SALES MANAGEMENT

Sales Organisation

PURPOSE OF SALES ORGANISATION Elimination of wasted motions Elimination of duplication of efforts Maximise co-operation and minimise friction between the staff and people in the organisation

The purpose is to move both individuals and informal groups to facilitate achievements of the purposes of the organisation. To permit the development of specialists With expansion of business, the executive need to be given more power as the activities also become very complex The executives also are reluctant to delegate, and therefore it is more necessary to assign responsibility and delegate authority This is done by breaking into various units and let them work as independent units with combined responsibility at the top

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To ensure necessary activities are performed

Sales Organisation

As the organisation grows it is important to get necessary activities done (also to revise the necessary time to time) When the organisation grows the Executives touch with the customers diminishes and therefore it is important to fix responsibility to executives who specialise in customer relationship.

To achieve coordination or balance Some executives when become senior, forcefully use their Authority or fail to delegate, it is the managers responsibility to achieve coordination or balance in the organisation He has to motivate people to work towards; 1. Common objectives of the organisation 2. Impart Training programmes 3. Group meetings and 4. Improve communications

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Sales Organisation

The main responsibility would be to ensure that instead of individuals, the team works and builds organisation As far as possible, the organisation should be split into small and freely communicating, face to face groups

To define Authority The person should know whether his authority is line, staff or functional In the case of line authority, his function would be to ensure order execution While the staff authority would be to advise line executives about methods but have no power to enforce the recommendations The functional executives are those who are specialist or experts in some aspects of the business and assist the line executives

To economise on executive time As the organisation grows, it is very difficult for a senior executive to do everything and therefore he needs to delegate and save his precious time for planning the growth of the organisation by doing other functions or higher functions.

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SETTING UP OF A SALES ORGANISATION The steps for setting up the sales organisation are: 1. Defining Objectives

Sales Organisation

Top management defines long term objectives and the main objectives as; i. SALES

ii. PROFITS and iii. GROWTH 2. Determination of Activities and their Volume of Performance i. Determining the necessary activities and volume of performance

ii. These need to be split and explained at every level

3. Grouping of Activities into positions

i. To ensure each activity is then performed by somebody

ii. A position is created and iii. Group formed

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4. Assigning of personnel to Positions i. Each position is created

Sales Organisation

ii. Group formed

iii. A person is allocated

5. Provision for Coordination and Control

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Sales Organisation

BASIC TYPE OF SALES ORGANISATION STRUCTURE 1. Line sales organisation

Head Marketing Sales Manager

Area Sales Manager1

Area Sales Manager2

Area Sales Manager3

Area Sales Manager4

salespeople salespeople salespeople salespeople

Characteristics: All managers have line authority to direct and control subordinates. Used in small firms / departments Advantages: Simple organisation, clear authority, quick decisions, low cost Disadvantages: No support to line managers from subordinates who have specialised knowledge / skills. Less time for planning / analysis

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2. Line & Staff Sales Organisation
Head-Marketing

Sales Organisation

Marketing Research Manager

Sales Manager

Promotional Manager

Customer Service Manager

Area Sales Manager-1

Area Sales Manager-1

Area Sales Manager-1

Salespeople

Salespeople

Salespeople

Characteristics: Specialist staff managers are available for senior marketing / sales managers. Staff role is to assist / advise line managers. Used in medium and large size organisations
Advantages: Better marketing decisions, superior sales performance Disadvantages: High cost and coordination, slower decision making, conflict may arise if staff managers role is not clear

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3. Functional Sales Organisation
Head-Marketing

Sales Organisation

Marketing Research Manager

Sales Manager

Promotional Manager

Customer Service Manager

Area Sales Manager #4

Salespeople

Characteristics: Each functional specialist has line responsibility over salespeople. Used by a large firm with many products / market segments, minimising line authority to functional managers
Advantages: Qualified specialists guide salesforce, simple to administer Disadvantage: confusion due to more managers giving orders to salesforce

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Outsourcing of Sales Force

Sales Organisation

It is basically transfer of sales resource, including overheads such as recruiting, payroll, insurance, commissions, equipments, training etc. The supplier has the responsibility to manage the sales team to meet clients

Companies have shown inclinations towards financial and information technology, but not very interested in outsourcing sales force
The concept is that you use your resources for your competency and outsource sales force, and you get not only sales force, but also the expert advice regarding sales and other related jobs like training etc

Benefits of outsourcing
Reduce and control operating costs Improve company focus Gain access to world-class capabilities Free internal resources for other purposes Function difficult to manage/out of control Share risks Cash infusion

SALES MANAGEMENT Specialisation within Sales Organisation

Needed to increase effectiveness of salesforce Done by expanding basic sales organisation Basis of specialisation Geography Type of product Market Combination of above Criteria for selection; 1.Nature of product 2.Sales force abilities 3.Demands of selling job 4.Customer and market facts

Sales Organisation

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Size of the Salesforce

Sales Organisation

How many salespeople needed (or salesforce size) to achieve a firms sales and profit objectives is a key decision Methods available to decide optimum salesforce size are as follows: Workload Sales potential (or breakdown) Incremental We shall discuss these methods briefly:

Workload Method
Assumption: All salespeople have equal workload Steps involved to calculate salesforce size are: 1) Classify customers as per their sales potential 2) Decide time per sales call and call frequencies for each class of customers 3) Calculate total market workload = (1) x (2) in hours 4) Decide total work time available per salesperson 5) Divide total work time available by different activities per salesperson in hours 6) Calculate total number of salespeople needed

total market workload (3) total selling time available per salesperson (5)

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Sales Organisation

Workload Method (Continued) Advantages: simple method, conceptually sound, used for all types of selling situations Disadvantages: Neglects sales productivity & sales force turnover Sales Potential / Breakdown Method The formula used is: S
N P

(1 T )

where

N=Number of salespeople needed, or sales force size S=Annual sales forecast for the company in value (Rs. Million) P=Estimated productivity of the average salesperson in sales (Rs. Million) T=Estimated percentage of annual sales force turnover Advantages: Simple and straight forward Disadvantages: Conceptually weak; lead time needed for a new salesperson to reach average productivity

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Incremental Method It is based on marginal analysis theory of economics

Sales Organisation

Basic concept: Net profits will increase when additional salespeople are added, if the incremental sales revenues exceed the incremental costs
Merit: Conceptually accurate, as it quantifies relationships between salesforce size, sales, costs, profits

Demerit: Can not be used if historical data on sales and costs are not available