Ch 4 Sales Management

Module 4:

Sales Organization Structure and Salesforce Deployment

Ingram LaForge Avila

Schwepker Jr. Williams

Sales Management:

Analysis and Decision Making

Sales Organization Structure

and Salesforce Deployment

Module 4:




Sales Management:


Learning Objectives

1. Define the concepts of specialization, centralization,

span of control versus management levels, and line

versus staff positions.

2. Describe the ways salesforces might be specialized.

3. Evaluate the advantages and disadvantages of sales

organization structures.

4. Name the important considerations in organizing

strategic account management programs.

5. Explain how to determine the appropriate sales

organization structure for a given selling situation.

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Sales Management:


Learning Objectives

6. Discuss salesforce deployment.

7. Explain three analytical approaches for determining

allocation of selling effort.

8. Describe three methods for calculating sales force

size.

9. Explain the importance of sales territories and list

the steps in the territory design process.

10. Discuss the important people considerations in

salesforce deployment.

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Sales Organization Concepts

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.

Specialization

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.

Centralization

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Sales Force Specialization Continuum

Some specialization

of selling activities,

products, and/or

customers

All selling activities

and all products to

all customers

Generalists Certain selling

activities for certain

products for certain

customers

Specialists

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Sales Management:


Flat Sales Organization

Span of Control

Ma

na

ge

me

nt L

eve

ls

National

Sales

Manager

District

Sales

Manager

District

Sales

Manager

District

Sales

Manager

District

Sales

Manager

District

Sales

Manager

Span of Control vs. Management Levels

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Sales Management:


Tall Sales Organization

National Sales

Manager

Span of Control

Ma

na

ge

me

nt L

eve

ls

District

Sales

Manager

District

Sales

Manager

District

Sales

Manager

District

Sales

Manager

District

Sales

Manager

District

Sales

Manager

Regional Sales

Manager

Regional Sales

Manager

Span of Control vs. Management Levels

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Sales Management:


National Sales Manager

Regional Sales Managers

District Sales Managers

Sales Training Manager

Sales Training Manager

Salespeople

Staff Position

Line Position

Line vs. Staff Positions

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Sales Management:


Selling-Situation Factors and

Organizational Structure

Organizational

Structure

Environmental

Characteristics

Task

Performance

Performance

Objective

Specialization

High

Environmental

Uncertainty

Nonroutine Adaptiveness

Centralization

Low

Environmental

Uncertainty

Repetitive Effectiveness

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Sales Management:


Customer and Product Determinants

of Sales Force Specialization

Customer Needs Different

Customer Needs Similar

Simple

Product

Offering

Complex

Range of

Products

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Sales Management:


Geographic Sales Organization

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Product Sales Organization

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Market Sales Organization

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Functional Sales Organization

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Large

Small

Complexity of Account

Siz

e o

f A

cco

un

t

Large

Account

Simple Complex

Strategic

Account

Regular

Account

Complex

Account

Identifying Strategic Accounts

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Sales Management:


Strategic Accounts Options

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Sales Management:


Comparison of Sales Organization Structures

Organizational

Structure Advantages Disadvantages

Geographic

Low Cost

No geographic duplication

No customer duplication

Fewer management levels

Limited specialization

Lack of management

control over product or

customer emphasis

Product

Salespeople become experts

in product attributes &

applications

Management control over

selling effort

High cost

Geographic duplication

Customer duplication

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Sales Management:


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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Sales Management:


Hybrid Sales Organization Structure

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Sales Management:


Salesforce Deployment

Salesforce deployment decisions can be viewed as

providing answers to three interrelated questions.

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Sales Management:


Interrelatedness of

Salesforce 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 to ensure proper

coverage of accounts and to provide each

salesperson with a reasonable opportunity for

success?

Allocation of

Selling Effort

Salesforce

Size

Territory

Design

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Sales Management:


Interrelatedness of

Salesforce Deployment Decisions

2,000 accounts x 25 sales calls/account = 50,000

sales calls required to cover accounts

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

salesperson = 40 salespeople needed

40 territories needed to provide each salesperson with

opportunity for success and to ensure proper

coverage of accounts (e.g. 50 accounts per territory)

Allocation of

Selling Effort

Salesforce

Size

Territory

Design

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Sales Management:


Analytical Approaches to

Allocation of Selling Effort

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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

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Sales Management:


Single Factor Model Example

Market Potential

Categories

Average Sales Calls to

an Account Last Year

Average Sales Calls to

an Account Next Year

A 25 32

B 23 24

C 20 16

D 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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Sales Management:


Portfolio Model Segments and Strategies

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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 Management:


Sales Force Size: Key Considerations

Sales Productivity Ration of Outputs to Inputs

Sales Growth as a Result of Adding Salespeople is Curvilinear

Diminishing Marginal Returns

Salesforce Turnover Usually Very Costly

Should be Anticipated and Managed

Organizational Strategy

Growth Targets

Selling Costs

Market Share

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Sales Management:


Salesforce Size Decisions

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Sales Management:


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

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Sales Management:


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

Number of salespeople = Total selling effort needed

Average selling effort per

salesperson

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Sales Management:


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

101

102

103

$85,000

$80,000

$75,000

$70,000

$75,000

$75,000

$75,000

$75,000

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Sales Management:


Salesforce Size: Other Considerations

Turnover

Salesforce Size Calculations Should Incorporate

Turnover Rates

Example: Desired Size is 100; Annual Turnover is

20%; Recruiting, Selecting, and Training Should be

Based on Salesforce Size of 120.

Outsourcing the Salesforce

Need salesforce quickly and/or for short period

Flexible

Contractual arrangements vary

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Sales Management:


Calculating Turnover

For any given time frame (e.g., month quarter,

year), divide the number of salespeople leaving

their jobs (e.g., terminated, quit, promoted) by

the total number of salespeople employed at the

mid-point of the time frame.

Example: Time Frame 1 Year

Separations 50 Salespeople

# of Salespeople at Mid-Point 200

Salesforce Turnover = 25%

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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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Sales Management:


Territory Design Procedure

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Sales Management:


Territory Design: Using Technology

Software Optimizes Territory Design Using

Multiple User-Defined Criteria

Compare Multiple Methods Quickly and Easily

Examples

Sales Territory Configurator

Tactician

TerrAlign

Alignstar

http://www.rochestergroup.com/http://www.rochestergroup.com/http://www.tactician.com/http://www.terralign.com/http://www.alignstar.com/

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People Considerations

Analytical models dont account for people

considerations

Individual differences in buyers and accounts

Salesperson intuition

Sales managers should temper the analytical results with

people considerations before making final deployment

decisions.

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Developing Forecasts

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Sales Management:


Why Forecast?

Determining Sales Force Size

Designing Territories

Establishing Sales Quotas and Selling Budgets

Determining Sales Compensation Levels

Evaluating Salesperson Performance

Evaluating Prospective Accounts

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Sales Management:


Types of Forecasts

Market Potential

Sales Potential

Market Potential

Sales Potential

Industry Level

Firm Level

Best

Possible Results

Expected Results

for Given Strategy

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Sales Management:


Top-Down vs. Bottom-Up Forecasting

Forecast made at the front-line level and then aggregated up the levels of the organization

Bottom Up

Forecast made at the business unit level then broken down by zone, region, district, territory, and account forecast.

Top Down

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Top-Down Approach

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Bottom-Up Approach

Company Sales Forecast

Combined into district, region,

and zone forecasts

Combined into territory forecasts

Salespersons forecasts

of accounts

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Sales Management:


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 Breakdown historical sales data into four components (trend,

cycle, seasonal, erratic)

Evaluate the components and then reincorporate to create forecast

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Sales Management:


Moving Averages Forecast Example

Year Actual Sales Two-Year Four-Year

2002 $8,400,000

2003 $8,820,000

2004 $8,644,000 $8,610,000

2005 $8,212,000 $8,732,000

2006 $8,622,000 $8,428,000 $8,520,000

2007 $9,484,000 $8,418,000 $8,574,000

2008 $9,674,000 $9,054,000 $8,740,000

2009 $10,060,000 $9,579,000 $8,998,000

2010 ? $9,868,000 $9,460,000

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Exponential Smoothing Forecast Example

Year Actual Sales = 0.2 = 0.5 = 0.8

2002 $8,400,000

2003 $8,820,000 $8,400,000 $8,400,000 $8,400,000

2004 $8,644,000 $8,484,000 $861,000 $8,736,000

2005 $8,212,000 $8,516,000 $8,627,000 $8,662,000

2006 $8,622,000 $8,455,000 $8,420,000 $8,302,000

2007 $9,484,000 $8,488,000 $8,521,000 $8,558,000

2008 $9,674,000 $8,687,000 $9,003,000 $9,299,000

2009 $10,060,000 $8,884,000 $9,339,000 $9,599,000

2010 ? $9,119,000 $9,700,000 $9,968,000

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Sales Management:


Moving Averages Forecast Example

$6,000,000

$7,000,000

$8,000,000

$9,000,000

$10,000,000

$11,000,000

2002 2003 2004 2005 2006 2007 2008 2009 2010

Actual Sales Two-Year Four-Year Exp. Smoothing

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Breakdown Methods

Use factors influencing sales at

the region, district, and territory

levels to adjust forecasts made at

the business unit level (top-down

method).

Buying Power Index (BPI) is often

used to adjust forecasts.

Factors should be continuously

evaluated.

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Even Allocation vs. Breakdown Methods

Company Sales Forecast = $1,000,000

Region A Portion= .33 Forecast = $333,333

Region B Portion = .33 Forecast = $333,333

Region C Portion = .34 Forecast = $333,334

Company Sales Forecast = $1,000,000

Region A Breakdown Factor = .20

Forecast = $200,000

Region B Breakdown Factor = .30

Forecast = $300,000

Region C Breakdown Factor = .50

Forecast = $500,000

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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

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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

Date post:	18-Nov-2015
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Ch 4 Sales Management

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