1. Part Four: Designing and Developing the Sales Force
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2. Designing and Organizing the Sales Force
Chapter 7
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3. 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
Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall.
Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall.

4. 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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5. Areas Impacted by a Firm’s Sales Force Structure
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6. Organizing the Members of the Firm’s Sales Force
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7. The Size of the Sales Force
Breakdown method
Divide forecasted sales revenue by average sales dollars per salesperson
Workload method
Compute total sales call workload
Determine amount of work performed by each rep
Factor in additional work responsibilities
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8. Workload Method
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9. 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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10. Geographical, Product, and Market Structures
Geographical Sales Structure
Depends on physical boundaries to organize sales force with customer accounts
Interacts with buyers as generalists
Product Sales Structure
Sales activities organized around related product lines or manufacturing divisions
Interacts with buyers as specialists
Market Sales 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
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11. Geographical, Product, and Market Structures
Geographical Sales Structure
Depends on physical boundaries to organize sales force with customer accounts
Interacts with buyers as generalists
Product Sales Structure
Sales activities organized around related product lines or manufacturing divisions
Interacts with buyers as specialists
Market Sales 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
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12. 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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13. Geographic-Based Structure
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14. Geographical, Product, and Market Structures
Geographical Sales Structure
Depends on physical boundaries to organize sales force with customer accounts
Interacts with buyers as generalists
Product Sales Structure
Sales activities organized around related product lines or manufacturing divisions
Interacts with buyers as specialists
Market Sales 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
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15. Product Sales Structure
Limitation: can be confusing for buyer
Example: Xerox has 3 separate sales forces
Called on same accounts
Had little knowledge of each other’s products
Confused buyers who had genuine need for Xerox products
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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16. Product-Based Structure
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17. Geographical, Product, and Market Structures
Geographical Sales Structure
Depends on physical boundaries to organize sales force with customer accounts
Interacts with buyers as generalists
Product Sales Structure
Sales activities organized around related product lines or manufacturing divisions
Interacts with buyers as specialists
Market Sales 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
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18. 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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19. Market-Based Structure
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20. Functional and Combination Sales Structures
Selling process divided into two or more steps performed by specialists
Example: grocery
Establish account
Manage inventory & orders
Merchandising
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
CONs
Coordinating multiple specialists
Ensuring smooth transition from account establishment to management
Expensive
Can result in duplicate sales efforts
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21. Pros and Cons of Various Structures
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22. 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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23. 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
Based on: David J. Cichelli, “Specialize Your Sales Force,” Sales & Marketing Management, September/October 2008, 15.
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24. 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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25. 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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26. 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
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27. 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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28. Telemarketing and Computerized Sales Structures
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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29. The Sales Process in a Hybrid Selling Structure
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30. 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 communication
Sources: Based on Ali, Sarmad “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 Services Marketing Quarterly, In Press.
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31. Reporting Relationships within a Firm’s Sales Force
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32. 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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33. Span of Control Ratios (Rep:Manager)
Span of control: number of individuals that report directly to a sales manager
Span of Control Ratios (Rep: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)
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34. Adding Independent Sales Reps to the Sales Structure
Clients
Sell on behalf of mfgs or other sellers in territories where no company sales force is present
Commission
Receive commission for all sales they make within an assigned geographical territory
Ownership
Do not take ownership of the product
Inventory
Do not maintain an inventory
Sales
Traditionally sells several related, noncompeting product lines
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35. 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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36. 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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37. 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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38. Sources of Conflict Between Firm and Selling Agent
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39. 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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40. 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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41. Company Salesperson or Sales Agent?
Break-even analysis: compares fixed and variable costs associated with the two types of reps
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42. Company Salesperson or Sales Agent?
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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43. 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
Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall.
Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall.

44. 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
Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall.
Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall.

45. 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
Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall.
Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall.

46. Caselet 7.1 (continued): Questions
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?
Why would the turnover rate be significantly lower for JP if it hired sales agents?
What type of resistance might JP encounter from its current sales reps if it hired sales agents?
How might JP integrate an independent rep strategy with its existing company sales force?
Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall.
Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall.

47. 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
Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall.
Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall.

48. Caselet 7.2 (continued): Questions
Even though IMC’s cost per call would decrease, what other costs should Jones consider when making her decision?
Do you think some of the countries Jones was thinking about offshoring to would result in potentially less caller dissatisfaction than others?
What criteria would you recommend that Jones consider when selecting a potential offshore location?
What other factors should Jones weigh as she ponders this major shift in customer service responsibilities?
Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall.
Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall.

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