2. Sales Organization Structure
• Functions of sales organization are:
1. Planning Functions
a) Sales Forecasting
b) Sales Budgeting
c) Selling Policy
3. SETTING UP SALES ORGANIZATION
• Defining the objectives
• Delineating the necessary activities.
• Grouping activities into “jobs” or “positions”.
• Assigning personnel to positions
• Providing for coordination and control.
4. Sales Organization Structure
2) Administrative Functions
a) Selection of salesmen (ads, employment agencies, educational
institutions, internal transfers, recommendations)
b) Training of Salesmen (role playing, simulations, interactions)
c) Control of Salesmen
d) Remuneration of Salesmen (salary plus commission, bonus etc)
3) Executive Functions
a) Sales Promotion (incentives, coupons, free samples, contests, refunds,
point of purchase material)
5. ROLE OF SALES ORGANIZATION
Overall Objectives
1. Total volume of products
2. Total annual value of products
3. Total annual selling costs
4. Total annual profit contribution
Breakup or Division
1. Quarter, month and week
2. Product line and range
3. Region and sales area
4. Type of customer
6. ROLE OF SALES ORGANIZATION
Sales organization has the following basic purposes:
1. Define the line of authority
2. Ensure that all necessary activities are assigned and
performed.
3. Establish lines of communication
4. Provide for coordination and balance.
5. Provide insights into avenues of advancement.
6. Economics of executive time.
7. DEVELOPING A SALES ORGANIZATION
• Formal and Informal organizations
• Horizontal and vertical organizations
• Centralized and decentralized organizations
• The line and staff components of organization
• The size of the company
24. Sales Force Size
• Methods to determine sales force size are:
- Breakdown Method/Sales potential method
- Workload Method
- Incremental Method
25. Breakdown Method/sales potential method
• Simplest method.
• Each member of corporate sales team is assumed to possess
same level of productivity.
• To determine the size of the sales force needed, the total
sales figure forecasted for the company is divided by the
sales likely to be generated by each individual.
• Fails to account for differences in the ability of salespeople
and the difference in potential of each market or territory.
• It treats the sales force as a function of the sales volume, and
does not take profitability into account.
26. Workload Method
• Also known as buildup method.
• Total workload (i.e no. of hrs required to serve the entire market) is
estimated.
• This is divided by the selling time available per person to the size of
the salesforce.
• Commonly used as it is easy to understand and recognize the effort
required to serve different categories of customers.
• Shortcomings: assumes all accounts in the same category require
the same effort.
• Other differentiating factors such as cost of servicing, gross margins
are not considered after the accounts are categorized.
• It also assumes that salespersons are equally efficient, which is not
true.
27. Incremental Method
• Compare the marginal profit contribution with the
incremental cost for each sales person.
• Optimal sales force size is when the marginal profit becomes
equal to the marginal cost and the total profit is maximized.
• Beyond the optimal sales force size, the profit reduces on
addition of an extra sales person.
• Therefore, the sales people need to be added as long as the
incremental profit exceeds the incremental cost of adding
sales people.
• Shortcoming: difficult to estimate the additional profit
generated by the addition of one salesperson and is therefore
difficult to develop.
28. Preparing Job Description and Specification
• Sales manager should prepare job description before
recruiting the sales force.
• Job description includes-
-title of the job, duties and responsibilities, reporting methods,
technical requirements, territory to be covered, degree of
autonomy.
• JD will act as the blueprint for personal specifications which
describe the type of applicant the company is looking for.
29. Recruitment Sources
• Advertisements (Newspapers, magazines, trade journals)
• Own staff (internal transfers, promotion)
• Recruitment agencies
• Educational institutes
• Competitors and other industries
31. SALES FORCE TRAINING
• Basic purpose of providing training?
• Build sales training programmes
• Identifying initial training needs (job specifications, trainee’s
background and experience, sales-related marketing policies)
• Training on marketplace
• Training on competitors
• Training in handling the competition (creating new needs, creating
product differentiation, waiting for the right opportunity, preparing
onself)
• Training on communication
• Training on negotiating
• Training methods (lectures, conferences, demonstrations, role
playing, gaming , on the job methods)
32. Defining Training Aims
• Identifying Initial Training Needs
- Job specifications
- Trainee’s background and experience
- Sales related marketing policies
• Identifying Continuing Training Needs
34. Selecting Training Methods
• The lecture
• Demonstrations
• Role playing
• Case discussion
• Impromptu discussion
• Gaming
• On the job training
• Online courses
35. Executing the training program
• The execution step requires four key organizational decisions:
(1) Who will be the trainees? (2) Who will do the training?
(sales training staff, training the sales trainers, outside
experts)
(3) When will the training take place? (timing group vs
individual training, timing initial sales training program, timing
continuing sales training programs) (4) Where will the training
site be?
36. Evaluation of training programs
• Measuring program effectiveness
• Written tests (on before and after training basis)
• In progress and upon completion
37. Motivating Sales Personnel
• Motivation is goal-directed behavior, underlying which are certain needs or
desires.
• Specifically, as applied to sales personnel, motivation is the amount of
effort the salesperson desires to expend on the activities associated with the
sales job, such as calling on potential accounts, planning sales
presentations, and filling out reports.
• Expending effort on each activity making up the sales job leads to some
level of achievement on one or more dimensions of job performance—total
sales volume, profitability, sales to new accounts, quota attainment, and the
like.
38. Why provide motivation to sales personnel?
• Inherent nature of sales job
• Salesperson boundary position and role conflicts
• Tendency towards apathy
• Maintaining a feeling of group identity
Motivation Hygiene theory (Herzberg theory), Maslow theory, Vroom theory,
39.
40.
41. Compensating Sales Personnel
• DEVISING A SALES COMPENSATION PLAN
- Define the sales job
- Consider the company’s general compensation structure
- Consider compensation patterns in industry
- Determine the compensation level
- Provide for various compensation elements
- Special company needs and problems
- Consult the present sales force
- Reduce the tentative plan to writing and pretest it
- Revise the plan
- Implement the plan and provide for follow up
42. Types of Compensation Plans
• Straight Salary Plan
• Straight Commission Plan (according to
productivity)
• Combination of salary and commission plan
43. Straight Salary Plan
• Salespersons receive fixed sums at regular intervals (usually each week or
month but sometimes every two weeks), representing total payments for
their services.
• It is the logical compensation plan when the selling job requires extensive
missionary or educational work, when salespeople service the product or
give technical and engineering advice to prospects or users, or when
salespeople do considerable sales promotion work.
• Advantages: It provides strong financial control over sales personnel, and
management can direct their activities along the most productive lines.
• stability of income
• Staff is cooperate
Disadvantages: do an average work only
problem in maintaining morale
Issue of under compensating productive people and overcompensating
inefficient people
44. Straight Commission Plan
• Individual sales personnel should be paid according to productivity.
• sales volume is the best productivity measure and can, therefore, be
used as the sole measure. This is a questionable assumption.
• Advantages: provides maximum direct monetary incentive for the
salesperson to strive for high-level volume. The star salesperson is paid
more than he or she would be under most salary plans, and low
producers are not likely to be over compensated.
• Means of cost control, great flexibility
• Weakness: little financial control over salespeople’s activities
• sales personnel push the easiest-to-sell low- margin items and neglect
harder-to-sell high-margin items
• salespersons’ efficiency may decline because of income uncertainties.
45. Combination salary and incentive plan
(salary plus commission)
• Two basic plans, management seeks both control and
motivation.
• Strength: security of stable incomes and the stimulus of
direct financial incentive.
• greater flexibility for adjustment to changing conditions
exists.
• Disadvantages: Clerical costs are higher than for either a
salary or a commission system.
• More records are maintained and in greater detail.
46. Use of BONUSES
• a bonus is an amount paid for accomplishing a specific sales
task; a commission varies in amount with sales volume or
other commission base.
• Bonuses are paid for reaching a sales quota, performing
promotional activities, obtaining new accounts, following
up leads, setting up displays, or carrying out other assigned
tasks.
• is an additional financial reward to the salesperson for
achieving results beyond a predetermined minimum.
47. Fringe Benefits
• Fringe benefits, which do not bear direct relationships to
job performance, range from 25 to 40 percent of the
total sales compensation package.
• Fringe benefits, like monetary compensation, are not
motivating factors.
• An increasing number of companies offer a “cafeteria”
approach to fringe benefits.
• In the Maslow hierarchy, fringe benefits contribute to
fulfillment of safety and security needs, although some
(such as payment of country club dues) contribute to
fulfillment of esteem and other higher- order needs.
48. Sales Quotas
• Sales quotas are sales goals (or performance standards)
set by a company for its marketing units for a certain
period of time.
• The marketing unit includes a sales region, a sales
territory, a branch office, a salesperson, a distributor or a
dealer.
• Sales quotas (also called quotas) can be set on sales
volume (rupees or dollar sales, and unit volume), selling
expense, profit margin, selling and non-selling activities,
customer satisfaction or some combination.
49. • Sales quotas are developed from the annual marketing
plan of the company.
• After preparing the sales forecast, the company
decides its annual sales budget, which includes the
company's goals for sales volume and selling expenses.
• The company sales budget is then broken down to
sales quotas for regions, branches and sales territories.
• Each branch or area sales manager decides for his
territory's quota for the salesperson, distributors and
dealers, who are attached to the territory.
50. Importance/Purpose of Sales Quotas
• Providing performance standards
• Controlling performance
• Motivating people
• Identifying strengths and weaknesses
51. Types of Quotas
• Sales Volume Quotas
- Rupees/dollars sales volume
- Unit sales volume
- Point sales volume
• Gross margin or profit contribution quotas
• Expense quotas
• Activity quotas
• Combination quotas
52. Methods for determining sales volume quotas
Quotas are based on:
(i) territorial sales potential
(ii) past sales experience
(iii) total market estimates
(iv) executive judgment
(v) salespeople's estimates
(vi) compensation plan.
53. Administration of sales quotas
(i) set realistic quotas,
(ii) understand problems in setting quotas
(iii) ensure salespeople understand quotas,
(iv) know marketing environment and
(v) make sure flexibility in administration.
54. Sales Contests
• A sales contest is a special selling campaign offering incentives in
the form of prizes or awards beyond those in the compensation
plan.
• Extra incentive to increase sales volume, to bring in more
profitable sales volume, or to do both.
• In line with Herzberg’s motivation-hygiene theory, sales contests
aim to fulfill individual needs for achievement and recognition—
both motivational factors.
• In terms of Maslow’s hierarchy of needs, sales contests aim to
fulfill individual needs for esteem and self-actualization— both
higher-order needs.
55. Specific objectives for conducting sales contests
• 1. To obtain new customers.
• 2. To secure larger orders per sales call.
• 3. To push slow-moving items, high-margin goods, or new products.
• 4. To overcome a seasonal sales slump.
• 5. To sell a more profitable mix of products.
• 6. To improve the performance of distributors’ sales personnel.
• 7. To promote seasonal merchandise.
• 8. To obtain more product displays by dealers.
• 9. To get reorders.
• 10. To promote special deals to distributors, dealers, or both.
56. Contests formats
• Direct or novelty
• A direct format has a contest theme
describing the specific objective, such as
obtaining new accounts. (Let’s go after new customers)
• A novelty format uses a theme which focuses
upon a current event, sport (find new customers, sell
more profitable orders)
57. • Contest prizes: Cash, merchandise, travel and
special honors or privileges
• Contest duration: week, year, mostly one to
four months
• Contest promotion
58. Managerial evaluation of contests
• Short and long term effects
• Contests vs alternatives
• Design
• Fairness
• Impact upon sales force personnel
59. Objections to sales contests
• Sales people paid under compensation plan, no
reason to reward further.
• High-caliber and more experienced sales personnel
consider sales contests juvenile and silly.
• Results in unanticipated and undesirable results
• Disappointment suffered by contest losers causes a
decline in sales force morale.
• Weakens team spirit.
• Temporary motivating devices, if used too frequently
may have a narcotic effect.
60. Evaluation of sales performance/ Monitoring and
performance appraisal
• Principles of sales evaluation
- pragmatic (practically possible parameters rather than pre decided goals)
- Transparent
- Realistic
- Positive
- Informative
- Participative
- Objective
- Flexible
- Specific
- Cost effective
- It should be a means and not an end
61. Evaluating performance standards
• Quantitative criterion
- Quotas
- Selling expense ratio
- Gross margin ratio
- Territorial market share
- Sales coverage effectiveness index
- Call frequency ratio
- Calls per days
- Order call ratio
- Average cost per call
- Average order size
- Non selling activities
• Qualitative standards
62. Field sales reports
• Sales planning
• Data for evaluation
• Records
• Market information
• Barometer of market/economic conditions
• Help organic logistics
