part four: designing and developing the sales force copyright © 2009 pearson education, inc....
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Part Four: Designing and Developing the Sales Force
Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall.7-1
Sales Management: Shaping Future Sales Leaders
Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall.7-2Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall.
Designing and Organizing the Sales Force
Chapter 7
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Learning Objectives
Explain how a firm’s goals affect the organization of its sales force
Understand that a sales force can be organized in multiple ways that match the way customers want to buy
Explain the advantages and disadvantages of different sales force organizational structures
Describe the various reporting relationships sales forces typically have
Understand the advantages and disadvantages of outsourcing a firm’s sales force
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How a Firm’s Goals Affect the Design of Its Sales Force
Organization of sales force is driven by strategic goals
Organizational sales structures serve a number of purposes that include Serving buyers effectively in ways they want to be served Operating efficiently as measured by cost and customer
satisfaction
Best way to design a sales structure is to Determine sales activities that must be performed to reach
goals Create sales structure that affords highest levels of service to
buyers at lowest overall cost Select, train and manage reps and managers to become
experts in their assigned duties
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Areas Impacted by a Firm’s Sales Force Structure
Sales Management: Shaping Future Sales Leaders
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Organizing the Members of the Firm’s Sales Force
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The Size of the Sales Force
Breakdown method Divide forecasted sales revenue by average sales dollars per
salesperson
Workload method1.Compute total sales call workload2.Determine amount of work performed by each rep3.Factor in additional work responsibilities
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Workload Method
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Specialists vs. Generalists
Generalist force: sells the firm’s entire product line to a group of customers that use the product(s) similarly Karl Strauss Brewing Company of San Diego
Specialist force: specializes in one product or product line Computer manufacturers organize forces by consumer, B2B,
education markets because each market purchases and utilizes products differently
Specialized sales structure offers expertise advantages over generalist sales force Coordinated to address buyers’ needs Integrated with other organizational functions
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Geographical, Product, and Market Structures
MarketSales Structure
Reps assigned to customers based on markets or how product is sold
Reps learn more about customer’s specific business needs and offers customized solutions
ProductSales Structure
Sales activities organized around related product lines or manufacturing divisions
Interacts with buyers as specialists
GeographicalSales Structure
Depends on physical boundaries to organize sales force with customer accounts
Interacts with buyers as generalists
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Geographical, Product, and Market Structures
MarketSales Structure
Reps assigned to customers based on markets or how product is sold
Reps learn more about customer’s specific business needs and offers customized solutions
ProductSales Structure
Sales activities organized around related product lines or manufacturing divisions
Interacts with buyers as specialists
GeographicalSales Structure
Depends on physical boundaries to organize sales force with customer accounts
Interacts with buyers as generalists
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Geographical Sales Structure
PROs
Relatively easy to design
Minimizes duplication of effort
Ensures a specific salesperson is assigned to each customer
Sales calls more efficiently scheduled
Territory can be divided or combined to respond to market conditions
CONs
Work best when product line is simple
Can be inefficient
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Geographic-Based Structure
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Geographical, Product, and Market Structures
MarketSales Structure
Reps assigned to customers based on markets or how product is sold
Reps learn more about customer’s specific business needs and offers customized solutions
ProductSales Structure
Sales activities organized around related product lines or manufacturing divisions
Interacts with buyers as specialists
GeographicalSales Structure
Depends on physical boundaries to organize sales force with customer accounts
Interacts with buyers as generalists
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Product Sales Structure
Limitation: can be confusing for buyer
Example: Xerox has 3 separate sales forces1. Called on same accounts2. Had little knowledge of each other’s products3. Confused buyers who had genuine need for Xerox
products4. Did not cooperate by providing leads and info to each
another Sales rose with combined force, but rep turnover
increased Some reps not interested in or able to learn and sell three
separate product lines
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Product-Based Structure
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Geographical, Product, and Market Structures
MarketSales Structure
Reps assigned to customers based on markets or how product is sold
Reps learn more about customer’s specific business needs and offers customized solutions
ProductSales Structure
Sales activities organized around related product lines or manufacturing divisions
Interacts with buyers as specialists
GeographicalSales Structure
Depends on physical boundaries to organize sales force with customer accounts
Interacts with buyers as generalists
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Market-Based Structure
PROs
Effective strategy when a seller wants to penetrate a new market
Allows selling firm to vary allocation of sales efforts to specific industries by adding to or reducing the number of salespersons slotted in one area to another
Permits firm to offer specialized training and develop individualized sales approaches and applications by industry
CONs
Selling expenses are higher than for geographic-based structure
Multiple reps calling on same client
Buyer confusion
Duplication of effort
Higher expenses
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Market-Based Structure
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Functional and Combination Sales Structures
Functional
Selling process divided into two or more steps performed by specialists
Example: grocery
Establish account
Manage inventory & orders
Merchandising
CONs
Coordinating multiple specialists
Ensuring smooth transition from account establishment to management
Combination
Sales force organized 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
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Pros and Cons of Various Structures
Should You Specialize Your Sales Force?
Sales specialization improves performance
However: Specialization is expensive Must produce results that are greater than investment
Sales specialization is more difficult to manage Requires greater oversight to align with firm’s strategy
Changing sales assignments are challenging: Must modify job content and account assignments This requires substantial planning and investment
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Common Forms of Sales Specialization
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 SPs maximize industry-specific application knowledge
Purchasing status “Hunters” go after new, while “farmers” serve existing
customers
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Based on: David J. Cichelli, “Specialize Your Sales Force,” Sales & Marketing Management, September/October 2008, 15.
S o u th A tlan tic O ce an S o u th P ac if ic O cean
N o rth P ac ific O cean
N o rth A tlan tic O ce an
In d ia n O c ean
A rc tic O ce an A rc tic O ce an A rc tic O ce an
N o rth P ac ific O cean
U n ited S ta te s o f A m erica
U .S .A .
C an a d a
M e x ic o
B raz il
U . S . A .
F re n c h P o ly n e s ia (F r.)
A rg e n tin a U ru g u a y
P a ra g u a y
C h ile
B o liv ia
P e ru
E c u a d o r
C o lo m b ia
Ve n e z u e la F re n c h G u ia n a (F r.)
S u rin a m e G u y a n a
T h e B a h am a s
C u b a D o m in ica n R e p u b lic
P a n a m a C o s ta R ic a
N ica ra g u a
H o n d u ra s G u ate m a la
E l S a lv a d o r
T rin id a d a n d To b ag o
Ja m . H a iti P u e rto R ic o (U S )
G re e n la n d (D e n .)
Ic e la n d
M a d a g a sc a r
S o u th A fr ic a L e so th o
S w a z ila n d
M o z a m b iq u e
Ta n z a n ia
B o tsw a n a N a m ib ia Z im b a b w e
A n g o la
Z a ire
Z a m b ia
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U g a n d a
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C a m e ro o n C . A . R .
B e n in
To g o G h an a
B u rk in a F a so B a rb a d o s
D o m in ica
C ô te D ’Iv o ire
L ib e ria
S ie rra L e o n e
G u in e a G u in e a -B issa u
S e n e g a l T h e G a m b ia
M a u rita n ia
W es te rn S ah a ra (M o r.)
M o ro c c o
F in la n d
N o rw a y
S w e d e n E sto n ia L a tv ia
L ith u a n ia
P o lan d
R o m a n ia
B u lg a r ia
T u rk e y G re e c e
C z ec h .
H u n g .
I ta ly A lb a n ia
P o rtu g a l
F ra n c e
S p a in
A u s. S w itz .
U n ite d K in g d o m
Ire la n d
D e n .
G e rm an y N e th .
B e l.
C y p .
Ye m e n
O m a n S a u d i A ra b ia U . A . E .
Q a ta r
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S y ria
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M y a n m a r (B u rm a ) B a n g .
A n d a m a n Is la n d s (In d ia )
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M a la y s ia
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C a m b o d ia
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L a o s
A u stra lia
P a p u a N ew G u in e a
N e w Z e a la n d
F ij i
N e w C a led o n ia
S o lo m o n Is la n d s
K ir ib a ti
M a rs h a ll Is lan d s F e d e ra te d S ta te s o f M ic ro n es ia
G u am (U S A )
Ja p a n
N . K o re a
S . K o rea
K u ri l Is la n d s
W ra n g e l Is la n d
A leu tian Is lan d s (U S A )
N e w S ib e r ia n Is la n d s
S e v e rn a y a Z e m ly a
N o v a y a Z e m ly a
F ra n z Jo se f L a n d S v a lb a rd (N o r.)
Ja n M a y en (N o r.) B a n k s Is lan d
Vic to r ia Is la n d B a ffin Is la n d
E lle sm e re Is la n d
Is lan d o f N e w fo u n d lan d
A n ta rc tic a
Î le s C ro ze t (F ra n ce )
Tasm an ia
S o u th G e o rg ia (a d m . b y U K , c la im e d b y A rg e n tin a )
F a lk la n d Is la n d s (Is la s M a lv in a s) (a d m . b y U K , c la im e d b y A rg e n tin a )
K u w a it C a n a ry Is la n d s (S p .)
S a o To m e & P rin c ip e
S in g a p o re E q . G u in e a
F a ro e Is . (D en .)
K a z a k h s ta n
B e la ru s
U k ra in e
M o ld o v a
G e o rg ia A rm e n ia A z e rb a ija n
T u rk m e n is ta n
U z b e k is ta n K y rg y z sta n
Yu g o .
M a c .
S lo v. C ro .
B o s .
S lo v a k .
E ri tre a
Ta jik is ta n
H aw a iian Is lan d s
G a la p ag o s Is la n d s (E cu a d o r)
M a u rit iu s
S e y c h e lle s
6 0 °
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Global Sales Management:Sales Structures in Global Markets
Country’s cultural context greatly influences the type of organizational sales force structure used Low-context: Germany High-context: Japan, China
Firms often employ geographical territories to structure overseas sales forces
Might use cultures, including languages, to organize sales force Examples: Belgium, Austria + Germany
Sources: Based on Samli, A. C., R. Still, and J. S. Hill (1993). International Marketing, New York:MacMillan; Axtell, Roger E. (1990). Do’s and Taboos Around the World, New York: John Wiley & Sons.
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Key Accounts
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
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Key Account Structures
Use Existing Force
Sales force structure is simplified
All accounts are managed under a single organizational structure
CONs
Reps may take short-term view
Reps may not understand broader, overall needs of key acc’t
Assign Execs
Assigning sales and marketing executives to manage key accounts makes sense for smaller firms that cannot afford separate sales effort
CONs
Can take a lot of time, leaving less time for other duties, like managing sales force
Create Separate
Create separate sales structures to serve most important customers
Integrates marketing and sales for key accounts under one organizational structure
CONs
Establishing distinct sales channels for major acc’ts is more costly
Duplication of effort Financial viability if key
acc’ts lost
Discussion Questions
What are the three principal ways to manage national or key accounts?
What is the best approach for a smaller company?
What about a large, multi-divisional sales firm?
What concerns would you have about allowing your regular sales force to manage key or national accounts?
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Telemarketing and Computerized Sales Structures
Telemarketing
Incoming: firm employs advertising and promo messages to end-users to “pull” or create buyer demand to call an 800 number and consult with in-house rep
Outgoing: pushing a firm’s product line by calling current or potential customers to try to uncover needs and close the sale
Computerized
Generated via Internet and telephone
Internet sales process varies greatly
Telemarketing is legal, but unwanted and intrusive telemarketing calls are likely to negatively impact an existing or potential business relationship
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The Sales Process in a Hybrid Selling Structure
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Global Sales Management: Some Offshore Call Centers Go Back Home
Offshoring call centers was a cost-cutting measure
Global phenomenon
Buyers complained Miscommunications, cultural gaffes, lack of
professionalism and product knowledge and ability to solve their problems
Perception is that lower-cost offshore centers equate to lower-quality service
Offshore firms respond Spend time, money training Purchase better equipment and software for
communicationSources: Based on Ali, Sarmad. 2006. “If You Want to Scream, Press . . . ,” The Wall Street Journal, October 30, R4; Thelen, Shawn, Tanya Thelen, Vincent P. Magnini, and Earl D. Honeycutt, Jr., An Introduction to the Offshore Service Ethnocentrism Construct. 2008. Services Marketing Quarterly, In Press.
Sales Management: Shaping Future Sales Leaders
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Reporting Relationships within a Firm’s Sales Force
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Ways to Construct Sales Force Reporting Structure
Line Organization
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
To make quicker decisions sales organization must be flattened
Line and Staff Structure
Using a line structure for core sales functions and placing support activities (sales training, customer service) into centers or departments outside of the line structure
Geographical, product, and market sales force structures are examples of Line and Staff Sales Structure
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Span of Control
Span of control: number of individuals that report directly to a sales manager
Customized customer solutions result in narrower spans of control (fewer employees reporting to sales manager)
Routine trade sales and telemarketing activities allow broader span of control (larger numbers of employees reporting to sales manager)
Span of Control Ratios (Rep:Manager)
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Adding Independent Sales Reps to the Sales Structure
Ownership Do not take ownership of the product
Commission Receive commission for all sales they make within
an assigned geographical territory
Clients Sell on behalf of mfgs or other sellers in territories
where no company sales force is present
Inventory Do not maintain an inventory
Sales Traditionally sells several related, noncompeting
product lines
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Relationship Between Company Sales Managers and Agents
Selling firm can contract with mfg’s agent or wholesaler’s sales force to manage accounts in geographical regions Example: company sales force manages larger, more
profitable territories and also contract with agents to service less developed, less profitable geographical territories (insurance companies)
Company sales mgr has little direct control over agents other than dissolving the agency relationship Sales mgr must motivate agents by appealing to self-interests
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Use of Sales Agents
Common for manufacturers to use sales agents when entering new territories with low or unknown sales volumes Selling costs (commissions) incurred only
when product or service is sold
Advantages An “in-place” or existing sales force Established buyer relationships Little (or no) fixed costs Experienced sales personnel Lower costs per sales call Long-term stability in the territory
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Use of Sales Agents
Tendency for mfgs to take credit for positive sales outcomes and assign blame for negative outcomes
Disadvantages Seller may not receive equal time for their products Agents blamed for shifting sales call focus to another
product line when buyer’s need is not easily identified Agents criticized for not opening new accounts, not
following up on leads, representing too many mfgs, and communicating poorly with the firms they represent
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Sources of Conflict Between Firm and Selling Agent
Discussion Questions
What are the advantages/disadvantages of using an independent sales agency?
What are the advantages/disadvantages of employing a company sales force?
Do you believe “sources of conflict” would be greater or less with an independent sales agency structure? Why?
Give examples of possible “sources of conflict” between a large manufacturer and their independent sales agents
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Ethics in Sales Management:Ethical Dilemmas with Partners
Wiles & Associates represents Exitron as mfg rep in California Sales have been phenomenal
Exitron decides to implement company sales force (25% cost savings)
Exitron attorney advises to send notification exactly 90 days from termination date
Exitron nat’l sales mgr wants to meet with Wiles and offer to split commission for following year Attorney advises would set bad precedent and impact $$
Epilogue: meets with Wiles, offers phase-out of commissions Well received by Wiles, will be able to partner in future if necessary
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Company Salesperson or Sales Agent?
Break-even analysis: compares fixed and variable costs associated with the two types of reps
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Company Salesperson or Sales Agent?
Salesperson When it’s important to
control sales effort, product or related technology is new, buyers need high 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 qualified sales agents already operate in the area
When it’s not feasible for company sales force to cover entire market (e.g., National Semiconductor, Advanced Micro Systems)
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Role Play: Structuring the Sales Effort at Green River Software (GRS)
RC Associates has been mfg rep for GRS for 10 yrs
~1 yr ago, GRS adopted relationship marketing approach for its best customers
RCA agents also sell hardware and computer peripheral equipment made by other companies to GRS customers
Receive 8% commission, last year sales revenues for GRS were $200 million
GRS feels relationships it has with its best customers are not deepening because of the current arrangement with RCA
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Role Play (continued): Assignment
Characters Janet Jackson, Sales Manager at Green River Software Ron Childress, Owner and Principal of RC Associates
Break into groups of 2, Janet and Ron Work individually to list advantages of each option for
organizing GRS sales force
Have a meeting where each presents what they believe are costs and benefits of current relationship At conclusion of meeting, Janet and Ron need to agree about
changes that should be made to meet GRS’s new strategy Alternatively, Janet recommends and justifies that the contract
be terminated and new sales structure established
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Caselet 7.1: Jefferson Pilot Reorganizes Its Sales Force
Jefferson Pilot sells insurance via company reps Reps work for commission Annual turnover 50% Cost of hiring, training, licensing new reps =
$5 million annually
Considering partnering with independent sales agents Located in all current sales areas, have market
knowledge, similar goals and values JP sales mgrs would need to sell agents on benefits of
partnering with JP JP reps unhappy because agents compete with them
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Caselet 7.1 (continued): Questions
1. What are the benefits of partnering with independent reps, as opposed to a company sales force? Can a case be made for finding a way to retain JP’s current salespeople instead of hiring sales agents to replace them?
2. Why would the turnover rate be significantly lower for JP if it hired sales agents?
3. What type of resistance might JP encounter from its current sales reps if it hired sales agents?
4. How might JP integrate an independent rep strategy with its existing company sales force?
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Caselet 7.2: IMC Considers Offshoring Its Call Center
IMC produces high-quality electronic components for OEMs
Costs IMC ~$4 million / yr to operate customer service center for dealers and distributors worldwide
Competitors opening call centers in India, Philippines, remote parts of Canada
IMC sales manager Jones being pressured to lower costs Contacts NCS International, which provides global site selection
services for call center industry Can lower cost / call by 75% by offshoring Concerned about negatives: caller satisfaction, repeat purchases
dropping off
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Caselet 7.2 (continued): Questions
1. Even though IMC’s cost per call would decrease, what other costs should Jones consider when making her decision?
2. Do you think some of the countries Jones was thinking about offshoring to would result in potentially less caller dissatisfaction than others?
3. What criteria would you recommend that Jones consider when selecting a potential offshore location?
4. What other factors should Jones weigh as she ponders this major shift in customer service responsibilities?
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