Sales Organization Structure
and Salesforce Deployment
Sales Management:
Analysis and Decision Making
Chapter 4:
Sales Organization Structure and Salesforce
Ingram
LaForge Avila
Schwepker Jr. Williams
Learning Objectives
1. Define the concepts of specialization, centralization,
span of control versus management levels, and line
versus staff positions.
2. Describe the ways salesforces might be specialized.
3. Evaluate the advantages and disadvantages of sales
organization structures.
4. Name the important considerations in organizing
strategic account management programs.
5. Explain how to determine the appropriate sales
organization structure for a given selling situation.
Sales Management:
Analysis and Decision Making
Chapter 4:
Sales Organization Structure and Salesforce
Ingram
LaForge Avila
Schwepker Jr. Williams
Learning Objectives
6. Discuss salesforce deployment.
7. Explain three analytical approaches for determining
allocation of selling effort.
8. Describe three methods for calculating sales force
size.
9. Explain the importance of sales territories and list
the steps in the territory design process.
10. Discuss the important people considerations in
salesforce deployment.
Sales Management:
Analysis and Decision Making
Chapter 4:
Sales Organization Structure and Salesforce
Ingram
LaForge Avila
Schwepker Jr. Williams
Sales Organization Concepts
Specialization
The 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.
Centralization
The degree to which important decisions and tasks performed at
higher levels in the management hierarchy.
Centralized structures place authority and responsibility at higher
management levels.
Sales Management:
Analysis and Decision Making
Chapter 4:
Sales Organization Structure and Salesforce
Ingram
LaForge Avila
Schwepker Jr. Williams
Sales Force Specialization Continuum
Generalists
All selling activities
and all products to
all customers
Sales Management:
Analysis and Decision Making
Some specialization
of selling activities,
products, and/or
customers
Chapter 4:
Sales Organization Structure and Salesforce
Specialists
Certain selling
activities for certain
products for certain
customers
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LaForge Avila
Schwepker Jr. Williams
Span of Control vs. Management Levels
Flat Sales Organization
District
Sales
Manager
District
Sales
Manager
District
Sales
Manager
District
Sales
Manager
District
Sales
Manager
Management Levels
National
Sales
Manager
Span of Control
Sales Management:
Analysis and Decision Making
Chapter 4:
Sales Organization Structure and Salesforce
Ingram
LaForge Avila
Schwepker Jr. Williams
Span of Control vs. Management Levels
Tall Sales Organization
National Sales
Manager
District
Sales
Manager
District
Sales
Manager
District
Sales
Manager
Regional Sales
Manager
District
Sales
Manager
District
Sales
Manager
District
Sales
Manager
Management Levels
Regional Sales
Manager
Span of Control
Sales Management:
Analysis and Decision Making
Chapter 4:
Sales Organization Structure and Salesforce
Ingram
LaForge Avila
Schwepker Jr. Williams
Line vs. Staff Positions
National Sales Manager
Sales Training Manager
Regional Sales Managers
Sales Training Manager
District Sales Managers
Staff Position
Salespeople
Sales Management:
Analysis and Decision Making
Chapter 4:
Sales Organization Structure and Salesforce
Line Position
Ingram
LaForge Avila
Schwepker Jr. Williams
Selling-Situation Factors and
Organizational Structure
Organizational
Structure
Environmental
Characteristics
Task
Performance
Performance
Objective
Specialization
High
Environmental
Uncertainty
Nonroutine
Adaptiveness
Centralization
Low
Environmental
Uncertainty
Repetitive
Effectiveness
Sales Management:
Analysis and Decision Making
Chapter 4:
Sales Organization Structure and Salesforce
Ingram
LaForge Avila
Schwepker Jr. Williams
Customer and Product Determinants
of Sales Force Specialization
Customer Needs Different
Simple
Product
Offering
Complex
Range of
Products
Customer Needs Similar
Sales Management:
Analysis and Decision Making
Chapter 4:
Sales Organization Structure and Salesforce
Ingram
LaForge Avila
Schwepker Jr. Williams
Geographic Sales Organization
Sales Management:
Analysis and Decision Making
Chapter 4:
Sales Organization Structure and Salesforce
Ingram
LaForge Avila
Schwepker Jr. Williams
Product Sales Organization
Sales Management:
Analysis and Decision Making
Chapter 4:
Sales Organization Structure and Salesforce
Ingram
LaForge Avila
Schwepker Jr. Williams
Market Sales Organization
Sales Management:
Analysis and Decision Making
Chapter 4:
Sales Organization Structure and Salesforce
Ingram
LaForge Avila
Schwepker Jr. Williams
Functional Sales Organization
Sales Management:
Analysis and Decision Making
Chapter 4:
Sales Organization Structure and Salesforce
Ingram
LaForge Avila
Schwepker Jr. Williams
Identifying Strategic Accounts
Size of Account
Large
Small
Large
Account
Strategic
Account
Regular
Account
Complex
Account
Simple
Complex
Complexity of Account
Sales Management:
Analysis and Decision Making
Chapter 4:
Sales Organization Structure and Salesforce
Ingram
LaForge Avila
Schwepker Jr. Williams
Strategic Accounts Options
Sales Management:
Analysis and Decision Making
Chapter 4:
Sales Organization Structure and Salesforce
Ingram
LaForge Avila
Schwepker Jr. Williams
Comparison of
Sales Organization Structures
Organizational
Structure
Geographic
Product
Sales Management:
Analysis and Decision Making
Advantages
Low Cost
No geographic duplication
No customer duplication
Fewer management levels
Salespeople become experts
in product attributes &
applications
Management control over
selling effort
Disadvantages
Limited specialization
Lack of management
control over product or
customer emphasis
High cost
Geographic duplication
Customer duplication
Chapter 4:
Sales Organization Structure and Salesforce
Ingram
LaForge Avila
Schwepker Jr. Williams
Comparison of
Sales Organization Structures
Organizational
Structure
Market
Functional
Sales Management:
Analysis and Decision Making
Advantages
Disadvantages
Salespeople develop better
understanding of unique
customer needs
Management control over
selling allocated to different
markets
High cost
Geographic duplication
Efficiency in performing
selling activities
Geographic duplication
Customer duplication
Need for coordination
Chapter 4:
Sales Organization Structure and Salesforce
Ingram
LaForge Avila
Schwepker Jr. Williams
Hybrid Sales Organization Structure
Sales Management:
Analysis and Decision Making
Chapter 4:
Sales Organization Structure and Salesforce
Ingram
LaForge Avila
Schwepker Jr. Williams
Salesforce Deployment
Salesforce deployment decisions can be viewed as
providing answers to three interrelated questions.
Sales Management:
Analysis and Decision Making
Chapter 4:
Sales Organization Structure and Salesforce
Ingram
LaForge Avila
Schwepker Jr. Williams
Interrelatedness of
Salesforce Deployment Decisions
Allocation of
Selling Effort
Salesforce
Size
Territory
Design
Sales Management:
Analysis and Decision Making
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 to ensure proper
coverage of accounts and to provide each
salesperson with a reasonable opportunity for
success?
Chapter 4:
Sales Organization Structure and Salesforce
Ingram
LaForge Avila
Schwepker Jr. Williams
Interrelatedness of
Salesforce Deployment Decisions
Allocation of
Selling Effort
Salesforce
Size
Territory
Design
Sales Management:
Analysis and Decision Making
2,000 accounts x 25 sales calls/account = 50,000
sales calls required to cover accounts
50,000 sales calls required 1,250 sales calls/
salesperson = 40 salespeople needed
40 territories needed to provide each salesperson with
opportunity for success and to ensure proper
coverage of accounts (e.g. 50 accounts per territory)
Chapter 4:
Sales Organization Structure and Salesforce
Ingram
LaForge Avila
Schwepker Jr. Williams
Analytical Approaches to
Allocation of Selling Effort
Sales Management:
Analysis and Decision Making
Chapter 4:
Sales Organization Structure and Salesforce
Ingram
LaForge Avila
Schwepker Jr. Williams
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
Sales Management:
Analysis and Decision Making
Chapter 4:
Sales Organization Structure and Salesforce
Ingram
LaForge Avila
Schwepker Jr. Williams
Single Factor Model Example
Market Potential
Categories
Average Sales Calls to
an Account Last Year
Average Sales Calls to
an Account Next Year
25
32
23
24
20
16
16
Sales Management:
Analysis and Decision Making
Chapter 4:
Sales Organization Structure and Salesforce
Ingram
LaForge Avila
Schwepker Jr. Williams
Portfolio Models
Account Opportunity - an accounts need for
and ability to purchase the firms products
Competitive Position - the strength of the
relationship between the firm and an
account
Sales Management:
Analysis and Decision Making
Chapter 4:
Sales Organization Structure and Salesforce
Ingram
LaForge Avila
Schwepker Jr. Williams
Portfolio Model Segments and Strategies
Sales Management:
Analysis and Decision Making
Chapter 4:
Sales Organization Structure and Salesforce
Ingram
LaForge Avila
Schwepker Jr. Williams
Decision Models
Simple Basic Concept - to allocate sales calls
to accounts that promise the highest sales
return from the sales calls
Optimal number of calls in terms of sales or
profit maximization
Sales Management:
Analysis and Decision Making
Chapter 4:
Sales Organization Structure and Salesforce
Ingram
LaForge Avila
Schwepker Jr. Williams
Sales Force Size: Key Considerations
Sales Productivity
Ration of Outputs to Inputs
Sales Growth as a Result of Adding Salespeople is Curvilinear
Diminishing Marginal Returns
Salesforce Turnover
Usually Very Costly
Should be Anticipated and Managed
Organizational Strategy
Growth Targets
Selling Costs
Market Share
Sales Management:
Analysis and Decision Making
Chapter 4:
Sales Organization Structure and Salesforce
Ingram
LaForge Avila
Schwepker Jr. Williams
Salesforce Size Decisions
Sales Management:
Analysis and Decision Making
Chapter 4:
Sales Organization Structure and Salesforce
Ingram
LaForge Avila
Schwepker Jr. Williams
Analytical Tools: Breakdown Approach
Uses sales forecast to determine salesforce size
Easy to use and understand
Conceptually weak - assumes sales drives the
need for salespeople
Best suited in stable selling environments
Salesforce size = Forecasted sales / Average sales per sales person
Sales Management:
Analysis and Decision Making
Chapter 4:
Sales Organization Structure and Salesforce
Ingram
LaForge Avila
Schwepker Jr. Williams
Analytical Tools: Workload Approach
Estimation of selling effort needed is used to
determine salesforce size
Estimating selling effort needed may be simple
or complex
Conceptually sound
Number of salespeople =
Sales Management:
Analysis and Decision Making
Total selling effort needed
Average selling effort per
salesperson
Chapter 4:
Sales Organization Structure and Salesforce
Ingram
LaForge Avila
Schwepker Jr. Williams
Analytical Tools: Incremental Approach
Uses Marginal Profit Contribution and Marginal
Costs to Determine Salesforce Size
Quantifies Important Relationships Between
Salesforce Size, Sales, and Costs,
Most Rigorous Method and Difficult to Develop
Not appropriate for New Salesforces
# of Salespeople
100
101
102
103
Sales Management:
Analysis and Decision Making
Marginal Contribution
$85,000
$80,000
$75,000
$70,000
Chapter 4:
Sales Organization Structure and Salesforce
Marginal Cost
$75,000
$75,000
$75,000
$75,000
Ingram
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Salesforce Size: Other Considerations
Turnover
Salesforce Size Calculations Should Incorporate
Turnover Rates
Example: Desired Size is 100; Annual Turnover is
20%; Recruiting, Selecting, and Training Should be
Based on Salesforce Size of 120.
Outsourcing the Salesforce
Need salesforce quickly and/or for short period
Flexible
Contractual arrangements vary
Sales Management:
Analysis and Decision Making
Chapter 4:
Sales Organization Structure and Salesforce
Ingram
LaForge Avila
Schwepker Jr. Williams
Calculating Turnover
For any given time frame (e.g., month quarter,
year), divide the number of salespeople leaving
their jobs (e.g., terminated, quit, promoted) by
the total number of salespeople employed at the
mid-point of the time frame.
Example:
Sales Management:
Analysis and Decision Making
Time Frame 1 Year
Separations 50 Salespeople
# of Salespeople at Mid-Point 200
Salesforce Turnover = 25%
Chapter 4:
Sales Organization Structure and Salesforce
Ingram
LaForge Avila
Schwepker Jr. Williams
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
Sales Management:
Analysis and Decision Making
Chapter 4:
Sales Organization Structure and Salesforce
Ingram
LaForge Avila
Schwepker Jr. Williams
Territory Design Procedure
Sales Management:
Analysis and Decision Making
Chapter 4:
Sales Organization Structure and Salesforce
Ingram
LaForge Avila
Schwepker Jr. Williams
People Considerations
Analytical models dont account for people
considerations
Individual differences in buyers and accounts
Salesperson intuition
Sales managers should temper the analytical results with
people considerations before making final deployment
decisions.
Sales Management:
Analysis and Decision Making
Chapter 4:
Sales Organization Structure and Salesforce
Ingram
LaForge Avila
Schwepker Jr. Williams
