Based on the information provided: Breakdown Approach: Forecasted Sales = $110 million Average Sales per Salesperson = $9 million Number of Salespeople = Forecasted Sales / Average Sales per Salesperson = $110 million / $9 million = 12 salespeople Workload Approach: Number of existing accounts = 41 Ideal call frequency per account = 12 calls/year Total annual calls required = 41 * 12 = 492 calls Average weekly calls per salesperson = 30 Working weeks per year = 52 - vacation weeks = 43 Average annual calls per salesperson = 43 * 30 = 1,290 Salesforce size = Total annual calls / Average annual calls per sales

1. 07/06/10 1
By :
Prof. Amit Kumar

2. 07/06/10 2
“A student pursuing management education from IILM-
Graduate School of Management, for example may find
himself or herself placed in a firm as a Sales Manager.
Our goal is to prepare the student for the exciting
challenges related to leading sales organizations in
today’s hyper-competitive global economy”.
IILM-GSM
Importance of this course
Selling & Sales Management

3. 07/06/10
IILM-GSM
Selling & Sales Management

4. 07/06/10
Contents
• Sales Organization
• Organization Design & Structure
– Line Organization
– Activity/Function-based Sales Structure
– Geographical/Territory Sales Structure
– Product-based Structure
– Customer-based/ Market Structure
– Combined/Hybrid Sales Structure
• Pros and Cons of Different Territory Structures
• Number of Sales People
• Break-even Cost Analysis
IILM-GSM
Selling & Sales Management Designing and Organizing the Sales Force

5. 07/06/10
Sales Organization
• An organization of individuals either working together
for the marketing of products and services manufactured
by an enterprise or for products that are procured by the
firm for the purpose of reselling.
• A sales organization defines duties, roles, rights, and
responsibilities of sales people engaged in selling
activities meant for the effective execution of the sales
function.
IILM-GSM
Selling & Sales Management Designing and Organizing the Sales Force

6. 07/06/10
Sales Organization
• A structural body through which the functions of
sales management are carried out
• Sales organization always makes efforts to increase
sales, thereby achieving the principle of profit
maximization, which contributes to the overall growth
of enterprise
IILM-GSM
Selling & Sales Management Designing and Organizing the Sales Force

7. 07/06/10
Factors Influencing Structure
• Product and service related factors
• Organization related factors
• Marketing mix related factors
• External factors:
- Level of competition in the market
(In case of intense competition, organization decides to
expand the size of the organization to enter into new
markets or to serve the existing customers better.)
IILM-GSM
Selling & Sales Management Designing and Organizing the Sales Force

8. 07/06/10
Factors Influencing Structure
Product and service related factors
IILM-GSM
Selling & Sales Management Designing and Organizing the Sales Force
• In case of fast moving consumer goods like soaps, oils and
toothpaste, the size of the organization is large and flat at the
lower level as it has to cater to a large customer base and
frequency demanding product markets.
• Similarly, in complex service offers, organizations are found
to be complex and are supported by a large number of sales
staff.

9. 07/06/10
Factors Influencing Structure
Organization related factors
IILM-GSM
Selling & Sales Management Designing and Organizing the Sales Force
• If the size of the enterprise is small, there will be limited
number of products and customers, and in such a case,
a simple structure may be sufficient to serve the market.
– Organizations having highly specialized products and
serving niche markets have a smaller and simpler sales
organization.

10. 07/06/10
Factors Influencing Structure
Marketing Mix related factors
IILM-GSM
Selling & Sales Management Designing and Organizing the Sales Force
• The product, price, promotion and distribution policy also
determines the structure and size of the organization.
• When organization serves a global or national market like
India, organization size will be necessarily large.
– Companies with a selective distribution strategy prefer to have
their own outlets and decide in favor of simple sales
organizations, whereas
– With an intensive distribution strategy through retail channels
have complex and large sales organizations
• Price policy, in case of low-priced goods, where the potential
demand as well as the number of customers is large, size of
the organization will be large.

11. 07/06/10
Organizational Design
IILM-GSM
Selling & Sales Management Designing and Organizing the Sales Force
Organizational design refers to:
• the formal and coordinated task of assigning territories and
• establishing flows of communication and responsibilities of
sales groups and individuals to serve customer effectively.
• The developed structure helps the salespeople in the
organization to identify their roles, responsibilities and
command in the organization.
Organizations adopt different kinds of structures
starting from the simple line organization to special
designs based on functions, geographic…

12. 07/06/10
Line Organization
- In a pure line organization, the chief executive does the decision
making and decisions flow down the line for execution.
-Many small sales firms have such a structure. These are also
called one-man show or person-centric organizations.
-As organizations grow in size, organization are designed around
functions, geographic, customer-based and a combination design.
Line organization
Mr. Ratnakar Shetty
President / Owner
Mr. Chandrakant
VP (Sales)
Five sales people
IILM-GSM
Selling & Sales Management Designing and Organizing the Sales Force

13. 07/06/10
Activity / Function-based Sales Structure
IILM-GSM
Selling & Sales Management Designing and Organizing the Sales Force
• In FSS, selling process is divided into two or more steps that
are performed by specialists.
– A company may have one salesperson open a new account.
But as soon as buyer makes the first purchase, the account is
turned over to another salesperson who manage the account.
• For firms that sell to grocery stores or retail outlets, the sales
effort might include one salesperson who establishes a
store's account, a second salespeople who manages the
store's stock and its order and resolve customer service
issues, and a third sales-support person who merchandises
the company's products by setting up in-store shelf, display
and promotional materials.

14. 07/06/10
Activity / Function-based Sales Structure
IILM-GSM
Selling & Sales Management Designing and Organizing the Sales Force
Prospecting Telemarketing/Cold Calls
Presentation Face-to-face Field Sales
Service Personal Visits
A major problem with using FSS is coordinating the
multiple salespeople that would call on a single
customer.
Activity Sales Method

15. 07/06/10
IILM-GSM
Selling & Sales Management Designing and Organizing the Sales Force
• A firm that employs a geographical sales structure depends upon
physical boundaries to organize its sales force with customer
accounts.
– Depending upon the number of accounts located within a geographic
entity, a salesperson is assigned a specified group of customers within a
state, region, a single city or a zip/postal code.
• Firms often favor this because it is relatively easy to design,
minimize duplication of efforts and ensure a specific salespeople is
assigned to each customer.
• B.W.Wilson Paper Company, which was formed in Richmond,
Virginia, slowly expanded its geographical sales territories across
the state and into North Carolina. Company salespeople sells all
paper and industrial products to commercial painters, publishers etc.
Geographical / Territory Sales Structure

16. 07/06/10
Geographical / Territory Sales Structure
VP Marketing
FMCG SALES
National Sales
Manager
West Division
Area Sales Manager
Central Division
Area Sales Manager
East Division
Area Sales Manager
IILM-GSM
Selling & Sales Management Designing and Organizing the Sales Force
-Mumbai -Delhi -Kolkata
-Surat -Jaipur -Patna
Advantages:
• Proper coverage of territory, Defining the responsibility
Disadvantage:
• Salespeople responsible for the entire product line in territory
• Within their territory, they may choose to concentrate on
products and customers that are easy prospects.

17. 07/06/10
Product-based Sales Structure
IILM-GSM
Selling & Sales Management Designing and Organizing the Sales Force
• When a firm's product lines are broad and complex, it might
be more effective to organize sales activities around a
product or division- to specialize the sales force, in other
words.
• In PSS, the firms organize its sales activities around related
product lines. GE offers consumer and commercial solutions
in the areas of automotive, aviation, energy, health-care, oil
and gas and transportation to market worldwide.
• There are also a number of limitations to product
specialization. A firm may unknowingly send two or more
salesperson to the same account, thus confusing the buyer.

18. 07/06/10
President,
Marketing
Product Manager (A)
Product Manager (B)
Manager
(Sales)
Manager
(Training)
Manager
(Promotion)
Manager
(Sales)
Manager
(Training)
Manager
(Promotion)
IILM-GSM
Selling & Sales Management Designing and Organizing the Sales Force
Product-based Sales Structure

19. 07/06/10
Product-based Sales Structure
IILM-GSM
Selling & Sales Management Designing and Organizing the Sales Force
A noteworthy example is Xerox, which at one point had three
independent sales forces that sold computers, copiers and office
equipment. Xerox became aware, based on customer feedback,
that its sales representatives from the different forces:
– called upon same accounts;
– had little knowledge of each other's products
– confused buyers who had a genuine need for the company's
products, and
– did not cooperate by providing leads and information to one
another.
To fix this problem, Xerox assigned a single salesperson
to sell all three product lines to accounts. As a result,
customer service levels and total sales increased.

20. 07/06/10
IILM-GSM
Selling & Sales Management Designing and Organizing the Sales Force
• Firms that utilize a MSS assign representatives to customers
based upon their markets- automotive, telecommunications,
military, computer. By employing a MSS, the firm is able to
apply the marketing concept.
• Applying MSS appears to be an effective strategy when a
seller wants to penetrate a new market.
For example, over the past decade pharmaceutical
manufacturer like Pfizer have added a large number of
salespersons to sell to physicians, hospitals and health-
care providers.
Customer-based / Market Structure

21. 07/06/10
Customer-based / Market Structure
President
(Marketing)
Sales Manager
Wholesalers
Sales Manager
Retail Sales
Sales People
Sales Manager
Health Care Product
Vice President
(Marketing)
Sales People Sales People
IILM-GSM
Selling & Sales Management Designing and Organizing the Sales Force

22. 07/06/10
Combination / Hybrid Sales Structure
IILM-GSM
Selling & Sales Management Designing and Organizing the Sales Force
• A firm utilizes a CSS when its sales force is organized based
on a mixture of product, market, and geographical factors.
CSS work best when the market is large, the product mix is
complex and customers require different applications.
An example is a salesperson for Lenovo. Lenovo sells
sales force CRM system to automotive parts
manufacturer in Midwest. But, CSS is expensive and
can result in duplicate sales efforts.

23. 07/06/10
Functional
Geographic
Customer
Combined
Sales Org. Design
President
Marketing Manager
International
G.M
International Sales
Marketing Manager
India
Vice President
(Marketing)
G.M
Consumer care
G.M
International Sales
Vice President
(HRD)
Vice President
(Production)
Divisional Manager
Soaps
Divisional Manager
Food
Divisional Manager
Paper
Eastern Sales
Division
Western Sales
Division
Northern Sales
Division
Europe Division America Division Gulf Division
Product
IILM-GSM
Selling & Sales Management Designing and Organizing the Sales Force

24. 07/06/10
Pros & Cons of Different Territory Structures
IILM-GSM
Selling & Sales Management Designing and Organizing the Sales Force
PROS CONS
Geographical
(Generalized approach)
Simplicity, Efficiency,
No Duplication
Unbalanced Territories,
Coordination Issues
Product ( Specialist
approach)
Better Rep Product
Knowledge, Better
Application Knowledge
Duplicate Sales Efforts
Market ( Specialist
approach)
Better Customer/
Market/ Product Application
knowledge
Duplicate Sales Effort,
More Complex to work
with Product Managers
Functional ( Specialist
approach)
Job Expertise Achieved by
Representatives
Coordination Issues
Combination
(specialist approach)
Better customer and Market
Knowledge
Economic of Scale Issue,
More complex to Manage,
Duplicate Sales Efforts

25. 07/06/10
Number of Sales People
(The Size of the Sales Force)
IILM-GSM
Selling & Sales Management Designing and Organizing the Sales Force
• When firms design their sales organization, a major
decision is how many salespersons are needed to
serve existing and potential customers.
• Sales managers utilize two methods for computing the
number of salespersons they should hire and maintain:
1. Breakdown Method
2. Workload Method

26. 07/06/10
Number of Sales People
1. The Breakdown approach
This method is relatively simple to compute.
Sales Managers need only divide the forecasted sales
revenue by the average sales per salesperson. e.g.
Forecasted Sales
No of Sales People =
Average Sales per Salesperson
IILM-GSM
Selling & Sales Management Designing and Organizing the Sales Force

27. 07/06/10
Number of Sales People
2. The workload approach
The workload approach allowed the number of salespeople
needed to be calculated, given that the company knows the
number of calls per year it wishes its salespeople to make
on different classes of customer.
IILM-GSM
Selling & Sales Management Designing and Organizing the Sales Force

28. 07/06/10
Number of Sales People
2. The workload approach
Series of Steps:
1. Customers are grouped into categories according to the value of goods
bough and potential for the future.
2. The call frequency (number of calls on an account per year) is assessed for
each category of the customer.
3. The total required workload per year is calculated by multiplying the call
frequency and number of customers in each category and then summing for
all categories.
4. The average numbers of calls per week per salesperson is estimated.
5. The number of working weeks per year is calculated.
6. The average number of calls a salesperson can make per year is being
calculated.
7. Finally the number of salespeople required is determined by dividing the total
annual calls required by the average number of calls one salesperson can
make per year.
IILM-GSM
Selling & Sales Management Designing and Organizing the Sales Force

29. 07/06/10
Number of Sales People
2. The workload approach
IILM-GSM
Selling & Sales Management Designing and Organizing the Sales Force
Number of sales people =
(Number of
customers)
(Ideal frequency of
calls)
X
(Average
weekly call
rate)
(Number of
working weeks per
year)
X

30. 07/06/10
Number of Sales People
The workload approach
Customer Group No of Firms Call Frequency Total
per year
A ( Over $ 1 Million per Year) 200 12 2400
B ( Over $ .5 to 1 M per year) 1000 9 9000
C (.3 M to .5 M per year) 3000 6 18000
D ( Less than .3 M per year) 6000 3 18000
Step (1), (2), (3) are summarized above.
IILM-GSM
Selling & Sales Management Designing and Organizing the Sales Force
Total Annual Workload 47,400

31. 07/06/10
Number of Sales People
The workload approach
Customer Group No of Firms Call Frequency Total
per year
A ( Over $ 1 Million per Year) 200 12 2400
B ( Over $ .5 to 1 M per year) 1000 9 9000
C (.3 M to .5 M per year) 3000 6 18000
D ( Less than .3 M per year) 6000 3 18000
Step (4) gives: Average number of call per week per salesperson = 30
Step (5)...No of working weeks = 52-9 = 43
Step (6) Average number of calls per salesperson per year = 43* 30 = 1290
Step (7) gives,
IILM-GSM
Selling & Sales Management Designing and Organizing the Sales Force
Sales Force Size = 47,400/1290 = 37 Salespeople

32. 07/06/10
Number of Sales People
Adjust for other workload
Now, suppose 15 % to call upon new accounts and 10 % for
customer service duties = 25 percent
Hence, 49 salespersons needed to service existing
accounts, call on new accounts, and provide
customer service.
IILM-GSM
Selling & Sales Management Designing and Organizing the Sales Force
Sales Force Size = (37) / (.75) = 49 Salespeople

33. 07/06/10
Question: Number of Sales People
Using the following information, perform a
breakdown and workload computation to predict
how many salespersons XYZ Inc. will need to
service their customers.
IILM-GSM
Selling & Sales Management Designing and Organizing the Sales Force

34. 07/06/10
Question: Number of Sales People
Forecasted sales for next year $110 million and an
average
salesperson sells $9 million annually.
Also, XYZ sales manager has categorized existing
accounts into 41 “A”, 105 “B”, and 225 “C” customers. “A”
customers are visited weekly, “B” accounts monthly, and
“C” accounts every other month. Salespersons are
required to make four calls per day and be in the field four
days per week. Because of vacation and holidays, each
salesperson works 48 weeks a year. In addition to calling
upon existing accounts, salespersons are assigned a quota
of calling upon 10 percent new accounts and devoting 5
percent of their time to information gathering duties.
IILM-GSM
Selling & Sales Management Designing and Organizing the Sales Force

35. 07/06/10
Company Salespeople or Sales Agent?
Case Study : Salespeople or Sales Agent
Consider the following situation:
Delhi –based branded furniture manufacturer
wants to sell its furniture in southern markets.
The manufacturer has to decide between two
alternatives.
IILM-GSM
Selling & Sales Management Designing and Organizing the Sales Force

36. 07/06/10
Evaluating the Major Alternatives
Case Study : Salespeople or Sales Agent
1. Hiring 10 news sales representatives who will
operate from offices in Bangalore, Chennai and
Hyderabad. They would receive a base salary plus
commissions. Also, the company has to meet the
expenses for setting up their office-cum-residence.
2. Using a Bangalore-based industrial distributor
dealing in furniture with offices in Chennai, and
Hyderabad. The distributor has 30 sales
representatives (agents), who would receive
commissions based on their sales.
IILM-GSM
Selling & Sales Management Designing and Organizing the Sales Force

37. 07/06/10
Evaluating the Major Alternatives
Case Study : Salespeople or Sales Agent
1. Hiring 10 New Company Sales Force
2. Using a Bangalore-based Sales Agents/Agency.
First step is to determine whether a company sales
force or a sales agents will produce more sales.
The next step is to estimate the costs of selling
different volumes through each channel.
IILM-GSM
Selling & Sales Management Designing and Organizing the Sales Force

38. 07/06/10
Break-even Cost analysis
IILM-GSM
Selling & Sales Management Designing and Organizing the Sales Force
(Break-Even Chart)
Total Revenue
Total Cost
Fixed Cost
Target profit
Break-even point
Sales Volume in Units (thousands)
TotalCost
Rupees(inthousand)
10 20 30 40 50
200
400
600
800
1000
Rs. 20 – Rs. 10
Rs. 300,000 = 30,000Break-even volume =
loss

39. 07/06/10
Break-even Analysis: Company Sales Force or
Manufacturer’s Sales Agency
There is a sales level at which selling costs are the same for the
two channels. The sales agency is thus better channel for any sales
volume below , and the company sales branch is better at any
volume above .
IILM-GSM
Selling & Sales Management Designing and Organizing the Sales Force
Total Sales Cost: Sales Agents/Agency
Total Sales Cost: Company
Sales Force
Fixed Cost
Target profit
Break-even point
loss
Sales Volume (Level)
SalesCosts

40. 07/06/10
Break-even Analysis: Company Sales Force or
Manufacturer’s Sales Agency
Sales
Costs
Sales Agency/Agents
Company Sales Force
Level of Sales
Breakeven
CONCLUSION : Sales agents tend to be used by smaller
firm, or by the large firms in small territories where volume is low.
IILM-GSM
Selling & Sales Management Designing and Organizing the Sales Force

41. 07/06/10
Break-even Analysis
IILM-GSM
Selling & Sales Management Designing and Organizing the Sales Force
Some Examples:
• Using agents to sell services like advertising is logical
because nearly anyone can advertise. However, sales
agents are not practical in all sales situations. For
example, pharmaceutical companies use in –house sales
forces because of ethical and accountability issues.
• Insurance companies have found that independent sales
reps are less expensive than hiring new.
• Company outsource their telemarketing function to
independent telemarketing companies that have call
center and telemarketing expertise.