Organisational Strategies

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MKF 5391

Lecture 2

Organisational Strategies and The sales Function

Lecturer: Kimble Montagu

Objectives

Define different strategy levels for multibusiness Business strategy decisions Advantages and disadvantages of personal selling d a tages a d d sad a tages o pe so a se g Effective integrated marketing communication strategies Concepts of specialization Describe the different ways that sales forces might be

specialized Advantages and disadvantages of different

organizational structures Deployment of the sales force

Definition of Strategic Business Units (SBUs)

An SBU is a single product or brand, a line of An SBU is a single product or brand, a line of products, or a mix of related products that products, or a mix of related products that

Cravens (2004)Cravens (2004)

p , pp , pmeets a common market need or a group of meets a common market need or a group of related needs, and the unit's management is related needs, and the unit's management is responsible for all (or most) of the basic responsible for all (or most) of the basic business functions."business functions."

Corporate Corporate Corporate MissionCorporate MissionSBU DefinitionSBU Definition Corporate Corporate

Strategy Strategy LevelLevel

Key Key Decision AreasDecision Areas

KeyKeyDecision MakersDecision Makers

Organizational Strategy Levels

StrategyStrategy SBU DefinitionSBU DefinitionSBU ObjectivesSBU Objectives ManagementManagement

Sales Sales StrategyStrategy

Strategy TypesStrategy TypesStrategy ExecutionStrategy Execution

SBU SBU ManagementManagement

Strategy Strategy LevelLevel

Key Key Decision AreasDecision Areas

KeyKeyDecision MakersDecision Makers

Marketing Marketing Corporate Corporate Target Market SelectionTarget Market SelectionI t t d Mkt CI t t d Mkt C

Organizational Strategy Levels

StrategyStrategy ManagementManagementMarketing Mix Dev.Marketing Mix Dev.

Integrated Mkt Comm.Integrated Mkt Comm.

Business Business StrategyStrategy

SBU SBU ManagementManagement

Account Targeting StrategyAccount Targeting StrategySales Channel StrategySales Channel StrategyRelationship StrategyRelationship Strategy

Salary plus Prospective and Build sales vol.Build

SBU Objectives and the Sales Organization

Compensation System

Primary Sales Tasks

Sales Organization Objectives

Market Share Objectives

incentivenew accountsProvide high

service levels particularly pre-sales serviceProduct/market

feedback

Secure distrib.

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Salary plus Call on targeted Maintain sales vol.Hold


Compensation System

Primary Sales Tasks



commission or bonus

current accountsIncr. service levels to

current accountsCall on new accounts

Consolidate market position through concentration on targeted segmentsSecure additional

outlets

Salary Service most Reduce selling Harvest


Compensation System

Primary Sales Tasks



plus bonusprofitable accountseliminate

unprofitable accountsReduce service

levelsReduce inventories

levels

costsTarget profitable

accounts

SalaryDump inventoryEli i i

Minimize selling costs and clear

Divest or Liquidate


Compensation System

Primary Sales Tasks



Eliminate servicecosts and clear out inventory

Liquidate

Business Strategy and the Sales Function

Low-cost supplier Pursue large customersPursue large customers

Minimize costMinimize cost

Compete on priceCompete on price

Seek customers who are Seek customers who are low price shopperslow price shoppers


Low-cost supplier Compete on nonCompete on non--price price benefitsbenefits

Differentiation Provide high quality Provide high quality customer servicecustomer service

Seek customers who are Seek customers who are not low price shoppersnot low price shoppers


Low-cost supplier Serve a distinct target Serve a distinct target market not served well by market not served well by othersothers

Differentiation

Niche

othersothers

Provide high quality Provide high quality customer servicecustomer service

Seek customers who are Seek customers who are not low price shoppersnot low price shoppers

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Marketing Strategy and the Sales Function

Advantages+ Only promotional tool that consists of personal

communication between seller and buyer+ More credible and has more impactp+ Better timing of message delivery+ Ability to tailor message to buyer+ Allows for sale to be closed

Disadvantage High cost per contact

Personal Selling-Driven vs. Advertising-DrivenMarketing Communications StrategiesPersonal SellingPersonal Selling When Message Flexibility is ImportantWhen Message Flexibility is Important

When Message Timing is ImportantWhen Message Timing is ImportantWhen Reaction Speed is ImportantWhen Reaction Speed is ImportantWhen Message Credibility is ImportantWhen Message Credibility is Important

AdvertisingAdvertising

When Message Credibility is ImportantWhen Message Credibility is ImportantWhen Trying to Close the SaleWhen Trying to Close the Sale

When Low Cost per Contact is ImportantWhen Low Cost per Contact is ImportantWhen Repetitive Contact is ImportantWhen Repetitive Contact is ImportantWhen Control of Message is ImportantWhen Control of Message is ImportantWhen Audience is LargeWhen Audience is Large

Target Market Situations and Personal Selling

Target Market:A definition of the specific market segment to be served

Personal Selling-Driven Promotional Strategies arePersonal Selling Driven Promotional Strategies are appropriate when:

The market consists of only a few buyers that tend to be concentrated in location

The buyer needs a great deal of information The purchase is important The product is complex Service after the sale is important

Integrated Marketing Communications

The strategic integration of multiple The strategic integration of multiple marketing communications toolsmarketing communications toolsmarketing communications tools marketing communications tools communicating a consistent message communicating a consistent message in the most effective and efficient in the most effective and efficient manner.manner.

BuyingBuyingSituationSituation

BuyingBuyingCenterCenter

AccountAccountTargetingTargetingStrategyStrategy

RelationshipRelationshipStrategyStrategy

The Sales Strategy Framework

OrganizationalOrganizationalBuyer BehaviorBuyer Behavior AccountAccount

BuyingBuyingProcessProcess

BuyingBuyingNeedsNeeds

SalespersonSalespersonSalesSales

StrategyStrategy

Sales ChannelSales ChannelStrategyStrategy

SellingSellingStrategyStrategy

Major CategoryMajor Category TypesTypesUsersUsers: purchase products : purchase products and services to produce and services to produce other products and servicesother products and services

Organizational Buyer Behavior: Types of Organizations

Business or Business or Industrial Industrial

OrganizationsOrganizations

Original Equipment Original Equipment Manufacturers (OEM)Manufacturers (OEM)::purchase products to purchase products to incorporate into productsincorporate into products

ResellersResellers: purchase : purchase products to sellproducts to sell

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Government Government OrganizationsOrganizations

Major CategoryMajor Category TypesTypes

Federal, State, and Federal, State, and Local Government Local Government

Organizational Buyer Behavior: Types of Organizations

OrganizationsOrganizations AgenciesAgencies

Public and Public and Private InstitutionsPrivate InstitutionsInstitutionsInstitutions

Organizational Buyer Behavior: Buying Situations

Straight Rebuy Buying Situation Routinized Response Behaviorp

Modified Rebuy Buying Situation Limited Problem Solving

New Task Buying Situation Extensive Problem Solving

Organizational Buyer Behavior: Buying Center

Initiators UsersUsers Gatekeepers Influencers Deciders Purchasers

Organizational Buyer Behavior: Buying Process

Phase 1: Recognize Problem/NeedPhase 2: Determine Item Specs/Quantity NeededPhase 3: Specify Item Specs/Quantity NeededPhase 4: Identify and Qualify Potential SourcesPhase 5: Acquire and Analyze ProposalsPhase 6: Evaluate Proposals/Select SuppliersPhase 7: Selection of Order RoutinePhase 8: Performance Feedback/Evaluation

Control Cost in Product Control Cost in Product Use SituationUse SituationFew Breakdowns of ProductFew Breakdowns of Product

Want a Feeling of PowerWant a Feeling of Power

Seek Personal PleasureSeek Personal Pleasure

Personal GoalsPersonal Goals Organizational GoalsOrganizational GoalsPersonal and Organizational Needs

Few Breakdowns of ProductFew Breakdowns of ProductDependable Delivery for Dependable Delivery for Repeat PurchasesRepeat PurchasesAdequate Supply of Adequate Supply of ProductsProductsCost within Budget LimitsCost within Budget Limits

Desire Job SecurityDesire Job Security

Want to be Well LikedWant to be Well Liked

Want RespectWant Respect

Sales Strategy: Account-Targeting Strategy

The classification of accounts withina target market into categories forthe purpose of developing strategic approaches for selling to each account or account group.

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Sales Strategy: Relationship Strategy

A determination of the type of relationship to betype of relationship to be developed with different account groups.

TransactionTransaction SolutionsSolutions PartnershipPartnership CollaborativeCollaborative

Characteristics of Relationship Strategies

GoalGoal Sell ProductsSell Products Add ValueAdd Value

TimeTimeTime Time FrameFrame ShortShort

LongLong

OfferingOffering StandardizedStandardized CustomizedCustomized

Number of Number of CustomersCustomers ManyMany FewFew

Sales Strategy: Selling Strategy

E i th t tEnsuring that accounts receive selling effort coverage in an effective and efficient manner.

Matching Selling and Relationship Strategies

PartnershipPartnership

CollaborativeCollaborative

Cost Cost toto

HighHigh

TransactionTransaction

SolutionsSolutions

PartnershipPartnership

CommitmentCommitment

to to ServeServe

HighHighLowLow

Sales Strategy: Sales Channel Strategy

The planned selling approach for each relationship strategy.

The InternetIndustrial DistributorsIndependent RepresentativesTeam SellingTelemarketingTrade Shows

Sales Strategy: The Internet

Increase Reach Gather Information about Customers Showcase New Products Conduct Surveys Enhance Corporate Image Obtain Feedback Service Existing Customers

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Sales Channel Strategy: Industrial Distributors

Have Their Own Sales Force May Represent One Manufacturer; Several May Represent One Manufacturer; Several

Non-competing Manufacturers; Several Competing Manufacturers

Normally Carry Inventory

Sales Strategy: Independent or Manufacturers Reps

Sell complimentary products from non-competing manufacturerscompeting manufacturers.

Do Not Normally Carry Inventory Paid for Performance Reduced Control over Selling Effort Reduced Access to Customer Information

Sales Strategy: Team Selling

Three Selling SituationsNew Task SellingModified Resell Selling SituationRoutine Resell Selling Situation

Two Types of Team SellingMultilevel SellingMajor Account Selling

Sales Strategy: Telemarketing

May replace field sales force for certain accountsWhen integrated with field sales force, activities include:

Prospecting, Qualifying Leads, Conducting Surveys Taking Orders, Checking on Order Status, Handling Order

Problems Following Up for Repeat Business

Sales Strategy: Trade Shows

Generate Leads Test Market New Products Introduce New Products Close Sales Gather Competitive Information Service Existing Customers Enhance Corporate Image

Sales Organization ConceptsSpecializationThe degree to which individuals perform some of the

required tasks to the exclusion of others. Individuals can become experts on certain tasks, leading to better performance for the entire organization.

CentralizationThe degree two which important decisions and tasks

performed at higher levels in the management hierarchy. Centralized structures place authority and responsibility at higher management levels.

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Sales 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

Manage

Manage

National National Sales Sales

ManagerManager

Span of Control vs. Management Levels

Span of ControlSpan of Control

ement Levels

ement Levels

District District Sales Sales

ManagerManager


ManagerManager


ManagerManager


ManagerManager


ManagerManager

Tall Sales Organization

National Sales National Sales ManagerManager M

anM

an

Span of Control vs. Management Levels

Span of ControlSpan of Control

agement Levels

agement Levels


ManagerManager


ManagerManager


ManagerManager


ManagerManager


ManagerManager


ManagerManager

Regional Sales Regional Sales ManagerManager

Regional Sales Regional Sales ManagerManager

National Sales ManagerNational Sales Manager

Regional Sales ManagersRegional Sales Managers

Sales Training ManagerSales Training Manager

Line vs. Staff Positions

District Sales ManagersDistrict Sales Managers


SalespeopleSalespeople

Staff PositionStaff Position

Line PositionLine Position

OrganizationalStructure

EnvironmentalCharacteristics

TaskPerformance

PerformanceObjective

Hi h E iHi h E i

Selling-Situation Factors and Organizational StructureSelling Situation Contingencies

SpecializationSpecialization High Envir. High Envir. uncertaintyuncertainty NonroutineNonroutine AdaptivenessAdaptiveness

CentralizationCentralization Low Envir.Low Envir.UncertaintyUncertainty RepetitiveRepetitive EffectivenessEffectiveness

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

Customer Needs DifferentCustomer Needs Different

Selling Situation Contingencies

Simple Simple Product Product OfferingOffering

Complex Complex Range of Range of ProductsProducts

Customer Needs SimilarCustomer Needs Similar

MarketMarket--Driven Driven

SpecializationSpecialization

Product/MarketProduct/Market--Driven Driven


GeographyGeography--Driven Driven


ProductProduct--Driven Driven


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Geographic Sales OrganizationNational Sales ManagerNational Sales Manager


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 OrganizationNational Sales ManagerNational Sales Manager

Office Equipment Sales ManagerOffice Equipment Sales Manager Office Supplies Sales ManagerOffice Supplies Sales Managerq p gq p g pp gpp g


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


Market Sales Organization


Commercial AccountsCommercial AccountsSales ManagerSales Manager

Government AccountsGovernment AccountsSales ManagerSales Manager

S l T i iS l T i i

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


Salespeople (150)Salespeople (150)


Sales Training Sales Training ManagerManager


Functional Sales OrganizationNational Sales ManagerNational Sales Manager

Field Sales ManagerField Sales Manager Telemarketing Sales ManagerTelemarketing Sales Manager

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





LargeLarge

ount

ount

LargeLargeAccountAccount

MajorMajorAccountAccount

Sales Organization Structures:Identifying Major Accounts

SmallSmall

Complexity of AccountComplexity of Account

Siz

e of

Acc

oS

ize

of A

cco

SimpleSimple ComplexComplex

RegularRegularAccountAccount

ComplexComplexAccountAccount

Develop Major Account SalesforceDevelop Major Account Salesforce

Sales Organization Structures:Major Accounts Options

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

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Comparison of Comparison of Sales Organization StructuresSales Organization Structures

OrganizationalOrganizationalStructureStructure AdvantagesAdvantages DisadvantagesDisadvantages

Low CostLow Cost No geographic duplicationNo geographic duplication Limited specializationLimited specializationLack of managementLack of managementGeographicGeographic

g g p pg g p p No customer duplicationNo customer duplication Fewer management levelsFewer management levels

Lack of management Lack of management control over product or control over product or customer emphasiscustomer emphasis

ProductProduct

Salespeople become expertsSalespeople become expertsin product attr. & applicationsin product attr. & applications

Management control overManagement control overselling effortselling effort

High costHigh cost Geographic duplicationGeographic duplication Customer duplicationCustomer duplication

Comparison of Comparison of Sales Organization StructuresSales Organization Structures

Salespeople developSalespeople developbetter understanding ofbetter understanding of

OrganizationalOrganizationalStructureStructure AdvantagesAdvantages DisadvantagesDisadvantages

MarketMarket unique customer needsunique customer needs Management control overManagement control overselling allocated to differentselling allocated to differentmarketsmarkets

High costHigh cost Geographic duplicationGeographic duplication

FunctionalFunctional Efficiency in performingEfficiency in performingselling activitiesselling activities

Geographic duplicationGeographic duplication Customer duplicationCustomer duplication Need for coordinationNeed for coordination


Commercial Accounts Commercial Accounts Sales ManagerSales Manager

Government Accounts Government Accounts Sales ManagerSales Manager

Hybrid 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

WesternWesternSales ManagerSales Manager

EasternEasternSales ManagerSales Manager

Salesforce 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 b hi d?b hi d?

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

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?

Interrelatedness ofSales Force Deployment Decisions

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

Allocation ofAllocation ofSelling EffortSelling EffortAllocation ofAllocation ofSelling EffortSelling Effort

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?

Sales ForceSales ForceSizeSize

Sales ForceSales ForceSizeSize

TerritoryTerritoryDesignDesignTerritoryTerritoryDesignDesign

Single FactorSingle FactorModelsModels

Single FactorSingle FactorModelsModels

Easy to Develop and UseEasy to Develop and Use

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

Difficult to Develop and UseDifficult to Develop and Use

LowLowAnalyticalAnalyticalRigorRigor

HighHighAnalyticalAnalyticalRigorRigor

PortfolioPortfolioModelsModelsPortfolioPortfolioModelsModels

DecisionDecisionModelsModels

DecisionDecisionModelsModels

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Allocation of Selling Effort:Single Factor Models Easy to develop and use/low analytical rigor

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

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

Effort allocation decisions are based on the analysis of only one factor and differences among accounts in the same category are not considered in assigning sales call coverage

Allocation of Selling Effort:Single Factor Model Example

Market PotentialMarket PotentialCategoriesCategories

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

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

ABCD

25232016

3224168

Allocation of Selling Effort:Portfolio Models

Account Opportunity - an accounts need for and ability to purchase the firms productsproducts

Competitive Position - the strength of the relationship between the firm and an account

Allocation of Selling Effort:Portfolio Model Segments and Strategies

Competitive PositionCompetitive Position

Segment 1Segment 1 Segment 2Segment 2

StrongStrong WeakWeak

ghghnity

nity gg gg

Segment 4Segment 4Segment 3Segment 3Low

Low

Hig

Hig

Acco

unt O

ppor

tun

Acco

unt O

ppor

tun

Allocation of Selling Effort:Decision Models

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

Optimal number of calls in terms of sales or profit maximization

Sales Force Size: Key Considerations

Sales Productivity - the ratio of sales generated to selling effort used

In early stages, the addition of salespeople increases sales considerably more than the selling costs. As salespeople

ti t b dd d l i t d t d li til i tcontinue to be added, sales increases tend to decline until a point is reached when the costs to add a salesperson are more than the revenues that salesperson can generate.

Salesforce Turnover Is very costly Should be anticipated

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Sales Force Size: Analytical ToolsThe 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 underlyingHowever it is weak conceptually The concept underlying

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

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 neededsalespeople neededputting the cart before the horse.putting the cart before the horse.

Sales Force Size: Analytical ToolsThe The Workload ApproachWorkload Approach determines how much selling determines how much selling effort is needed to adequately cover the firms market. effort is needed to adequately cover the firms 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 conceptuallyrelatively simple to develop and is sound conceptuallyrelatively 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

Sales Force Size: Analytical ToolsThe 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 theadvantage of this approach is that it quantifies theadvantage 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 Territories Territories consist of whatever specific

accounts are assigned to a specific salesperson. The territory can be viewed as the work unit for a salesperson.

Territory Considerations Trading areas Present effort Recommended effort

Territory Design Procedure

FinalizeFinalizeT itT itFinalizeFinalizeT itT it

AssessAssessT itT itAssessAssessT itT itForm InitialForm InitialForm InitialForm Initial

AnalyzeAnalyzePlanning andPlanning and

AnalyzeAnalyzePlanning andPlanning andSelectSelectPl i dPl i d

SelectSelectPl i dPl i d TerritoryTerritory

DesignDesignTerritoryTerritoryDesignDesign

TerritoryTerritoryWorkloadWorkloadTerritoryTerritory

WorkloadWorkload

Form Initial Form Initial TerritoriesTerritoriesForm Initial Form Initial TerritoriesTerritories

Planning andPlanning andControl UnitControl UnitOpportunityOpportunity

Planning andPlanning andControl UnitControl UnitOpportunityOpportunity

Planning andPlanning andControl UnitControl Unit

Planning andPlanning andControl UnitControl Unit

Organisational Strategies

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