Sales Organization Structure

and Salesforce Deployment

Sales Management:
Analysis and Decision Making

Chapter 4:
Sales Organization Structure and Salesforce

Ingram

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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

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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

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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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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

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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

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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
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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

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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

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Geographic Sales Organization

Sales Management:
Analysis and Decision Making

Chapter 4:
Sales Organization Structure and Salesforce

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Product Sales Organization

Sales Management:
Analysis and Decision Making

Chapter 4:
Sales Organization Structure and Salesforce

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Market Sales Organization

Sales Management:
Analysis and Decision Making

Chapter 4:
Sales Organization Structure and Salesforce

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Functional Sales Organization

Sales Management:
Analysis and Decision Making

Chapter 4:
Sales Organization Structure and Salesforce

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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

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Strategic Accounts Options

Sales Management:
Analysis and Decision Making

Chapter 4:
Sales Organization Structure and Salesforce

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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

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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

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Hybrid Sales Organization Structure

Sales Management:
Analysis and Decision Making

Chapter 4:
Sales Organization Structure and Salesforce

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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

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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

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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

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Analytical Approaches to
Allocation of Selling Effort

Sales Management:
Analysis and Decision Making

Chapter 4:
Sales Organization Structure and Salesforce

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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

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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

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LaForge Avila
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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

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Portfolio Model Segments and Strategies

Sales Management:
Analysis and Decision Making

Chapter 4:
Sales Organization Structure and Salesforce

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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

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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

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Salesforce Size Decisions

Sales Management:
Analysis and Decision Making

Chapter 4:
Sales Organization Structure and Salesforce

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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

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LaForge Avila
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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

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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
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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

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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

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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

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Territory Design Procedure

Sales Management:
Analysis and Decision Making

Chapter 4:
Sales Organization Structure and Salesforce

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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

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