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Chapter 4
Organizing the
Sales Effort

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Learning Objectives
Identify the purposes of sales organization.
Understand the different horizontal
organizational structures of a sales force.
Outline the major issues in key account and
team selling.
Discuss key vertical structure issues in sales
organizations.
Identify important issues in starting a new sales
force from the ground up.
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Importance of Sales Organization Decisions

Organizing the activities and management of the
sales force forms a major part of strategic sales
planning
Managers are becoming more proactive in
restructuring
A strong corporate vision and effective strategic
market planning are closely linked with how the
organization is structured and how it interacts
with its customers

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Purposes of Sales Organization

Activities should be divided and arranged in
such a way the firm can benefit from the
specialization of labor.
The organizational structures should provide for
stability and continuity in the firms selling efforts.
The structure should provide for the coordination
of activities assigned to different persons in the
sales force and different departments in the firm.

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Division and Specialization of Labor

Increase productivity - each specialist can
concentrate efforts and become more proficient
at the assigned task
Divide required selling activities to gain
maximum benefits of specialization within the
sales force
Line organization - vertical organization, chain of
command runs from the chief sales executive
down through levels of subordinates

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Division and Specialization of Labor

Line and staff most common design
Concerns
What specific functions should be assigned to
staff?
How can staff activities be integrated with line
sales manager activities?
Should staff activities be performed in-house
or outsourced to independent contractors?

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Organize for Stability and

Continuity
Organize activities without regard to the
talents or preferences of current
employees.
People can be trained or recruited to fill
positions.
The same activities will be carried out at
the same positions within the firm even if
designated individuals receive promotions
or leave.
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Coordination and Integration

The more an organization divides tasks
among specialists, the more difficult
integrating those tasks becomes.
Issues:
Sales force activities must be integrated
with customer needs.
Selling activities must be coordinated with
other departments.
Tasks must be integrated.
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Outsourcing the Sales Force

Manufacturers Representatives
intermediaries who sell part of the output of
their principals.
Take neither ownership nor physical
possession of the goods they sell.
Cover a specific territory and specialize in a
limited range of complementary products.

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Outsourcing the Sales Force

Advantages of Manufacturers Reps
Many established contacts and prospects
Familiarity with the technical nature and
applications of specialized products
The ability to keep expenses low by spreading
selling costs
They appear as a variable cost item on their
principals income statement

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Outsourcing the Sales Force

1.
2.
3.
4.
5.
6.

Six Cs of finding the right rep

Compatible lines
Compatible territories
Compatible customers
Credibility of the rep
Capabilities
Credits

Source: Dan Hanover, Independents Day, Sales & Marketing Management, April 2000, pp. 6568.
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Outsourcing the Sales Force

Selling Agents
Intermediaries who do not take title or
possession of the goods they sell
Compensated by commissions from their
principals
Have broad authority by their principals to
modify prices and terms of sale
Actively shape the manufacturers
promotional and sales programs
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Considerations for Outsourcing the

Sales Force

Economic Criteria
Control
Transactions costs
Strategic Flexibility

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Common Bases for Structuring the

Sales Effort

Geographic organization
Product organization
Organization by customer type or markets
Organization by selling function

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Geographic Organization
Simplest and most common method
Individual salespeople assigned to
separate geographic territories
Each salesperson is responsible for
performing all activities necessary to sell
all the products

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Geographic Organization
Advantages
Tends to achieve
lowest costs
Travel time and
expenses are
minimized.
Sales administration
and overhead costs
are kept low.
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Disadvantages
It does not provide
any benefits
associated with the
specialization of labor.

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Product Organization
A separate sales force for each product (or category) in the line.
Advantages
Individual salespeople
master effective selling
methods for single or
related products.
Closer alignment of sales
and production possible.
Sales management
controls the allocation of
the selling effort across
the line.

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Disadvantages
Duplication of effort.

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Organizing by Customer Type or Markets

Organizing a sales force by customer type is a natural
extension of the marketing concept and a strategy of
market segmentation.
Advantages
Better understanding of
customer needs
Increased familiarity with
certain businesses
Increased control over
the allocation of the
selling effort
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Disadvantages
Possible higher selling
and administrative costs
Duplication of effort

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Organizing by Selling Function

Different salespeople specialize in
performing different selling functions e.g.
prospecting and developing new accounts
versus maintaining and servicing existing
customers.

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Role of Telemarketing
Prospecting for and qualifying potential
new accounts
Servicing existing accounts quickly when
unexpected problems arise
Seeking repeat purchases from existing
accounts that cannot be covered efficiently
in person
Gaining quicker communication of
newsworthy developments
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National and Key Accounts

Organizational approach to deliver customer
service necessary to attract and maintain large
and important customers.
Sales execs must be able to . . .
be business managers capable of managing key
accounts
customize products and services
plan and implement key account business plans

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Organizing for National and Key

Accounts
Assign key accounts to top sales
executives
Create separate corporate division
Create a separate sales force to handle
major accounts

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Team Selling
Team selling integrates functional
specialists with customer relationship
specialists.
Benefits include:
Questions answered faster
People with similar interests speak directly
with one another

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Team Selling
A selling center brings together individuals
from around the organization
A matrix organization employs directreporting salespeople who support internal
consultants with specialized expertise

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Alternative Organizations
Multi level selling sales team consists of
personnel from various managerial levels
who call on their counterparts in the
buying organization
Co-Marketing Alliances develop
marketing and sales programs to sell
integrated systems directly to the ultimate
customer
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Logistical Alliances and

Computerized Ordering
From the customer point of view,
computerized ordering is
Convenient,
Flexible and
Less time consuming

How will computerized reorder systems

change the role of the sales force?

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Vertical Structure of Sales

Organizations
Key questions:
How many levels of sales managers should
there be?
How many people should each manager
supervise? (span of control)

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Vertical Sales Organization

Generally, span of control should be
smaller and number of levels of managers
larger when:
The sales task is complex
The profit impact of each salespersons
performance is high
The salespeople in the organization are well
paid and professional

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Vertical Sales Organization

Span of control should be smaller at
higher levels in the sales organization
Other issues:
How much authority should each manager be
given?
At what level of sales management should
authority for different decisions lay?

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Building Blocks for New Sales

Force Startup
1.
2.
3.
4.
5.
6.

Start with a strategy

Appoint an expansion team
Leverage existing strengths
Go to the press
Avoid compensation snafus
Provide support

Sales managers assigned to create a new sales

force can employ best practices
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Key Terms

division and specialization of labor

line organization
line and staff organization
outsourcing the sales force
manufacturers representatives
selling agents
transaction cost analysis (TCA)
geographic organization
product organization
organization by customer type

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organization by selling function

telemarketing
national or key accounts
team selling
selling center
matrix organization
multilevel selling
co-marketing alliances
logistical alliances
span of control

Copyright 2006 by The McGraw-Hill Companies, Inc. All rights

Mark W. Johnston
Rollins College
McGraw-Hill/Irwin

Greg W. Marshall
Rollins College
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