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Organizing the Sales Effort McGraw-Hill/Irwin


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Organizing the Sales Effort McGraw-Hill/Irwin

  1. 1. 4 <ul><li>Organizing the </li></ul><ul><li>Sales Effort </li></ul>McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.
  2. 2. Organize Around Customers <ul><li>Historical </li></ul><ul><ul><li>Product-centered </li></ul></ul><ul><ul><li>Expertise in features and functions </li></ul></ul><ul><li>Today </li></ul><ul><ul><li>Customer-centered </li></ul></ul><ul><ul><li>Expertise in business issues </li></ul></ul><ul><ul><li>Sales resources deployed to provide best service to best customers </li></ul></ul>Source: HR Chally Group (2007), The Chally World Class Excellence Research Report: The Route to the Summit. Dayton, OH: HR Chally Group.
  3. 3. <ul><li>Identify purposes of sales organization </li></ul><ul><li>Understand different horizontal organizational structures of a sales force. </li></ul><ul><li>Outline major issues in key account and team selling. </li></ul><ul><li>Discuss key vertical structure issues in sales organizations. </li></ul><ul><li>Identify important issues in starting a new sales force from the ground up. </li></ul>
  4. 4. Purposes of Sales Organization <ul><li>Divide and arrange activities so the firm can benefit from specialization of labor </li></ul><ul><li>Provide for stability and continuity in firm’s selling efforts </li></ul><ul><li>Provide for coordination of activities assigned to sales force and to departments in the firm </li></ul>
  5. 5. Division and Specialization of Labor <ul><li>Increase productivity - specialists can become proficient at assigned tasks </li></ul><ul><li>Divide required selling activities to gain maximum benefits within the sales force </li></ul>
  6. 6. Division and Specialization of Labor <ul><li>Line organization </li></ul><ul><ul><li>Vertical </li></ul></ul><ul><ul><li>Chain of command runs from chief sales executive down through levels of subordinates </li></ul></ul><ul><ul><li>Each subordinate responsible to one person </li></ul></ul>VP Sales Director of U.S. Sales Regional Mgr. for NE US District Mgr. for Massachusetts
  7. 7. Division and Specialization of Labor <ul><li>Line and staff organization </li></ul><ul><ul><li>Vertical (most common) </li></ul></ul><ul><ul><li>Several sales management activities assigned to separate specialists </li></ul></ul>VP Sales Director of Sales Training Director of Distributor Relations Director of Sales Promotion
  8. 8. Stability and Continuity <ul><li>Organize activities without regard to talents of current employees </li></ul><ul><li>People can be trained to fill positions </li></ul><ul><li>Same activities will be carried out even if designated individuals receive promotions or leave </li></ul>
  9. 9. Sales Organization Structure <ul><li>Horizontal – divides selling activities among sales force </li></ul><ul><li>Vertical – assigns authority for specific sales management activities </li></ul>
  10. 10. Horizontal Structure Options Outside Agents Company Sales Force Geographic Co-Marketing Product Nat’l Key Accounts Market/ Customer Type Team Selling Selling Function Selling Centers Matrix Organizations OR Telemarketing 4-
  11. 11. Outsourcing the Sales Force <ul><li>Types of agents </li></ul><ul><ul><li>Manufacturer’s representatives </li></ul></ul><ul><ul><ul><li>Sell part of the output of their principals </li></ul></ul></ul><ul><ul><ul><li>Take neither ownership nor physical possession of goods </li></ul></ul></ul><ul><ul><ul><li>Cover specific territory and specialize in limited range of complementary products </li></ul></ul></ul><ul><ul><li>Selling agents </li></ul></ul><ul><ul><ul><li>Do not take title or possession of the goods they sell </li></ul></ul></ul><ul><ul><ul><li>Compensated by commissions </li></ul></ul></ul><ul><ul><ul><li>Broad authority to modify prices and terms of sale </li></ul></ul></ul><ul><ul><ul><li>Actively shape manufacturer’s promotional and sales programs </li></ul></ul></ul>Horizontal Structure Options
  12. 12. 4.1 <ul><li>Six C’s of finding the </li></ul><ul><li>right rep </li></ul>Horizontal Structure Options Source: Dan Hanover, “Independents Day,” Sales & Marketing Management, April 2000, pp. 65–68. <ul><li>Compatible lines </li></ul><ul><li>Compatible territories </li></ul><ul><li>Compatible customers </li></ul><ul><li>Credibility of the rep </li></ul><ul><li>Capabilities </li></ul><ul><li>Credits </li></ul>
  13. 13. Outsourcing Considerations <ul><li>Economic Criteria </li></ul><ul><li>Control </li></ul><ul><li>Transactions costs </li></ul><ul><li>Strategic Flexibility </li></ul>Horizontal Structure Options
  14. 14. Geographic Organization <ul><li>Simplest and most common method </li></ul><ul><li>Individual salespeople assigned to separate geographic territories </li></ul><ul><li>Responsible for performing all activities necessary to sell all products </li></ul>Horizontal Structure Options
  15. 15. Geographic Organization <ul><li>Lowest costs </li></ul><ul><li>Travel time and expenses minimized </li></ul><ul><li>Sales administration and overhead costs kept low </li></ul><ul><li>Does not provide benefits associated with specialization of labor </li></ul>Horizontal Structure Options
  16. 16. 4.3 <ul><li>Geographic sales organization </li></ul>Horizontal Structure Options
  17. 17. Product Organization <ul><li>Salespeople master effective selling methods for single or related products </li></ul><ul><li>Closer alignment of sales and production </li></ul><ul><li>Sales management controls allocation of selling effort across the line </li></ul><ul><li>Duplication of effort </li></ul>Horizontal Structure Options Separate sales force for each product (or category) in the line
  18. 18. 4.4 <ul><li>Sales force organized by product type </li></ul>Horizontal Structure Options
  19. 19. Customer Type/Market Organization <ul><li>Better understanding of customer needs </li></ul><ul><li>Increased familiarity with certain businesses </li></ul><ul><li>Increased control over allocation of selling effort </li></ul><ul><li>Possible higher selling and administrative costs </li></ul><ul><li>Duplication of effort </li></ul>Horizontal Structure Options Natural extension of marketing concept and strategy of market segmentation
  20. 20. 4.5 <ul><li>Sales force organized by customer type </li></ul>Horizontal Structure Options
  21. 21. Selling Function Organization <ul><li>Skills matched to sales function </li></ul><ul><li>Developmental salespeople often a successful alternative </li></ul><ul><li>Customer objections to switch to maintenance salesperson </li></ul><ul><li>Feelings of rivalry between the sales force </li></ul>Horizontal Structure Options Salespeople specialize in performing different selling functions – e.g. prospecting and developing new accounts versus maintaining and servicing existing customers
  22. 22. Telemarketing <ul><li>Form of organization by selling function </li></ul><ul><li>Qualifying potential new accounts </li></ul><ul><li>Servicing existing accounts quickly </li></ul><ul><li>Seeking repeat purchases from existing accounts that cannot be covered efficiently in person </li></ul><ul><li>Providing quick communication of newsworthy developments </li></ul>Horizontal Structure Options
  23. 23. 4.2 Database Capabilities and Telemarketing Horizontal Structure Options Source: KenSpralling, “Centex Houses Ranks Highest in Customer Satisfaction in 10 major: U.S. Markets, According to Independent Study,” , September 14, 2005; Alicia Orr, “Predicting a Need,” Target Marketing, February 2001, pp. 62–64. Database Database Analysis Software Telemarketing Customized Direct Mail Collects/provides information Formulates prospecting solutions – matches homeowners against other data to qualify customers, predict interest; generates prospect universe Prequalifies prospects, can transfer to salesperson to close sale Follows-up with prospects not ready to buy, provides response vehicles (web address, toll-free #)
  24. 24. National and Key Accounts <ul><li>Separate corporate division/sales force </li></ul><ul><li>Deliver high-level customer service to attract and maintain large and important customers </li></ul><ul><li>Key account sales execs </li></ul><ul><ul><li>Business managers capable of managing key accounts </li></ul></ul><ul><ul><li>Customize products and services </li></ul></ul><ul><ul><li>Plan and implement key account business plans </li></ul></ul>Horizontal Structure Options
  25. 25. Team Selling <ul><li>Integrates functional specialists with customer relationship specialists </li></ul><ul><li>ID team structure that meets customer needs </li></ul><ul><li>Benefits </li></ul><ul><ul><li>Customer questions answered faster </li></ul></ul><ul><ul><li>Customers can speak directly with desired specialist </li></ul></ul>Horizontal Structure Options
  26. 26. Other Team Selling Structures <ul><li>Selling center brings together individuals from around the organization to help salesperson </li></ul><ul><li>Matrix organization employs direct-reporting salespeople who support internal consultants with specialized expertise </li></ul><ul><li>Multi level selling – sales team consists of personnel from various managerial levels who call on their counterparts in the buying organization </li></ul>Horizontal Structure Options
  27. 27. Co-Marketing Alliances <ul><li>Develop marketing and sales programs to sell integrated systems directly to the ultimate customer </li></ul>Horizontal Structure Options
  28. 28. Logistical Alliances and Computerized Ordering <ul><li>Customer point of view - </li></ul><ul><ul><li>Convenient </li></ul></ul><ul><ul><li>Flexible </li></ul></ul><ul><ul><li>Less time consuming </li></ul></ul><ul><li>How will computerized reorder systems change the role of the sales force? </li></ul>Horizontal Structure Options
  29. 29. Vertical Structure Issues Span of Control Managerial Levels 4-
  30. 30. Larger Span of Control <ul><li>Greater control/ responsiveness due to fewer management layers </li></ul><ul><li>Lower admin costs </li></ul><ul><li>Reduced one-to-one communication due to larger # of subordinates </li></ul><ul><li>Managements may be less effective, negating cost savings </li></ul>
  31. 31. Span of Control <ul><li>Reduce span of control when: </li></ul><ul><ul><li>Sales task is complex </li></ul></ul><ul><ul><li>Profit impact of each salesperson’s performance is high </li></ul></ul><ul><ul><li>Salespeople are well paid and professional </li></ul></ul><ul><ul><li>Also, at higher levels in the organization </li></ul></ul>
  32. 32. Managerial Decision Levels <ul><li>How much, where should the managerial authority lie? </li></ul><ul><li>Hiring, firing, evaluation </li></ul>
  33. 33. Managerial Decision Levels Importance of decision = Managerial decision level Sales force pay = Managerial decision level Complex selling tasks = Managerial decision level 4-
  34. 34. Managerial Selling Responsibilities <ul><li>Managers often active in sales to key accounts </li></ul><ul><li>Organizations value their selling skills </li></ul><ul><li>Managers value commissions, contact with marketplace </li></ul><ul><li>Drawback – some managers neglect managerial responsibilities </li></ul>
  35. 35. 4.6 4.6 Line and staff sales organization