The document discusses sales force design and management. It covers 4 topics: 1) determining the optimal size of the sales force, 2) allocating sales teams according to customer segments, 3) compensation systems that are either outcome-based with variable pay or behavior-based with fixed pay, and 4) soft motivational techniques for the sales force. The document provides models and considerations for analyzing each of these factors to effectively design and manage a sales force.

1. Sales Force Design and Management
B2B Marketing
Spring 2013
HKUST
Professor Yi XIANG

2. 2
Topic Today
Place
Price
Product
Promotion
Firm
Competitive
advantage
Company report &
market research
Strategic decision
& information
Industrial branding
Key account management
Sales force management
New products
Competitive pricing

3. 3
Content
! 1. Size of the sales force
! 2. Allocation of the sales force
! 3. Compensation of the sales force
! 4. ‘Soft’ motivation of the sales force

4. 4
1. Size of the sales force
! The S-shaped response curve:
! Dynamics of the sales response curve:
What does the sales force do?
! Estimation of the sales response curve:
– Experimentation
– Historical Data Analysis
– Delphi
s x s s s
x
b x
a
a( ) ( )= + −
+∞0 0

5. 5
2. Allocation of the sales force
! Sales teams
– Salesperson - Account representative
– Engineer - Systems Engineer
– Service and Support
– Administrator
! Specialized sales teams
– by industry
– by geography
– by transaction type (e.g. open bid, re-buy, RFP)

6. 6
Sales force allocation
! Allocate Sales teams by macro-segments (i.e according to
specialization)
! Allocate Team members by micro-segments (i.e. according to
decision makers in the DMU)

7. 7
3. Sales force compensation
! Approach 1: To what extent should the sales force be part of the
firm
! Approach 2: How should the “contract” be designed for the
sales-people (agents)

8. 8
Two extreme types of
compensation systems
! Outcome Based:
Performance evaluated on a
few observable results (e.g.
sales)
! Mostly variable
compensation (commission,
bonus)
! Sales-person bears the risk
of low sales
! Behavior based:
Performance evaluated on
observed behavior set by
management
! Mostly fixed compensation
(salary)
! Company bears the risk of
low sales

9. 9
Types of systems (cont.)
Outcome based
! Little control (contact,
authority) of management
! Decentralized
! Informal
! “Ad-hoc”
Behavior based
! High level of management
control
! Centralized
! Formal
! Structured (well-defined
processes)

10. 10
Summary on compensation systems
! Each system has its advantages and drawbacks (avoid
management fads)
! An optimal system is probably a mixed system
! The system has to be consistent
– Don’t send conflicting signals to salespeople
– Don’t ask actions that you cannot get/observe
– Avoid having conflict between management and salespeople