and accurate judgments are not
possible.possible.
Designing TerritoriesDesigning Territories
Territories consist of whatever specific accounts are Territories consist of whatever specific accounts are assigned to a specific salesperson. The territory assigned to a specific salesperson. The territory can be viewed as the work unit for a salesperson.can be viewed as the work unit for a salesperson.
Territory ConsiderationsTerritory Considerations» Trading areasTrading areas» Present effortPresent effort» Recommended effortRecommended effort
DESIGNING TERRITORIESDESIGNING TERRITORIES
EXTREMELY RAREEXTREMELY RARE
Most often territories evolve Most often territories evolve
with market development & volume, with market development & volume,
And are revised / adjusted And are revised / adjusted
on an ‘ongoing basis. on an ‘ongoing basis.
DESIGN GOALSDESIGN GOALS• EQUALITY OF SALESEQUALITY OF SALES
• WORKLOAD WORKLOAD
• GROWTH POTENTIALGROWTH POTENTIAL
SIX DESIGN STEPSSIX DESIGN STEPS
1.1. Select a control element for territory Select a control element for territory boundaries / size.boundaries / size.
2.2. Determine location & potential of customers.Determine location & potential of customers.
3.3. Determine basic territoriesDetermine basic territories
4.4. Assign sales people to territories.Assign sales people to territories.
5.5. Establish territorial coverage plans for sales Establish territorial coverage plans for sales reps.reps.
6.6. Monitor sales & cost of sales on an ‘ongoing’ Monitor sales & cost of sales on an ‘ongoing’ basis.basis.
STEP ONESTEP ONE
TERRITORIAL SIZETERRITORIAL SIZE (miles covered) (miles covered) • Boundaries (usually political or geographical): Boundaries (usually political or geographical):
– BASED ON: BASED ON: • REGION (WESTERN CANADA) REGION (WESTERN CANADA) • PROVINCE (BC) PROVINCE (BC) • CITY / COUNTRY (PRINCE GEORGE / VANDERHOOF, CITY / COUNTRY (PRINCE GEORGE / VANDERHOOF,
QUESNEL, ETC.)QUESNEL, ETC.)
STEP TWO
Determine the location of potential Determine the location of potential customers from: customers from:
• phone bookphone book
• Mailing lists Mailing lists
• route ridingroute riding
STEP THREE
TO DETERMINE BASIC TERRITORIES USE EITHER:
BUILD UP METHOD:
• Establish individual performance parameters (workload capacity: # of calls per day x # of days), frequency / miles, account types a, b or c, length of call.
• Draw out individual territory boundaries
• Adjust as needed
STEP THREE
BREAKDOWN METHODBREAKDOWN METHOD::
• Determine total market sales potentialDetermine total market sales potential• Establish individual territories: Establish individual territories: • CanCan use a market index x total sales potential, use a market index x total sales potential,
shouldshould use ‘hands on’ territory analysis as use ‘hands on’ territory analysis as territories are rarely sufficiently uniformterritories are rarely sufficiently uniform
• Estimate sales volume per person and draw Estimate sales volume per person and draw boundaries.boundaries.
• Adjust as neededAdjust as needed
STEP FOURSTEP FOUR
• Assigning sales people to territoriesAssigning sales people to territories• Need to match personality of the SR to Need to match personality of the SR to
the personality of the territory the personality of the territory (ie. miles, account type, culture, etc.)(ie. miles, account type, culture, etc.)
• Can be a management toolCan be a management tool– Beginner territoriesBeginner territories– ‘‘Penal’ territoriesPenal’ territories– ‘‘Plum’ territoriesPlum’ territories
• Territory adjustment need is ‘ongoing’Territory adjustment need is ‘ongoing’
STEP FOURSTEP FOUR continued continued
• Set performance norms that ‘flag’ when the Set performance norms that ‘flag’ when the need becomes critical.need becomes critical.
• Territory can ‘boom’ & far out pace sales Territory can ‘boom’ & far out pace sales (Alberta) / can shrink / dry up (Nfld.)(Alberta) / can shrink / dry up (Nfld.)
• Claim jumpingClaim jumping ~ territory / account overlap ~ territory / account overlap• Consequence of revising territoriesConsequence of revising territories
– People don’t like change: it means more work / People don’t like change: it means more work / less return.less return.
– The change needs to be ‘sold’The change needs to be ‘sold’– Compensation format may need adjustmentCompensation format may need adjustment
STEP FIVESTEP FIVE
• Territory coverageTerritory coverage• The plan of how the territory is to be The plan of how the territory is to be
servicedserviced• Call sequence / frequency, routingCall sequence / frequency, routing• Sales management should only ‘do’ the Sales management should only ‘do’ the
initial ‘set up’initial ‘set up’• Assigned rep should submit modifications Assigned rep should submit modifications
with as their territory knowledge develops.with as their territory knowledge develops.• Managements role is to set performance Managements role is to set performance
standards e.G. Calls per day, etc.standards e.G. Calls per day, etc.• Need to factor in account merchandising, Need to factor in account merchandising,
prospecting.prospecting.
STEP SIXSTEP SIX
• Monitor sales Monitor sales
• Cost of sales on an ‘ongoing’ basis.Cost of sales on an ‘ongoing’ basis.
Sales Organization Structure Sales Organization Structure &&
Sales Force DeploymentSales Force Deployment
A dynamic management undertaking A dynamic management undertaking that must be constantly that must be constantly
assessed and ‘fine tuned’ assessed and ‘fine tuned’ to ensure the ideal balance to ensure the ideal balance
between profitability between profitability and the development of and the development of continued sales growth.continued sales growth.