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Module 4
Module 4
Module 4
Module 4
Module 4
Module 4
Module 4
Module 4
Module 4
Module 4
Module 4
Module 4
Module 4
Module 4
Module 4
Module 4
Module 4
Module 4
Module 4
Module 4
Module 4
Module 4
Module 4
Module 4
Module 4
Module 4
Module 4
Module 4
Module 4
Module 4
Module 4
Module 4
Module 4
Module 4
Module 4
Module 4
Module 4
Module 4
Module 4
Module 4
Module 4
Module 4
Module 4
Module 4
Module 4
Module 4
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Module 4
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Module 4

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    • 1. Sales Organization Structure and Sales Force Deployment Module Four
    • 2. 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.
    • 3. Sales Force Specialization Continuum Specialists Certain selling activities for certain products for certain customers Generalists All selling activities and all products to all customers Some specialization of selling activities, products, and/or customers
    • 4. Span of Control vs. Management Levels Flat Sales Organization Span of Control Management Levels National Sales Manager District Sales Manager District Sales Manager District Sales Manager District Sales Manager District Sales Manager
    • 5. Span of Control vs. Management Levels Tall Sales Organization National Sales Manager Span of Control Management Levels District Sales Manager District Sales Manager District Sales Manager District Sales Manager District Sales Manager District Sales Manager Regional Sales Manager Regional Sales Manager
    • 6. Line vs. Staff Positions National Sales Manager Regional Sales Managers District Sales Managers Sales Training Manager Sales Training Manager Salespeople Staff Position Line Position
    • 7. Selling Situation Contingencies Organizational Structure Environmental Characteristics Task Performance Performance Objective Selling-Situation Factors and Organizational Structure Specialization High Envir. uncertainty Nonroutine Adaptiveness Centralization Low Envir. Uncertainty Repetitive Effectiveness
    • 8. Selling Situation Contingencies Market- Driven Specialization Product/Market-Driven Specialization Geography- Driven Specialization Product- Driven Specialization Customer and Product Determinants of Sales Force Specialization Simple Product Offering Complex Range of Products Customer Needs Different Customer Needs Similar
    • 9. Geographic Sales Organization National Sales Manager Zone Sales Managers (4) Zone Sales Managers (4) District Sales Managers (20) Salespeople (100) Salespeople (100) District Sales Managers (20) Eastern Region Sales Manager Western Region Sales Manager Sales Training Manager
    • 10. Product Sales Organization National Sales Manager Office Equipment Sales Manager Office Supplies Sales Manager District Sales Managers (10) Salespeople (100) Salespeople (100) District Sales Managers (10)
    • 11. Market Sales Organization National Sales Manager Zone Sales Managers (4) District Sales Managers (25) Salespeople (150) District Sales Managers (5) Commercial Accounts Sales Manager Government Accounts Sales Manager Sales Training Manager Salespeople (50)
    • 12. Functional Sales Organization National Sales Manager Field Sales Manager Telemarketing Sales Manager Regional Sales Managers (4) Salespeople (160) Salespeople (40) District Sales Managers (2) District Sales Managers (16)
    • 13. Sales Organization Structures: Identifying Major Accounts Large Account Major Account Regular Account Complex Account Large Small Complexity of Account Size of Account Simple Complex
    • 14. Sales Organization Structures: Major Accounts Options Develop Major Account Salesforce Assign Major Accounts to Sales Managers Assign Major Accounts to Salespeople along with Other Accounts
    • 15. 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 attr. & applications
      • Management control over
      • selling effort
      • High cost
      • Geographic duplication
      • Customer duplication
    • 16. Comparison of Sales Organization Structures Market
      • Salespeople develop
      • better understanding of
      • unique customer needs
      • Management control over
      • selling allocated to different
      • markets
      • High cost
      • Geographic duplication
      Functional
      • Efficiency in performing
      • selling activities
      • Geographic duplication
      • Customer duplication
      • Need for coordination
      Organizational Structure Advantages Disadvantages
    • 17. Hybrid Sales Organization Structure National Sales Manager Major Accounts Sales Manager Regular Accounts Sales Manager Office Equipment Sales Manager Office Supplies Sales Manager Field Sales Manager Telemarketing Sales Manager Commercial Accounts Sales Manager Government Accounts Sales Manager Western Sales Manager Eastern Sales Manager
    • 18. Salesforce Deployment
      • 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?
      Sales Force deployment decisions can be viewed as providing answers to three interrelated questions.
    • 19. Interrelatedness of Sales 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 of Selling Effort Sales Force Size Territory Design
    • 20. So How Many Sale People Do I Need?
      • The budget way:
      • Revenue Divided by Quota
      • The Workload way:
      • How many unit sales do I need
      • How many sales calls need to make that many sales
      • How many sales calls can a sales person make
      • Total sales people to make that many calls.
    • 21. Example
      • Goal is $12,000,000 and average sale is $10,000 means you need 1200 sales to make goal.
      • Look at last years team batting average, if it was 30%:
      Batting Average = # Orders__ Total # Calls Total # of calls = 1200 divided by 0.30 = 4000 calls
    • 22. Example continued
      • If a sale person can make an average of 3 calls per day and is in the field 100 days per year they can make 300 sales calls in the year.
      • If you need to have 4000 sales calls made,
      # of sales people = 4000 divided by 300 = 13.3 sales people
    • 23. Allocation of Selling Effort: Analytical Approaches to Allocation of Selling Effort Single Factor Models Portfolio Models Decision Models Easy to Develop and Use Difficult to Develop and Use Low Analytical Rigor High Analytical Rigor
    • 24. Allocation of Selling Effort: 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
      • Effort allocation decisions are based on the analysis of only one factor and differences among accounts in the same category are not considered in assigning sales call coverage
    • 25. Allocation of Selling Effort: Single Factor Model Example Market Potential Categories A B C D Average Sales Calls to an Account Last Year 25 23 20 16 Average Sales Calls to an Account Next Year 32 24 16 8
    • 26. Allocation of Selling Effort: Portfolio Models
      • Account Opportunity - an account’s need for and ability to purchase the firm’s products
      • Competitive Position - the strength of the relationship between the firm and an account
    • 27. Allocation of Selling Effort: Portfolio Model Segments and Strategies Competitive Position Segment 1 Segment 2 Segment 4 Segment 3 Strong Weak Low High Account Opportunity
    • 28. Allocation of Selling Effort: 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
    • 29. Determining Minimum Account Size Break-even sales volume = Cost per call X Number of calls Sales cost as a percentage of sales
    • 30. Example
      • Cost per call = $300
      • Number of calls to close = 3.5 (average)
      • Sales cost as a 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
    • 31. Sales Force Size: Key Considerations
      • Sales Productivity - the ratio of sales generated to selling effort used
        • In early stages, the addition of salespeople increases sales considerably more than the selling costs. As salespeople continue to be added, sales increases tend to decline until a point is reached when the costs to add a salesperson are more than the revenues that salesperson can generate.
      • Salesforce Turnover
        • Is very costly
        • Should be anticipated
    • 32. Sales Force Size: Analytical Tools Salesforce size = Forecasted sales / Average sales per person The Breakdown Approach is used to determine the number of salespeople needed to generate a forecasted level of sales. This approach is easy to develop. However, it is weak conceptually. The concept underlying the calculations is that sales determine the number of salespeople needed—putting “the cart before the horse.”
    • 33. Sales Force Size: Analytical Tools The Workload Approach determines how much selling effort is needed to adequately cover the firm’s market. Then the number of salespeople required to provide this amount of selling effort is calculated. This approach relatively simple to develop and is sound conceptually. Number of salespeople = Total selling effort needed Average selling effort per salesperson
    • 34. Sales Force Size: Analytical Tools The Incremental Approach is the most rigorous for calculating salesforce size. Its basic concept is to compare the marginal profits and marginal costs associated with each incremental salesperson. The major advantage of this approach is that it quantifies the important relationships between salesforce size, sales, and costs. However, the incremental method is difficult to develop, and it cannot be used for new sales forces where historical data and accurate judgments are not possible.
    • 35. 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
    • 36. Territory Design Procedure Finalize Territory Design Assess Territory Workload Form Initial Territories Analyze Planning and Control Unit Opportunity Select Planning and Control Unit
    • 37. Estimating Potentials and Forecasting Sales THIS TOPIC TO BE COMPLETED AFTER Module 5
    • 38. Market Potential – Maximum demand in a time period based on the number of potential users and the purchase rate. Industry Forecast – Total predicted sales for competitive arena. Company Potential – Company portion of industry potential (forecast) Company Forecast – Predicted sales for the competitive arena.
    • 39. Forecasting Relationships
    • 40. Estimating Potentials
      • Buying Power Index Method
        • Sales & Marketing Magazine
      • NAICS and Industry Census Data
        • North American Industry Classification System
      • Published budgets or annual reports
    • 41. Table 7-1 Data Used to Calculate Buying Power Index 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% 100.0 Atlanta Metro 70,465 1.524% 43,703 1.532% 3,807 1.391% 0.1.498 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
    • 42. Qualitative Sales Forecasting
      • Sales Force Composite
      • Jury of Executive Opinion
      • Leading Indicators
        • Housing Starts
        • Interest Rates
        • Consumer Confidence Index
        • Stock Market Indicators
    • 43. Quantitative Forecast
      • Adjust for Season
      • Naïve Forecasts
      • Trend Forecasts
      • Percentage Error
      • Mean Absolute Percentage Error (MAPE)
      • Moving Averages
      • Exponential Smoothing
      • Linear Regression
      • Turning Points
    • 44. Calculating 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 0.97 Four-year sales of 1268/16 = 79.25 average quarterly sales Year Seasonal Index for quarter 4 is 76.8/79.25 = .969
    • 45. Naïve Forecasts This period’s forecast is the same as last period’s sales.
    • 46. Trend Forecast Quarter 1 2 3 4 Sales 10 20 25 25 Rate of Change Forecast 30 30 % Rate of Change Forecast 40 31.25 Rate of Change % Rate of Change S3= S2 + (S2-S1) S3 = [(S2-S1)/S1 X S2]+S2
    • 47. 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
    • 48. Calculate MAPE Quarter 1 2 3 4 Actual Sales 49 77 90 79 Forecast 60.2 72.1 % ErrorF3 = (60.2-90)/90 =33% % ErrorF4 = (72.1- 79)/79 = 9% MAPE = (33% + 9%)/2 = 21%
    • 49. Moving Average= S1+S2+S3… n Forecast (S) = α X Current sales + (1- α ) X Last Forecast Exponential Smoothing Linear Regression Y = mx + b
    • 50. Forecasting with Moving Averages 1 2 3 4 5 6 Actual sales 49 77 90 79 57 98 Seasonally adjusted sales 67 68 78 81 78 87 Two-period moving average forecast seasonally corrected 67.5 73 79.5 79.5 Three-period moving average forecast seasonally corrected 71 75 79 Two-period Moving Average Three-period Moving Average F 3 = ( S 1 + S 2 )/2 F 4 = ( S 1 + S 2 + S 3 )/3 = ( 67 + 68 ) /2 = ( 67 + 68 + 78 ) /3 = 67.5 = 71 Time Periods
    • 51. Forecasting with Exponential Smoothing
      • Alpha is always between 0 and 1.
      • Calculate alpha to fit previous actual sales.
      • An alpha of 1 is equivalent to a naïve forecast.
    • 52. Exponential 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
    • 53. Figure 7-3: Fitting a Trend Regression to Seasonally Adjusted Sales Data 0 1 2 3 4 5 6 50 60 70 80 90 63.9 3.6 Y = 63.9 + 3.5 X Sales Time Period Linear Regression
    • 54. Turning Points
      • By definition breaks the mathematical model.
      • Turning points are best predicted by Qualitative Methods.
    • 55. How to determine the best method
      • Download the spreadsheet
    • 56. 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

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