Module 4

Sales Organization Structure and Sales Organization Structure and Sales Force DeploymentSales Force Deployment

Module FourModule Four

Sales Organization ConceptsSales Organization Concepts

SpecializationSpecializationThe degree to which individuals perform some of the The degree to which individuals perform some of the required tasks to the exclusion of others. Individuals required tasks to the exclusion of others. Individuals can become experts on certain tasks, leading to better can become experts on certain tasks, leading to better performance for the entire organization.performance for the entire organization.

CentralizationCentralizationThe degree two which important decisions and tasks The degree two which important decisions and tasks performed at higher levels in the management performed at higher levels in the management hierarchy. Centralized structures place authority and hierarchy. Centralized structures place authority and responsibility at higher management levels.responsibility at higher management levels.

Sales Force Specialization ContinuumSales Force Specialization Continuum

SpecialistsSpecialistsCertain selling Certain selling activities for certain activities for certain products for certain products for certain customerscustomers

GeneralistsGeneralistsAll selling activitiesAll selling activitiesand all products toand all products toall customersall customers

Some specializationSome specializationof selling activities,of selling activities,

products, and/orproducts, and/orcustomerscustomers

Flat Sales OrganizationFlat Sales Organization

Span of ControlSpan of Control

Ma

na

ge

men

t Lev

els

Ma

na

ge

men

t Lev

els

National National Sales Sales

ManagerManager

District District Sales Sales

ManagerManager


ManagerManager


ManagerManager


ManagerManager


ManagerManager

Span of Control vs. Management LevelsSpan of Control vs. Management Levels

Tall Sales Organization

National Sales National Sales ManagerManager

Span of ControlSpan of Control

Managem

ent LevelsM

anagement Levels


ManagerManager


ManagerManager


ManagerManager


ManagerManager


ManagerManager


ManagerManager

Regional Sales Regional Sales ManagerManager

Regional Sales Regional Sales ManagerManager

Span of Control vs. Management LevelsSpan of Control vs. Management Levels

National Sales ManagerNational Sales Manager

Regional Sales ManagersRegional Sales Managers

District Sales ManagersDistrict Sales Managers

Sales Training ManagerSales Training Manager


SalespeopleSalespeople

Staff PositionStaff Position

Line PositionLine Position

Line vs. Staff PositionsLine vs. Staff Positions

OrganizationalStructure

EnvironmentalCharacteristics

TaskPerformance

PerformanceObjective

SpecializationSpecialization High Envir. High Envir. uncertaintyuncertainty NonroutineNonroutine AdaptivenessAdaptiveness

CentralizationCentralization Low Envir.Low Envir.UncertaintyUncertainty RepetitiveRepetitive EffectivenessEffectiveness

Selling-Situation Factors and Organizational Structure

Selling Situation ContingenciesSelling Situation Contingencies

Customer and Product DeterminantsCustomer and Product Determinantsof Sales Force Specializationof Sales Force Specialization

Simple Simple Product Product OfferingOffering

Complex Complex Range of Range of ProductsProducts

Customer Needs DifferentCustomer Needs Different

Customer Needs SimilarCustomer Needs Similar

Market-Market-Driven Driven

SpecializationSpecialization

Product/Market-Product/Market-Driven Driven


Geography-Geography-Driven Driven


Product-Product-Driven Driven


Selling Situation ContingenciesSelling Situation Contingencies

Geographic Sales OrganizationGeographic Sales Organization


Zone Sales Managers (4)Zone Sales Managers (4) Zone Sales Managers (4)Zone Sales Managers (4)

District Sales Managers (20)District Sales Managers (20)

Salespeople (100)Salespeople (100) Salespeople (100)Salespeople (100)


Eastern Region Sales ManagerEastern Region Sales Manager Western Region Sales ManagerWestern Region Sales Manager


Product Sales OrganizationProduct Sales Organization


Office Equipment Sales ManagerOffice Equipment Sales Manager Office Supplies Sales ManagerOffice Supplies Sales Manager


Salespeople (100)Salespeople (100) Salespeople (100)Salespeople (100)


Market Sales OrganizationMarket Sales Organization


Zone Sales Managers (4)Zone Sales Managers (4)


Salespeople (150)Salespeople (150)


Commercial AccountsCommercial AccountsSales ManagerSales Manager

Government AccountsGovernment AccountsSales ManagerSales Manager

Sales Training Sales Training ManagerManager


Functional Sales OrganizationFunctional Sales Organization


Field Sales ManagerField Sales Manager Telemarketing Sales ManagerTelemarketing Sales Manager

Regional Sales Managers (4)Regional Sales Managers (4)





LargeLarge

SmallSmall

Complexity of AccountComplexity of Account

Siz

e of

Acc

ount

Siz

e of

Acc

ount

LargeLargeAccountAccount

SimpleSimple ComplexComplex

MajorMajorAccountAccount

RegularRegularAccountAccount

ComplexComplexAccountAccount

Sales Organization Structures:Sales Organization Structures:Identifying Major AccountsIdentifying Major Accounts

Develop Major Account SalesforceDevelop Major Account Salesforce

Assign Major Accounts to Assign Major Accounts to Sales ManagersSales Managers

Assign Major Accounts to Salespeople Assign Major Accounts to Salespeople along with Other Accountsalong with Other Accounts

Sales Organization Structures:Sales Organization Structures:Major Accounts OptionsMajor Accounts Options

Comparison of Comparison of Sales Organization StructuresSales Organization Structures

OrganizationalOrganizationalStructureStructure AdvantagesAdvantages DisadvantagesDisadvantages

GeographicGeographic

• Low CostLow Cost• No geographic duplicationNo geographic duplication• No customer duplicationNo customer duplication• Fewer management levelsFewer management levels

• Limited Limited specializationspecialization• Lack of Lack of management management control over product control over product or or customer emphasiscustomer emphasis

ProducProductt

• Salespeople become Salespeople become expertsexperts in product attr. & in product attr. & applicationsapplications• Management control overManagement control over selling effortselling effort

• High costHigh cost• Geographic Geographic duplicationduplication• Customer duplicationCustomer duplication

Comparison of Comparison of Sales Organization StructuresSales Organization Structures

MarketMarket

• Salespeople developSalespeople develop better understanding ofbetter understanding of unique customer needsunique customer needs• Management control overManagement control over selling allocated to differentselling allocated to different marketsmarkets

• High costHigh cost• Geographic Geographic duplicationduplication

FunctionFunctionalal

• Efficiency in performingEfficiency in performing selling activitiesselling activities

• Geographic Geographic duplicationduplication• Customer duplicationCustomer duplication• Need for coordinationNeed for coordination

OrganizationalOrganizationalStructureStructure AdvantagesAdvantages DisadvantagesDisadvantages

Hybrid Sales Organization StructureHybrid Sales Organization Structure


Major Accounts Major Accounts Sales ManagerSales Manager

Regular Accounts Regular Accounts Sales ManagerSales Manager

Office Equipment Office Equipment Sales ManagerSales Manager

Office Supplies Office Supplies Sales ManagerSales Manager

Field SalesField SalesManagerManager

TelemarketingTelemarketingSales ManagerSales Manager

Commercial Accounts Commercial Accounts Sales ManagerSales Manager

Government Accounts Government Accounts Sales ManagerSales Manager

WesternWesternSales ManagerSales Manager

EasternEasternSales ManagerSales Manager

Salesforce DeploymentSalesforce Deployment

1.1. How much selling effort is needed to cover accounts and How much selling effort is needed to cover accounts and prospects adequately so that sales and profit objectives will prospects adequately so that sales and profit objectives will be achieved?be achieved?

2.2. How many salespeople are required to provide the desired How many salespeople are required to provide the desired amount of selling effort?amount of selling effort?

3.3. How should territories be designed to ensure proper coverage How should territories be designed to ensure proper coverage of accounts and to provide each salesperson with a of accounts and to provide each salesperson with a reasonable opportunity for success?reasonable opportunity for success?

Sales Force deployment decisions can be viewed as providing answers to three interrelated questions.

Interrelatedness ofInterrelatedness ofSales Force Deployment DecisionsSales Force Deployment Decisions

How much selling effort is needed to cover accounts and prospects adequately so that sales and profit objectives will be achieved?

How many salespeople are required to provide the desired amount of selling effort?

How should territories be designed and salespeople assigned to territories to ensure proper coverage of accounts and to provide each salesperson with a reasonable opportunity for success?

Allocation ofAllocation ofSelling EffortSelling EffortAllocation ofAllocation ofSelling EffortSelling Effort

Sales ForceSales ForceSizeSize

Sales ForceSales ForceSizeSize

TerritoryTerritoryDesignDesign

TerritoryTerritoryDesignDesign

So How Many Sale People Do I Need?So How Many Sale People Do I Need?

The budget way:The budget way: Revenue Divided by Quota Revenue Divided by Quota

The Workload way:The Workload way:• How many unit sales do I needHow many unit sales do I need• How many sales calls need to make that many How many sales calls need to make that many

salessales• How many sales calls can a sales person makeHow many sales calls can a sales person make• Total sales people to make that many calls.Total sales people to make that many calls.

ExampleExample

• Goal is $12,000,000 and average sale is Goal is $12,000,000 and average sale is $10,000 means you need 1200 sales to $10,000 means you need 1200 sales to make goal.make goal.

• Look at last years team batting average, if it was 30%:Look at last years team batting average, if it was 30%:

Batting Average = Batting Average = # Orders__ # Orders__ Total # CallsTotal # Calls

Total # of calls = 1200 divided by 0.30Total # of calls = 1200 divided by 0.30

= 4000 calls= 4000 calls

Example continuedExample continued

If a sale person can make an average of 3 If a sale person can make an average of 3 calls per day and is in the field 100 days calls per day and is in the field 100 days per year they can make 300 sales calls in per year they can make 300 sales calls in the year.the year.

If you need to have 4000 sales calls made, If you need to have 4000 sales calls made,

# of sales people = 4000 divided by 300 # of sales people = 4000 divided by 300

= 13.3 sales people= 13.3 sales people

Single FactorSingle FactorModelsModels

Single FactorSingle FactorModelsModels

Easy to Develop and UseEasy to Develop and Use

Difficult to Develop and UseDifficult to Develop and Use

LowLowAnalyticalAnalyticalRigorRigor

HighHighAnalyticalAnalyticalRigorRigor

PortfolioPortfolioModelsModels

PortfolioPortfolioModelsModels

DecisionDecisionModelsModels

DecisionDecisionModelsModels

Allocation of Selling Effort:Allocation of Selling Effort:Analytical Approaches to Allocation of Selling EffortAnalytical Approaches to Allocation of Selling Effort

Allocation of Selling Effort:Allocation of Selling Effort:Single Factor ModelsSingle Factor Models

• Easy to develop and use/low analytical rigorEasy to develop and use/low analytical rigor

• Accounts classified into categories based on one Accounts classified into categories based on one factor, such as market potentialfactor, such as market potential

• All accounts in the same category are assigned the All accounts in the same category are assigned the same number of sales callssame number of sales calls

• Effort allocation decisions are based on the analysis Effort allocation decisions are based on the analysis of only of only oneone factor and differences among accounts in factor and differences among accounts in the same category are the same category are notnot considered in assigning considered in assigning sales call coveragesales call coverage

Allocation of Selling Effort:Allocation of Selling Effort:Single Factor Model ExampleSingle Factor Model Example

Market PotentialMarket PotentialCategoriesCategories

ABCD

Average Sales Calls toAverage Sales Calls toan Account Last Yearan Account Last Year

25232016

Average Sales Calls toAverage Sales Calls toan Account Next Yearan Account Next Year

3224168

Allocation of Selling Effort:Allocation of Selling Effort:Portfolio ModelsPortfolio Models

• Account Opportunity - an account’s need Account Opportunity - an account’s need for and ability to purchase the firm’s for and ability to purchase the firm’s productsproducts

• Competitive Position - the strength of the Competitive Position - the strength of the relationship between the firm and an relationship between the firm and an accountaccount

Allocation of Selling Effort:Allocation of Selling Effort:Portfolio Model Segments and StrategiesPortfolio Model Segments and Strategies

Competitive PositionCompetitive Position

Segment 1Segment 1 Segment 2Segment 2

Segment 4Segment 4Segment 3Segment 3

StrongStrong WeakWeak

Lo

wL

ow

Hig

hH

igh

Acc

ount

Opp

ortu

nity

Acc

ount

Opp

ortu

nity

Allocation of Selling Effort:Allocation of Selling Effort:Decision ModelsDecision Models

• Simple Basic Concept - to allocate sales Simple Basic Concept - to allocate sales calls to accounts that promise the highest calls to accounts that promise the highest sales return from the sales callssales return from the sales calls

• Optimal number of calls in terms of sales Optimal number of calls in terms of sales or profit maximizationor profit maximization

Determining Minimum Account SizeDetermining Minimum Account Size

Break-even sales volume =

Cost per call X Number of calls

Sales cost as a percentage of sales

ExampleExample

• Cost per call = $300Cost per call = $300• Number of calls to close Number of calls to close

= 3.5 (average)= 3.5 (average)• Sales cost as a Sales cost as a

percentage of sales = 4%percentage of sales = 4%

Break-even sales volume =

Cost per call X Number of calls

Sales cost as a percentage of sales

$300 X 3.5

.04

= $26,250

Sales Force Size: Key ConsiderationsSales Force Size: Key Considerations

• Sales ProductivitySales Productivity - the ratio of sales - the ratio of sales generated to selling effort usedgenerated to selling effort used– In early stages, the addition of salespeople increases sales In early stages, the addition of salespeople increases sales

considerably more than the selling costs. As salespeople considerably more than the selling costs. As salespeople continue to be added, sales increases tend to decline until a continue to be added, sales increases tend to decline until a point is reached when the costs to add a salesperson are point is reached when the costs to add a salesperson are more than the revenues that salesperson can generate.more than the revenues that salesperson can generate.

• Salesforce TurnoverSalesforce Turnover– Is very costlyIs very costly– Should be anticipatedShould be anticipated

Sales Force Size: Analytical ToolsSales Force Size: Analytical Tools

Salesforce size = Forecasted sales / Average sales per personSalesforce size = Forecasted sales / Average sales per person

The The Breakdown ApproachBreakdown Approach is used to determine the is used to determine the number of salespeople needed to generate a forecasted number of salespeople needed to generate a forecasted level of sales. This approach is easy to develop. level of sales. This approach is easy to develop. However, it is weak conceptually. The concept underlying However, it is weak conceptually. The concept underlying the calculations is that sales determine the number of the calculations is that sales determine the number of salespeople needed—putting “the cart before the horse.”salespeople needed—putting “the cart before the horse.”


The The Workload ApproachWorkload Approach determines how much selling determines how much selling effort is needed to adequately cover the firm’s market. effort is needed to adequately cover the firm’s market. Then the number of salespeople required to provide this Then the number of salespeople required to provide this amount of selling effort is calculated. This approach amount of selling effort is calculated. This approach relatively simple to develop and is sound conceptually.relatively simple to develop and is sound conceptually.

Number of salespeople =Number of salespeople = Total selling effort neededTotal selling effort needed

Average selling effort per Average selling effort per salespersonsalesperson


The The Incremental ApproachIncremental Approach is the most rigorous for is the most rigorous for calculating salesforce size. Its basic concept is to calculating salesforce size. Its basic concept is to compare the marginal profits and marginal costs compare the marginal profits and marginal costs associated with each incremental salesperson. The major associated with each incremental salesperson. The major advantage of this approach is that it quantifies the advantage of this approach is that it quantifies the important relationships between salesforce size, sales, important relationships between salesforce size, sales, and costs. However, the incremental method is difficult to and costs. However, the incremental method is difficult to develop, and it cannot be used for new sales forces where develop, and it cannot be used for new sales forces where historical data and accurate judgments are not possible.historical data and accurate judgments are not possible.

Designing TerritoriesDesigning Territories

• Territories consist of whatever specific Territories consist of whatever specific accounts are assigned to a specific accounts are assigned to a specific salesperson. The territory can be viewed salesperson. The territory can be viewed as the work unit for a salesperson.as the work unit for a salesperson.

• Territory ConsiderationsTerritory Considerations– Trading areasTrading areas– Present effortPresent effort– Recommended effortRecommended effort

Territory Design ProcedureTerritory Design Procedure

FinalizeFinalizeTerritoryTerritoryDesignDesign

FinalizeFinalizeTerritoryTerritoryDesignDesign

AssessAssessTerritoryTerritoryWorkloadWorkload

AssessAssessTerritoryTerritoryWorkloadWorkload

Form Initial Form Initial TerritoriesTerritories

Form Initial Form Initial TerritoriesTerritories

AnalyzeAnalyzePlanning andPlanning andControl UnitControl UnitOpportunityOpportunity

AnalyzeAnalyzePlanning andPlanning andControl UnitControl UnitOpportunityOpportunity

SelectSelectPlanning andPlanning andControl UnitControl Unit

SelectSelectPlanning andPlanning andControl UnitControl Unit

Estimating Potentials and Forecasting Estimating Potentials and Forecasting SalesSales

THIS TOPIC TO BE COMPLETED AFTER THIS TOPIC TO BE COMPLETED AFTER Module 5Module 5

Market PotentialMarket Potential – Maximum demand in a time – Maximum demand in a time period based on the number of potential users period based on the number of potential users and the purchase rate.and the purchase rate.

Industry ForecastIndustry Forecast – Total predicted sales for – Total predicted sales for competitive arena.competitive arena.

Company PotentialCompany Potential – Company portion of – Company portion of industry potential (forecast)industry potential (forecast)

Company ForecastCompany Forecast – Predicted sales for the – Predicted sales for the competitive arena.competitive arena.

$0

$20

$40

$60

$80

$100

$120

1 2 3 4 5 6 7 8

Quarters

Sales $

Mkt Poten

Ind Fcst

Cmpy Poten

Cmpy Fcst

Forecasting Relationships

Estimating PotentialsEstimating Potentials

• Buying Power Index MethodBuying Power Index Method– Sales & Marketing MagazineSales & Marketing Magazine

• NAICS and Industry Census DataNAICS and Industry Census Data– North American Industry Classification North American Industry Classification

SystemSystem

• Published budgets or annual reportsPublished budgets or annual reports

1999 Effective 1999 Total Buying Income Retail Sales Total Population

Percentage Percentage Percentage Buying Amount of United Amount of United Amount of United Power

($000,000) States ($000,000) States (000) States Index Total United States $4,621,491 100.0% $2,852429 100.0% 273,537 100.0% 100.0Atlanta Metro 70,465 1.524% 43,703 1.532% 3,807 1.391% 0.1.498

Table 7-1Table 7-1 Data Used to Calculate Buying Power Index Data Used to Calculate Buying Power Index

What portion of the total market potential is in the given market area.

http://www.salesandmarketing.com

http://www.census.gov/epcd/www/naics.html

http://www.salesandmarketing.com/




Qualitative Sales ForecastingQualitative Sales Forecasting

• Sales Force CompositeSales Force Composite

• Jury of Executive OpinionJury of Executive Opinion

• Leading IndicatorsLeading Indicators– Housing StartsHousing Starts– Interest RatesInterest Rates– Consumer Confidence IndexConsumer Confidence Index– Stock Market IndicatorsStock Market Indicators

Quantitative ForecastQuantitative Forecast

• Adjust for SeasonAdjust for Season• Naïve ForecastsNaïve Forecasts• Trend ForecastsTrend Forecasts• Percentage ErrorPercentage Error• Mean Absolute Percentage Error (MAPE)Mean Absolute Percentage Error (MAPE)• Moving AveragesMoving Averages• Exponential SmoothingExponential Smoothing• Linear RegressionLinear Regression• Turning PointsTurning Points

Calculating a Seasonal Index from Historical Sales DataCalculating a Seasonal Index from Historical Sales Data

Four-year Quarterly Seasonal

Quarter 1 2 3 4 Average Index

1 49 57 53 73 58.0 0.73 2 77 98 85 100 90.0 1.13 3 90 89 92 98 92.3 1.16 4 79 62 88 78 76.8 0.97Four-year sales of 1268/16 = 79.25 average quarterly sales

Year

Seasonal Index for quarter 4 is 76.8/79.25 = .969

Naïve ForecastsNaïve Forecasts

This period’s forecast is the same as last period’s sales.

Trend ForecastTrend Forecast

Quarter

1 2 3 4

Sales 10 20 25 25

Rate of ChangeForecast 30 30

% Rate of ChangeForecast 40 31.25

Rate of Change % Rate of Change

S3= S2 + (S2-S1) S3 = [(S2-S1)/S1 X S2]+S2

Percentage Forecast Error = Forecast -- Actual

Actual

MAPE =

∑ (forecast – actual) / actual

n

X 100%

X 100%

Mean Absolute Percentage Error

Calculate % Error for each period and then take average

Calculate MAPECalculate MAPE

Quarter 1 2 3 4Actual Sales 49 77 90 79Forecast 60.2 72.1

% ErrorF3 = (60.2-90)/90 =33%

% ErrorF4 = (72.1- 79)/79 = 9%

MAPE = (33% + 9%)/2 = 21%

Moving Average=

S1+S2+S3…

n

Forecast (S) = α X Current sales + (1-α) X Last Forecast

Exponential Smoothing

Linear Regression

Y = mx + b

Forecasting with Moving AveragesForecasting with Moving Averages

1 2 3 4 5 6

Actual sales 49 77 90 79 57 98Seasonally adjusted sales 67 68 78 81 78 87Two-period moving average forecast seasonally corrected 67.5 73 79.5 79.5Three-period moving average forecast seasonally corrected 71 75 79 Two-period Moving Average Three-period Moving Average

F3 = ( S1 + S2 )/2 F4 = ( S1 + S2 + S3 )/3

= ( 67 + 68 ) /2 = ( 67 + 68 + 78 ) /3

= 67.5 = 71

Time Periods

Forecasting with Exponential SmoothingForecasting with Exponential Smoothing

• Alpha is always between 0 and 1.Alpha is always between 0 and 1.

• Calculate alpha to fit previous actual sales.Calculate alpha to fit previous actual sales.

• An alpha of 1 is equivalent to a naïve An alpha of 1 is equivalent to a naïve forecast.forecast.

Exponential SmoothingExponential Smoothing Quarter

1 2 3 4

Actual Sales 49 77 90 79

Smooth Forecast 60.2 72.1

If alpha = .4

SF3 = .4 X S2 + (1-.4) X S1

= 30.8 + .6X 49

30.8 + 29.4

S3 = 60.2

SF4 = .4 X 90 + (1-.4) X SF3

= 36 + .6 X 60.2

= 36 + 36.1

= 72.1

Figure 7-3:Figure 7-3: Fitting a Trend Regression to Fitting a Trend Regression to Seasonally Adjusted Sales Data Seasonally Adjusted Sales Data

0 1 2 3 4 5 650

60

70

80

90

63.9

3.6

Y = 63.9 + 3.5 X

Sale

s

Time Period

Linear Regression

Turning PointsTurning Points

• By definition breaks the mathematical By definition breaks the mathematical model.model.

• Turning points are best predicted by Turning points are best predicted by Qualitative Methods.Qualitative Methods.

How to determine the best methodHow to determine the best method

Download the spreadsheetDownload the spreadsheet

Rate of Change % Rate of Change

S3= S2 + (S2-S1) S3 = [(S2-S1)/S1 X S2]+S2

Moving Average=

S1+S2+S3…

n

Forecast (S) = α X Current sales + (1-α) X Last Forecast

Exponential Smoothing

MAPE = ∑ (forecast – actual) / actual

n

X 100%

Mean Absolute Percentage Error

Module 4

Documents

Transcript of Module 4