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Sales Organization Structure and
Salesforce Deployment
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.
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 Organization Concepts
• 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.
Specialization
• The 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.
Centralization
Sales Force Specialization Continuum
Some specialization
of selling activities,
products, and/or
customers
All selling activities
and all products to
all customers
GeneralistsCertain selling
activities for certain
products for certain
customers
Specialists
Centralization
Span of Control vs. Management Levels
Flat Sales Organization
Span of Control
Ma
na
ge
me
nt L
eve
ls
National
Sales
Manager
District
Sales
Manager
District
Sales
Manager
District
Sales
Manager
District
Sales
Manager
District
Sales
Manager
Span of Control vs. Management Levels
Tall Sales Organization
National Sales
Manager
Span of Control
Man
agem
en
t Leve
ls
District
Sales
Manager
District
Sales
Manager
District
Sales
Manager
District
Sales
Manager
District
Sales
Manager
District
Sales
Manager
Regional Sales
Manager
Regional Sales
Manager
Line vs. Staff Positions
National Sales Manager
Regional Sales Managers
District Sales Managers
Sales Training Manager
Sales Training Manager
Salespeople
Staff Position
Line Position
Selling Situation Contingencies
Should the salesforce be specialized?
If the salesforce should be specialized,
what type of specialization is most
appropriate?
Selling-Situation Factors and
Organizational Structure
OrganizationalStructure
EnvironmentalCharacteristics
TaskPerformance
PerformanceObjective
SpecializationHigh Environmental
UncertaintyNonroutine Adaptiveness
CentralizationLow Environmental
UncertaintyRepetitive Effectiveness
Customer and Product Determinants
of Sales Force Specialization
Geographic Sales Organization
Product Sales Organization
Market Sales Organization
Functional Sales Organization
Identifying Strategic Accounts
Large
Small
Complexity of Account
Siz
e o
f A
cco
un
t
Large
Account
Simple Complex
Strategic
Account
Regular
Account
Complex
Account
Strategic Accounts Options
Comparison of
Sales Organization Structures
OrganizationalStructure
Advantages Disadvantages
Geographic
•Low Cost•No geographic duplication•No customer duplication•Fewer management levels
• Limited specialization• Lack of management
control over product or customer emphasis
Product
• Salespeople become experts in product attributes & applications
• Management control over selling effort
•High cost•Geographic duplication•Customer duplication
OrganizationalStructure
Advantages Disadvantages
Market
•Salespeople develop better understanding of unique customer needs
• Management control over selling allocated to different markets
• High cost• Geographic duplication
Functional• Efficiency in performing selling
activities
• Geographic duplication• Customer duplication• Need for coordination
Comparison of
Sales Organization Structures
Salesforce Deployment
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?
Hybrid Sales Organization Structure
Salesforce deployment decisions can be viewed as
providing answers to three interrelated questions.
Salesforce Deployment
Interrelatedness of
Salesforce 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 to ensure proper
coverage of accounts and to provide each
salesperson with a reasonable opportunity for
success?
Allocation of
Selling Effort
Salesforce
Size
Territory
Design
Interrelatedness of
Salesforce Deployment Decisions
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)
Allocation of
Selling Effort
Salesforce
Size
Territory
Design
Analytical Approaches to
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
Market PotentialCategories
Average Sales Calls toan Account Last Year
Average Sales Calls toan Account Next Year
A 25 32
B 23 24
C 20 16
D 16 8
Single Factor Model Example
Portfolio Models
• Account Opportunity - an account’s need for and ability
to purchase the firm’s products
• Competitive Position - the strength of the relationship
between the firm and an account
Portfolio Model Segments and Strategies
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 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 and Cost Relationship
Salesforce Size Decisions
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 salesperson
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 = Total selling effort needed
Average selling effort per salesperson
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 Marginal Contribution Marginal Cost
100101102103
$85,000$80,000$75,000$70,000
$75,000$75,000$75,000$75,000
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
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: Time Frame – 1 Year
Separations – 50 Salespeople
# of Salespeople at Mid-Point – 200
Salesforce Turnover = 25%
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
Territory Design: Using Technology
• Software Optimizes Territory Design Using
Multiple User-Defined Criteria
• Compare Multiple Methods Quickly and Easily
• Examples
• Sales Territory Configurator
• Tactician
• TerrAlign
• Alignstar
“People” Considerations
• Analytical models don’t
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.
DEVELOPING FORECASTS
Appendix 4
Why Forecast?
• Determining Sales Force Size
• Designing Territories
• Establishing Sales Quotas and Selling Budgets
• Determining Sales Compensation Levels
• Evaluating Salesperson Performance
• Evaluating Prospective Accounts
Types of Forecasts
Market Potential
Sales Potential
Market Forecast
Sales Forecast
Industry Level
Firm Level
Best
Possible Results
Expected Results
for Given Strategy
Top-Down vs. Bottom-Up Forecasting
• Forecast made at the “front-line” level and then aggregated up the levels of the organization
Bottom– Up
• Forecast made at the business unit level then broken down by zone, region, district, territory, and account forecast.
Top –Down
Top-Down Approach
Bottom-Up Approach
Company Sales Forecast
Combined into district, region, and zone forecasts
Combined into territory forecasts
Salespersons’ forecasts of accounts
Company Forecasting Methods
• Moving Averages• Uses historical averages to forecast future sales
• Averages are calculated using a predetermined number of previous periods (e.g., two-year moving average; four-year moving average)
• Exponential Smoothing• Weighted moving average
• Usually most recent period is weighted heavier
• Decomposition Methods• Breakdown historical sales data into four components (trend,
cycle, seasonal, erratic)
• Evaluate the components and then reincorporate to create forecast
Moving Averages Forecast Example
Year Actual Sales Two-Year Four-Year
2008 $8,400,000
2009 $8,820,000
2010 $8,644,000 $8,610,000
2011 $8,212,000 $8,732,000
2012 $8,622,000 $8,428,000 $8,520,000
2013 $9,484,000 $8,418,000 $8,574,000
2014 $9,674,000 $9,054,000 $8,740,000
2015 $10,060,000 $9,579,000 $8,998,000
2016 ? $9,868,000 $9,460,000
Exponential Smoothing Forecast
Example
Year Actual Sales α = 0.2 α = 0.5 α = 0.8
2008 $8,400,000
2009 $8,820,000 $8,400,000 $8,400,000 $8,400,000
2010 $8,644,000 $8,484,000 $861,000 $8,736,000
2011 $8,212,000 $8,516,000 $8,627,000 $8,662,000
2012 $8,622,000 $8,455,000 $8,420,000 $8,302,000
2013 $9,484,000 $8,488,000 $8,521,000 $8,558,000
2014 $9,674,000 $8,687,000 $9,003,000 $9,299,000
2015 $10,060,000 $8,884,000 $9,339,000 $9,599,000
2016 ? $9,119,000 $9,700,000 $9,968,000
Moving Averages Forecast Example
$6,000,000
$7,000,000
$8,000,000
$9,000,000
$10,000,000
$11,000,000
2008 2009 2010 2011 2012 2013 2014 2015 2016
Actual Sales Two-Year Four-Year Exp. Smoothing
Breakdown Methods
• Use factors influencing sales at the
region, district, and territory levels
to adjust forecasts made at the
business unit level (top-down
method).
• Buying Power Index (BPI) is often
used to adjust forecasts.
• Factors should be continuously
evaluated.
Even Allocation vs. Breakdown Methods
Company Sales Forecast = $1,000,000
Region A Portion= .33 Forecast = $333,333
Region B Portion = .33 Forecast = $333,333
Region C Portion = .34 Forecast = $333,334
Company Sales Forecast = $1,000,000
Region A Breakdown Factor = .20
Forecast = $200,000
Region B Breakdown Factor = .30
Forecast = $300,000
Region C Breakdown Factor = .50
Forecast = $500,000
Bottom-Up Approach Methods
• Survey buyer intentions
• Survey buyers purchasing intentions
• Aggregate
• Jury of executive opinion
• Executives or other experts estimate sales at the account level
• Estimates are averaged or otherwise agreed upon to generate forecast
• Delphi (A form of jury of executive opinion)
• “jury” is anonymous and estimates are redistributed for revision
• “jury” review and revise estimates until consensus is reached
• Sales force composite
• Salespeople create forecasts for the accounts and territories
• Forecasts are aggregated
Forecasting with Regression Analysis
• Statistical technique using predictor variables
(factors) to forecast sales
• May be complex
• Requires collection of
predictor variable data
• Analysis may be
linear or logarithmic