07

Part Four: Designing and Developing
the Sales Force
7-1
Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall.

Sales Management: Shaping Future Sales Leaders
7-2
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
7-3

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
 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
7-4
satisfaction

Areas Impacted by a Firm’s Sales
Force Structure
7-5

7-6
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
 Workload method
1.Compute total sales call workload
2.Determine amount of work performed by each rep
3.Factor in additional work responsibilities
7-7
salesperson

Workload Method
7-8

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,
 Specialized sales structure offers expertise advantages
over generalist sales force
 Coordinated to address buyers’ needs
 Integrated with other organizational functions
7-9
education markets because each market purchases and utilizes
products differently

Geographical, Product,
and Market Structures
Geographical
Sales Structure
Product
Sales Structure
Market
Sales Structure
7-10
 Depends on physical boundaries to organize sales
force with customer accounts
 Interacts with buyers as generalists
 Sales activities organized around related product
lines or manufacturing divisions
 Interacts with buyers as specialists
 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

Geographical
Sales Structure
Product
Sales Structure
Market
Sales Structure
7-11
how product is sold

Geographical Sales Structure
 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
7-12
PROs
CONs
 Work best when product line is
simple
 Can be inefficient

Geographic-Based Structure
7-13

Geographical
Sales Structure
Product
Sales Structure
Market
Sales Structure
7-14
how product is sold

Product Sales Structure
 Limitation: can be confusing for buyer
 Example: Xerox has 3 separate sales forces
1. Called on same accounts
2. Had little knowledge of each other’s products
3. Confused buyers who had genuine need for Xerox
products
4. Did not cooperate by providing leads and info to each
another
 Sales rose with combined force, but rep turnover
increased
7-15
 Some reps not interested in or able to learn and sell three
separate product lines

Product-Based Structure
7-16

Geographical
Sales Structure
Product
Sales Structure
Market
Sales Structure
7-17
how product is sold

Market-Based Structure
 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
7-18
PROs
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
7-19

Functional and Combination
Sales Structures
 Selling process divided into two or
more steps performed by specialists
 Example: grocery
 Establish account
 Manage inventory & orders
 Merchandising
 Coordinating multiple specialists
 Ensuring smooth transition from
account establishment to management
7-20
Functional
CONs
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
7-21

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
7-22

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.
7-23

Global Sales Management:
Sales Structures in Global Markets
 Country’s A r c t i cultural c O c e a n E l l e s m context
e r e I s l a n d
A r c t i c O c e a n A r c t i c O c e a n
F r a n z J o s e f L a n d
greatly influences the type of
F a r o e I s . ( D e n . )
organizational sales force
U n i t e d K i n g d o m
structure used
S l o v a k .
U z b e k i s t a n
 Low-context: Germany
L e b . M o r o c c o
I r a q I r a n
C h i n a
 High-context: Japan, China
W e s t e r n S a h a r a ( M o r . )
S a u d i A rUa .b A i .a E .
G u a t e m a l a H o n d u r a s
B u r k i n a F a s o
E l S a l v a d o r
B a r b a d o s G u i n e a - B i s s a u G u i n e a
 Firms often employ
V e n e z u e l a
S i e r r a L e o n e
S u r i n a m e
E q . G u i n e a S i n g a p o r e
geographical territories to
G a b o n
R w a n d a K e n y a
Z a i r e
structure overseas sales
M a l a w i
A n g o l a
Z a m b i a
forces
N a m i b i a Z i m b a b w e
P a r a g u a y
S o u t h P a c i f i c O c e a n S o u t h A t l a n t i c O c e a n
 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.
N o r t h P a c i f i c O c e a n
N o r t h A t l a n t i c O c e a n
I n d i a n O c e a n
N o r t h P a c i f i c O c e a n
U n i t e d S t a t e s o f A m e r i c a
U . S . A .
C a n a d a
M e x i c o
B r a z i l
U . S . A .
F r e n c h P o l y n e s i a ( F r . )
A r g e n t i n a
U r u g u a y
C h i l e
B o l i v i a
P e r u
E c u a d o r
C o l o m b i a
F r e n c h G u i a n a ( F r . )
G u y a n a
T h e B a h a m a s
C u b a
D o m i n i c a n R e p u b l i c
P a n a m a
C o s t a R i c a
N i c a r a g u a
T r i n i d a d a n d T o b a g o
J a m .
H a i t i P u e r t o R i c o ( U S )
G r e e n l a n d ( D e n . )
I c e l a n d
M a d a g a s c a r
T a n z a n i a
S w a z i l a n d
S o u t h A f r i Lc ae s o t h o
M o z a m b i q u e
B o t s w a n a
B u r u n d i
U g a n d a
C o n g o
S o m a l i a
E t h i o p i a
S u d a n
D j i b o u t i
B e l i z e
L i b y a E g y p t
C h a d
N i g e r
A l g e r i a
M a l i
T u n i s i a
N i g e r i a
C a m e r o o n
C . A . R .
B e n i n
G h a n a T o g o
D o m i n i c a
C ô t e D ’ I v o i r e
L i b e r i a
S e n e g a l
T h e G a m b i a
M a u r i t a n i a
F i n l a n d
N o r w a y
S w e d e n E s t o n i a
L a t v i a
L i t h u a n i a
P o l a n d
R o m a n i a
B u l g a r i a
G r e e c e T u r k e y
C z e c h .
H u n g .
I t a l y
A l b a n i a
P o r t u g a l
F r a n c e
S p a i n
A u s .
S w i t z .
I r e l a n d
D e n .
G e r m a n y
N e t h .
B e l .
C y p .
Y e m e n
O m a n
Q a t a r
S y r i a
J o r d a n
I s r a e l
M o n g o l i a
R u s s i a
A f g h a n i s t a n
P a k i s t a n
I n d i a
S r i L a n k a
M a l d i v e s
N e p a l
B h u .
B a n g . M y a n m a r ( B u r m a )
T h a i l a n d
A n d a m a n I s l a n d s ( I n d i a )
V i e t n a m
B r u n e i
M a l a y s i a
I n d o n e s i a
T a i w a n
J a p a n
P h i l i p p i n e s
C a m b o d i a
L a o s
A u s t r a l i a
P a p u a N e w G u i n e a
M a r s h a l l I s l a n d s
S o l o m o n I s l a n d s
N e w Z e a l a n d
F i j i
N e w C a l e d o n i a
K i r i b a t i
F e d e r a t e d S t a t e s o f M i c r o n e s i a
G u a m ( U S A )
N . K o r e a
S . K o r e a
K u r i l I s l a n d s
W r a n g e l I s l a n d
A l e u t i a n I s l a n d s ( U S A )
N e w S i b e r i a n I s l a n d s
S e v e r n a y a Z e m l y a
N o v a y a Z e m l y a
S v a l b a r d ( N o r . )
B a n k s I s l a n d J a n M a y e n ( N o r . )
V i c t o r i a I s l a n d B a f f i n I s l a n d
I s l a n d o f N e w f o u n d l a n d
A n t a r c t i c a
Î l e s C r o z e t ( F r a n c e )
T a s m a n i a
F a l k l a n d I s l a n d s ( I s l a s M a l v i n a s ) ( a d m . b y U K , c l a i m e d b y A r g e n t i n a )
S o u t h G e o r g i a ( a d m . b y U K , c l a i m e d b y A r g e n t i n a )
K u w a i t
C a n a r y I s l a n d s ( S p . )
S a o T o m e & P r i n c i p e
K a z a k h s t a n
B e l a r u s
U k r a i n e
M o l d o v a
G e o r g i a
A r m e n i a A z e r b a i j a n
T u r k m e n i s t a n
K y r g y z s t a n
Y u g o .
M a c .
S l o v .
C r o .
B o s .
E r i t r e a
T a j i k i s t a n
H a w a i i a n I s l a n d s
G a l a p a g o s I s l a n d s ( E c u a d o r )
M a u r i t i u s
S e y c h e l l e s
6 0 °
7-24

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
7-25

Key Account Structures
Use Existing Force
 Sales force structure is
simplified
 All accounts are
managed under a single
organizational structure
 Reps may take short-term
 Reps may not
understand broader,
overall needs of key acc’t
7-26
CONs
view
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?
7-27

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
 Outgoing: pushing a firm’s
product line by calling
current or potential
customers to try to uncover
needs and close the sale
7-28
rep
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
7-29

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
Sources: 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.
7-30
communication

7-31
Reporting Relationships
within a Firm’s Sales Force

Ways to Construct Sales Force
Reporting Structure
 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
7-32
Line Organization
 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
Span of Control Ratios (Rep: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)
7-33

Adding Independent Sales Reps
to the Sales Structure
Clients  Sell on behalf of mfgs or other sellers in territories
where no company sales force is present
Commission  Receive commission for all sales they make within
an assigned geographical territory
Ownership  Do not take ownership of the product
Inventory  Do not maintain an inventory
Sales  Traditionally sells several related, noncompeting
7-34
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
7-35

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
 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
7-36
when product or service is sold

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
7-37

Sources of Conflict Between Firm and
Selling Agent
7-38

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
7-39

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
7-40

Company Salesperson or Sales Agent?
 Break-even analysis: compares fixed and variable costs
associated with the two types of reps
7-41

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
7-42
 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
7-43

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
 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
7-44
organizing GRS sales force

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 =
 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
7-45
$5 million annually

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?
7-46

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
7-47

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?
7-48

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