Semester 2 Lecture 7 PDF

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Semester 2 Lecture 7...

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Designing and Organising the Sales Force Structure - Size of the sales force - Profile of Sales Reps - Types of Sales Force Structure - Use of Sales Agents Goals affect the Design of Sales Force - Best way to design a sales structure is to  Determine sales activities that must be performed  Structure that affords highest levels of service to buyers at lower overall cost  Select, train and manage reps and manager to become experts in their assigned duties -

Consider sales objectives and what we’re trying to achieve in sales strategy e.g. a high number of sales, a high market share. We may need a big team to sell the product to reach as many customers as possible. The size and structure of the team will also depend on our approach to selling and the lifetime value of our customers. If we’re targeting customers with high future potential we may need to consider this in our operations that we will need people to find the customers and people to follow up and build the relationship with customers. The structure of our sales force depends on what we’re trying to achieve and what is going to be the best way to do this. So we need to know what type of activities we should implement e.g. visit

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customers at premises, send emails, call them as these methods are different in terms of timing and communication value. The second thing we should consider is cost in combination with the service we

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should provide. How can we provide the best service with the lowest possible cost? What kind of training and support do we have to provide to sales reps? E.g. do we need to train sales reps on the product, do we need to provide training on the selling process?

The Size of the Sales Force - Breakdown method

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How many sales are we trying to achieve Simplistic approach Workload method  Compute total sales call workload  Determine amount of work performed by each rep

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 Factor in additional work responsibilities Estimate how many activities can each sales rep implement within a particular day.

Geographical, Product and Market Structures - Geographical Sales Structures: Targeting a particular market e.g. trying to sell products in the UK and can design the force so they’re based in different areas e.g. -

team in Scotland, team in north west, team in north east Product Sales Structure: Team is structured around the product e.g. we have a company that sells different products e.g. laptops, and bottles of water. We will design a team that will focus on the water sales, a team to sell the laptops. If our company has a range of products or services we may have to design our teams accordingly which will specialize on the product and sell to the different customers. In this case its more likely our sales force will specialists on the individual products.

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Market Sales Structure: – design team based on market we are targeting e.g. offering a product/service targeting universities or football clubs or student accommodation in the area. We will have a team that focuses on universities, a team that focuses on football clubs and a team for universities as these staff will understand the specific customer needs and will be able to provide customized solutions. More appropriate for consultative sales approach.

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In most cases we have combinations of these approaches e.g. combine the product and geographical approach.

Geographical Sales Structure Pros: - Relatively easy to design - Minimises duplication of effort - Ensures a specific salesperson is assigned to each customer

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Sales calls more efficiently scheduled Territory can be divided or combined to respond to market conditions

Cons: - Work best when product line is simple - Geographical reps won’t have specialist info Market-Based Structure Pros: - Effective to penetrate a new market - Allocation of sales efforts to specific industries can very by adding to or reducing the number of salespersons slotted in one area - Offer specialised training and sales approaches and applications by industry Cons: - Selling expenses are higher than for geographical-based structure - Multiple reps calling on same client  Buyer confusion Functional Sales Structures - Selling process divided into two or more steps performed by specialists  Establish account  Manage inventory and orders  Merchandising Cons:  Coordinating multiple specialists  Ensuring smooth transition from account establishment to management Combination Sales Structures - Sales force organised 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

Specialists vs Generalists - Generalist force: sells the firm’s entire product line to a group of customers - Specialist force: specialises in one product or product line Should you specialise your sales force? - Sales specialisation improves performance - However:  Expensive  Difficult to manage – specialists will usually have their own opinion about how the product should be sold. They may not be open to receiving managerial orders. They’re more expensive as specialists need to be paid more.  Changing sales assignments are challenging – they have a specific specialisation so if we ask them to do something different they struggle Common Form of Sales Specialisation - 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  Maximise industry-specific application knowledge - Purchasing status  ‘Hunters’ go after new, while ‘farmers’ service existing customers Key Accounts

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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

Key Account Structures Use existing force - Sales force structure is simplified - All accounts are managed under a single organisational structure Cons:  Reps may take short-term view  Reps may not understand broader, overall needs of key accounts Create Separate - Create separate sales structures to serve most important customers - Integrates marketing and sales for key accounts under one organisational structure Cons:  Establishing distinct sales channels for major accounts is more costly  Duplication of effort  Financial viability if key accounts lost Reporting Relationships: Sales Force Reporting Structure Line Organisation 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 o To make quicker decisions, sales organisation must be flattened Line and Staff Structure  Using a line structure for core sales functions and placing support activities (sales training, customer service) into centres 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 o Customised customer solutions result in narrower spans of control (fewer employees reporting to sales manager)

o Line organisation of the sales team leads to broader span of control (larger numbers of employees reporting to sales manager) Adding Independent Sales Reps to the Sales Strucutre - Clients - Commission - Ownership - Inventory - Sales Use of Sales Agents  Common to use sales agents when entering new territories with low or unknown sales volumes  Advantages: o An ‘in-place’ or existing sales force o Established buyer relationships o Little (or no) fixed costs o Experienced sales personnel o Lower costs per sales call o Long-term stability in the territory  Tendency to take credit for positive sales outcomes and assign blame for negative outcomes  Disadvantages: o Seller may not receive equal time for their products o Agents blamed for shifting sales call focus to another product line when buyer’s need is not easily identified o Agents criticised for not opening new accounts, not following up on leads, representing too many manufacturers, and communicating poorly with the firms they represent Sources of Conflict between firm and selling agent

Company Salesperson or Sales Agent? - Salesperson  When it’s important to control sales effort, product or related technology is new, buyers need higher level of service  Company exerts greater control over sales force efforts  Greater control over who is hired - Sales agent  When potential sales revenue is low in a territory  When revenue will take years to become substantial  When it’s not feasible for company sales force to cover entire market

•Tanner, J. F., Honeycutt, E. D., Erffmeyer, R. C. (2013). Sales Management. Harlow: Pearson. •Chapter 7...