Sales Organization Structure and Sales Organization Structure and Sales Force DeploymentSales Force Deployment
Module FourModule Four
Sales Organization ConceptsSales Organization Concepts
SpecializationSpecializationThe degree to which individuals perform some of the The degree to which individuals perform some of the required tasks to the exclusion of others. Individuals required tasks to the exclusion of others. Individuals can become experts on certain tasks, leading to better can become experts on certain tasks, leading to better performance for the entire organization.performance for the entire organization.
CentralizationCentralizationThe degree two which important decisions and tasks The degree two which important decisions and tasks performed at higher levels in the management performed at higher levels in the management hierarchy. Centralized structures place authority and hierarchy. Centralized structures place authority and responsibility at higher management levels.responsibility at higher management levels.
Sales Force Specialization ContinuumSales Force Specialization Continuum
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. Management LevelsSpan of Control vs. Management Levels
Tall 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 LevelsSpan of Control vs. Management Levels
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. Staff PositionsLine vs. Staff Positions
OrganizationalStructure
EnvironmentalCharacteristics
TaskPerformance
PerformanceObjective
SpecializationSpecialization High Envir. High Envir. uncertaintyuncertainty NonroutineNonroutine AdaptivenessAdaptiveness
CentralizationCentralization Low Envir.Low Envir.UncertaintyUncertainty RepetitiveRepetitive EffectivenessEffectiveness
Selling-Situation Factors and Organizational Structure
Selling Situation ContingenciesSelling Situation Contingencies
Customer and Product DeterminantsCustomer and Product Determinantsof Sales Force Specializationof Sales Force Specialization
Simple Simple Product Product OfferingOffering
Complex Complex Range of Range of ProductsProducts
Customer Needs DifferentCustomer Needs Different
Customer Needs SimilarCustomer Needs Similar
Market-Market-Driven Driven
SpecializationSpecialization
Product/Market-Product/Market-Driven Driven
SpecializationSpecialization
Geography-Geography-Driven Driven
SpecializationSpecialization
Product-Product-Driven Driven
SpecializationSpecialization
Selling Situation ContingenciesSelling Situation Contingencies
Geographic Sales OrganizationGeographic Sales Organization
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
Product Sales OrganizationProduct Sales Organization
National 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)
Market Sales OrganizationMarket Sales Organization
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)
Functional Sales OrganizationFunctional Sales Organization
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)
LargeLarge
SmallSmall
Complexity of AccountComplexity of Account
Siz
e of
Acc
ount
Siz
e of
Acc
ount
LargeLargeAccountAccount
SimpleSimple ComplexComplex
MajorMajorAccountAccount
RegularRegularAccountAccount
ComplexComplexAccountAccount
Sales Organization Structures:Sales Organization Structures:Identifying Major AccountsIdentifying Major Accounts
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 Structures:Sales Organization Structures: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
Hybrid Sales Organization StructureHybrid Sales Organization Structure
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
Salesforce DeploymentSalesforce Deployment
1.1. How much selling effort is needed to cover accounts and How much selling effort 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 salespeople are required to provide the desired How many salespeople are required to provide the desired amount of selling effort?amount of selling effort?
3.3. How should territories be designed to ensure proper coverage How should territories be designed to ensure proper coverage 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 DecisionsSales Force Deployment Decisions
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?
Allocation ofAllocation ofSelling EffortSelling EffortAllocation ofAllocation ofSelling EffortSelling Effort
Sales ForceSales ForceSizeSize
Sales ForceSales ForceSizeSize
TerritoryTerritoryDesignDesign
TerritoryTerritoryDesignDesign
So How Many Sale People Do I Need?So How Many Sale People Do I Need?
The budget way:The budget way: Revenue Divided by Quota Revenue Divided by Quota
The Workload way:The Workload way:• How many unit sales do I needHow many unit sales do I need• How many sales calls need to make that many How many sales calls need to make that many
salessales• How many sales calls can a sales person makeHow many sales calls can a sales person make• Total sales people to make that many calls.Total sales people to make that many calls.
ExampleExample
• Goal is $12,000,000 and average sale is Goal is $12,000,000 and average sale is $10,000 means you need 1200 sales to $10,000 means you need 1200 sales to make goal.make goal.
• Look at last years team batting average, if it was 30%:Look at last years team batting average, if it was 30%:
Batting Average = Batting Average = # Orders__ # Orders__ Total # CallsTotal # Calls
Total # of calls = 1200 divided by 0.30Total # of calls = 1200 divided by 0.30
= 4000 calls= 4000 calls
Example continuedExample continued
If a sale person can make an average of 3 If a sale person can make an average of 3 calls per day and is in the field 100 days calls per day and is in the field 100 days per year they can make 300 sales calls in per year they can make 300 sales calls in the year.the year.
If you need to have 4000 sales calls made, If you need to have 4000 sales calls made,
# of sales people = 4000 divided by 300 # of sales people = 4000 divided by 300
= 13.3 sales people= 13.3 sales people
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 Effort:Allocation of Selling Effort:Analytical Approaches to Allocation of Selling EffortAnalytical Approaches to Allocation of Selling Effort
Allocation of Selling Effort:Allocation of Selling Effort:Single Factor ModelsSingle Factor Models
• Easy to develop and use/low analytical rigorEasy to develop and use/low analytical rigor
• Accounts classified into categories based on one Accounts classified into categories based on one factor, such as market potentialfactor, such as market potential
• All accounts in the same category are assigned the All accounts in the same category are assigned the same number of sales callssame number of sales calls
• Effort allocation decisions are based on the analysis Effort allocation decisions are based on the analysis of only of only oneone factor and differences among accounts in factor and differences among accounts in the same category are the same category are notnot considered in assigning considered in assigning sales call coveragesales call coverage
Allocation of Selling Effort:Allocation of Selling Effort:Single 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 Effort:Allocation of Selling Effort:Portfolio ModelsPortfolio Models
• Account Opportunity - an account’s need Account Opportunity - an account’s need for and ability to purchase the firm’s for and ability to purchase the firm’s productsproducts
• Competitive Position - the strength of the Competitive Position - the strength of the relationship between the firm and an relationship between the firm and an accountaccount
Allocation of Selling Effort:Allocation of Selling Effort:Portfolio Model Segments and StrategiesPortfolio Model Segments and Strategies
Competitive PositionCompetitive Position
Segment 1Segment 1 Segment 2Segment 2
Segment 4Segment 4Segment 3Segment 3
StrongStrong WeakWeak
Lo
wL
ow
Hig
hH
igh
Acc
ount
Opp
ortu
nity
Acc
ount
Opp
ortu
nity
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
Determining Minimum Account SizeDetermining Minimum Account Size
Break-even sales volume =
Cost per call X Number of calls
Sales cost as a percentage of sales
ExampleExample
• Cost per call = $300Cost per call = $300• Number of calls to close Number of calls to close
= 3.5 (average)= 3.5 (average)• Sales cost as a Sales cost as a
percentage of sales = 4%percentage of sales = 4%
Break-even sales volume =
Cost per call X Number of calls
Sales cost as a percentage of sales
$300 X 3.5
.04
= $26,250
Sales Force Size: Key ConsiderationsSales Force Size: Key Considerations
• Sales ProductivitySales Productivity - the ratio of sales - the ratio of sales generated to selling effort usedgenerated to selling effort used– In early stages, the addition of salespeople increases sales In early stages, the addition of salespeople increases sales
considerably more than the selling costs. As salespeople considerably more than the selling costs. As salespeople continue to be added, sales increases tend to decline until a continue to be added, sales increases tend to decline until a point is reached when the costs to add a salesperson are point is reached when the costs to add a salesperson are more than the revenues that salesperson can generate.more than the revenues that salesperson can generate.
• Salesforce TurnoverSalesforce Turnover– Is very costlyIs very costly– Should be anticipatedShould be anticipated
Sales Force Size: Analytical ToolsSales Force Size: Analytical Tools
Salesforce size = Forecasted sales / Average sales per personSalesforce size = Forecasted sales / Average sales per person
The The Breakdown ApproachBreakdown Approach is used to determine the is used to determine the number of salespeople needed to generate a forecasted number of salespeople needed to generate a forecasted level of sales. This approach is easy to develop. level of sales. This approach is easy to develop. However, it is weak conceptually. The concept underlying However, it is weak conceptually. The concept underlying the calculations is that sales determine the number of the calculations is that sales determine the number of salespeople needed—putting “the cart before the horse.”salespeople needed—putting “the cart before the horse.”
Sales Force Size: Analytical ToolsSales Force Size: Analytical Tools
The The Workload ApproachWorkload Approach determines how much selling determines how much selling effort is needed to adequately cover the firm’s market. effort is needed to 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. This approach amount of selling effort is calculated. This approach relatively simple to develop and is sound conceptually.relatively simple to develop and is sound 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 ToolsSales Force Size: Analytical Tools
The The Incremental ApproachIncremental Approach is the most rigorous for is the most rigorous for calculating salesforce size. Its basic concept is to calculating salesforce size. Its basic concept is to compare the marginal profits and marginal costs compare the marginal profits and marginal costs associated with each incremental salesperson. The major associated with each incremental salesperson. The major advantage of this approach is that it quantifies the advantage of this approach is that it quantifies the important relationships between salesforce size, sales, important relationships between salesforce size, sales, and costs. However, the incremental method is difficult to and costs. However, the incremental method is difficult to develop, and it cannot be used for new sales forces where develop, and it cannot be used for new sales forces where historical data and accurate judgments are not possible.historical data and accurate judgments are not possible.
Designing TerritoriesDesigning Territories
• Territories consist of whatever specific Territories consist of whatever specific accounts are assigned to a specific accounts are assigned to a specific salesperson. The territory can be viewed salesperson. The territory can be viewed as the work unit for a salesperson.as the work unit for a salesperson.
• Territory ConsiderationsTerritory Considerations– Trading areasTrading areas– Present effortPresent effort– Recommended effortRecommended effort
Territory Design ProcedureTerritory Design Procedure
FinalizeFinalizeTerritoryTerritoryDesignDesign
FinalizeFinalizeTerritoryTerritoryDesignDesign
AssessAssessTerritoryTerritoryWorkloadWorkload
AssessAssessTerritoryTerritoryWorkloadWorkload
Form Initial Form Initial TerritoriesTerritories
Form Initial Form Initial TerritoriesTerritories
AnalyzeAnalyzePlanning andPlanning andControl UnitControl UnitOpportunityOpportunity
AnalyzeAnalyzePlanning andPlanning andControl UnitControl UnitOpportunityOpportunity
SelectSelectPlanning andPlanning andControl UnitControl Unit
SelectSelectPlanning andPlanning andControl UnitControl Unit
Estimating Potentials and Forecasting Estimating Potentials and Forecasting SalesSales
THIS TOPIC TO BE COMPLETED AFTER THIS TOPIC TO BE COMPLETED AFTER Module 5Module 5
Market PotentialMarket Potential – Maximum demand in a time – Maximum demand in a time period based on the number of potential users period based on the number of potential users and the purchase rate.and the purchase rate.
Industry ForecastIndustry Forecast – Total predicted sales for – Total predicted sales for competitive arena.competitive arena.
Company PotentialCompany Potential – Company portion of – Company portion of industry potential (forecast)industry potential (forecast)
Company ForecastCompany Forecast – Predicted sales for the – Predicted sales for the competitive arena.competitive arena.
$0
$20
$40
$60
$80
$100
$120
1 2 3 4 5 6 7 8
Quarters
Sales $
Mkt Poten
Ind Fcst
Cmpy Poten
Cmpy Fcst
Forecasting Relationships
Estimating PotentialsEstimating Potentials
• Buying Power Index MethodBuying Power Index Method– Sales & Marketing MagazineSales & Marketing Magazine
• NAICS and Industry Census DataNAICS and Industry Census Data– North American Industry Classification North American Industry Classification
SystemSystem
• Published budgets or annual reportsPublished budgets or annual reports
1999 Effective 1999 Total Buying Income Retail Sales Total Population
Percentage Percentage Percentage Buying Amount of United Amount of United Amount of United Power
($000,000) States ($000,000) States (000) States Index Total United States $4,621,491 100.0% $2,852429 100.0% 273,537 100.0% 100.0Atlanta Metro 70,465 1.524% 43,703 1.532% 3,807 1.391% 0.1.498
Table 7-1Table 7-1 Data Used to Calculate Buying Power Index Data Used to Calculate Buying Power Index
What portion of the total market potential is in the given market area.
http://www.salesandmarketing.com
http://www.census.gov/epcd/www/naics.html
Qualitative Sales ForecastingQualitative Sales Forecasting
• Sales Force CompositeSales Force Composite
• Jury of Executive OpinionJury of Executive Opinion
• Leading IndicatorsLeading Indicators– Housing StartsHousing Starts– Interest RatesInterest Rates– Consumer Confidence IndexConsumer Confidence Index– Stock Market IndicatorsStock Market Indicators
Quantitative ForecastQuantitative Forecast
• Adjust for SeasonAdjust for Season• Naïve ForecastsNaïve Forecasts• Trend ForecastsTrend Forecasts• Percentage ErrorPercentage Error• Mean Absolute Percentage Error (MAPE)Mean Absolute Percentage Error (MAPE)• Moving AveragesMoving Averages• Exponential SmoothingExponential Smoothing• Linear RegressionLinear Regression• Turning PointsTurning Points
Calculating a Seasonal Index from Historical Sales DataCalculating a Seasonal Index from Historical Sales Data
Four-year Quarterly Seasonal
Quarter 1 2 3 4 Average Index
1 49 57 53 73 58.0 0.73 2 77 98 85 100 90.0 1.13 3 90 89 92 98 92.3 1.16 4 79 62 88 78 76.8 0.97Four-year sales of 1268/16 = 79.25 average quarterly sales
Year
Seasonal Index for quarter 4 is 76.8/79.25 = .969
Naïve ForecastsNaïve Forecasts
This period’s forecast is the same as last period’s sales.
Trend ForecastTrend Forecast
Quarter
1 2 3 4
Sales 10 20 25 25
Rate of ChangeForecast 30 30
% Rate of ChangeForecast 40 31.25
Rate of Change % Rate of Change
S3= S2 + (S2-S1) S3 = [(S2-S1)/S1 X S2]+S2
Percentage Forecast Error = Forecast -- Actual
Actual
MAPE =
∑ (forecast – actual) / actual
n
X 100%
X 100%
Mean Absolute Percentage Error
Calculate % Error for each period and then take average
Calculate MAPECalculate MAPE
Quarter 1 2 3 4Actual Sales 49 77 90 79Forecast 60.2 72.1
% ErrorF3 = (60.2-90)/90 =33%
% ErrorF4 = (72.1- 79)/79 = 9%
MAPE = (33% + 9%)/2 = 21%
Moving Average=
S1+S2+S3…
n
Forecast (S) = α X Current sales + (1-α) X Last Forecast
Exponential Smoothing
Linear Regression
Y = mx + b
Forecasting with Moving AveragesForecasting with Moving Averages
1 2 3 4 5 6
Actual sales 49 77 90 79 57 98Seasonally adjusted sales 67 68 78 81 78 87Two-period moving average forecast seasonally corrected 67.5 73 79.5 79.5Three-period moving average forecast seasonally corrected 71 75 79 Two-period Moving Average Three-period Moving Average
F3 = ( S1 + S2 )/2 F4 = ( S1 + S2 + S3 )/3
= ( 67 + 68 ) /2 = ( 67 + 68 + 78 ) /3
= 67.5 = 71
Time Periods
Forecasting with Exponential SmoothingForecasting with Exponential Smoothing
• Alpha is always between 0 and 1.Alpha is always between 0 and 1.
• Calculate alpha to fit previous actual sales.Calculate alpha to fit previous actual sales.
• An alpha of 1 is equivalent to a naïve An alpha of 1 is equivalent to a naïve forecast.forecast.
Exponential SmoothingExponential Smoothing Quarter
1 2 3 4
Actual Sales 49 77 90 79
Smooth Forecast 60.2 72.1
If alpha = .4
SF3 = .4 X S2 + (1-.4) X S1
= 30.8 + .6X 49
30.8 + 29.4
S3 = 60.2
SF4 = .4 X 90 + (1-.4) X SF3
= 36 + .6 X 60.2
= 36 + 36.1
= 72.1
Figure 7-3:Figure 7-3: Fitting a Trend Regression to Fitting a Trend Regression to Seasonally Adjusted Sales Data Seasonally Adjusted Sales Data
0 1 2 3 4 5 650
60
70
80
90
63.9
3.6
Y = 63.9 + 3.5 X
Sale
s
Time Period
Linear Regression
Turning PointsTurning Points
• By definition breaks the mathematical By definition breaks the mathematical model.model.
• Turning points are best predicted by Turning points are best predicted by Qualitative Methods.Qualitative Methods.
How to determine the best methodHow to determine the best method
Download the spreadsheetDownload the spreadsheet
Rate of Change % Rate of Change
S3= S2 + (S2-S1) S3 = [(S2-S1)/S1 X S2]+S2
Moving Average=
S1+S2+S3…
n
Forecast (S) = α X Current sales + (1-α) X Last Forecast
Exponential Smoothing
MAPE = ∑ (forecast – actual) / actual
n
X 100%
Mean Absolute Percentage Error