Sales Organization

Nature of Sales Organization

• An organization is simply an arrangement—a
working structure—of activities involving a group
of people.
• The goal is to arrange these activities so that the
people involved can act better together than they
can individually.
• The trend is toward flatter organizations in which
coordination across activities is more important
than top-down control.
 Characteristics of a Good Organization
• Organizational structure should reflect a
marketing orientation
• Organization should be built around activities,
not around people
• Responsibility and authority should be related
properly
• Span of executive control should be reasonable
• Organization should be stable but not flexible
• Activities should be balanced and coordinated
 Basic Types of Organization
• Most sales organizations can be classified mainly
into one of four basic categories:
– A line organization.
– A line-and-staff organization.
– A functional organization.
– A horizontal organization.
 Line Organisation

Nature Simplest form of organization. Authority flows

from chief executive to first subordinate, then to
second subordinate, and so on down.
When used In very small firms or within a small
department in a larger company.
Relative merits Low-cost operation; quick decision making;
highly centralized authority. Lack of managerial
specialization and frequently no replacement
for top executive, who is the owner of the firm.
 Line-and-Staff Sales Organization

Chief Marketing Executive

Advertising Marketing General Sales Sales

Manager Research Sales Promotion Analysis
Manager Manager Manager Manager

Salespeople

Line authority
Staff advisory authority
Nature Take a line organization and add staff assistants who are
specialists in various areas—advertising or marketing research, for
example. The staff executive is responsible for all planning
connected with the specialized activity, but has only an advisory
relationship with sales managers and sales reps. The same staff
executive—an advertising manager, for example—has line
authority over people in the advertising department, but is in a
staff-authority (advisory) relationship with the sales force.
When used Probably the most widely used basic form of organization in sales
departments today. Likely to be used when any of the following
conditions exist:
 Sales force is large.
 Market is regional or national.
 Line of products is varied.
 Number of customers is large.
Relative Provides benefits of division of labor and executive specialization.
merits Total cost of organization can be high, especially when staff
assistants have their own departments. Decision making is slower.
A potential problem: Strong staff executives may want to assume
line authority instead of staying in an advisory role.
 Functional Sales Organization

Chief Marketing Executive

Advertising Marketing General Credit Sales

Manager Research Sales Manager Promotion
Manager Manager Manager

Salespeople

Line authority
Staff advisory authority
Nature A step beyond line-and-staff structure in that each activity
specialist—advertising or sales promotion, for example—has
line authority over the activity in relations with the sales force.
Suppose a credit manager wants the salespeople to make
collections on delinquent accounts. A staff executive can only
recommend to the general manager that the reps do this job. A
functional executive has line authority to order the assistant
sales manager or the salespeople to do the job.
When used Large company with varied product lines and/or markets. The
key is to limit the number of executives who may use the
functional line authority. The more people giving orders to the
sales force, for example, the more opportunity there is for
trouble.
Relative Merits Advantages of specialization of labor plus the assur­ances that
functional executives' plans and pro­grams will be carried out
because the executives can order that this be done. The major
drawback is that line sales executives and the salespeople may
get orders from more than one person.
 The Horizontal Corporation

Manufacturing
Product Design and Team
Development Team Systems Engineering
Customer Research Production
Customer Analysis Quality Control
Design Engineering

Strategic Planning
Team
VP Strategic Planning
VP Finance & Information
Chief Operating Officer
Human Resources
Administration

Customer Support Customer

Team Fulfillment Team
Information Pricing and Promotion
Training Sales
Service Distribution
Research
Nature Eliminates both management levels and departmental boundaries
A small group of senior executives at the top overseeing the
support functions like human resources, finance, and long-term
planning. Everyone else is a member of cross-functional teams
which perform core processes such as product development and
sales and fulfillment. These teams are self-managed,
When used By large and small companies seeking greater efficiencies and
customer responsiveness. Firms which are establishing long-term
partnering relationships with their customers are the most likely
to adopt a horizontal structure. Various cross-functional teams
work with customers' teams to solve problems and create
opportunities for greater productivity and growth.
Relative Reduces supervision and eliminates activities that are not
Merits necessary for the process. Costs are reduced and customer
responsiveness is greatly enhanced.
Specialisation within a Sales
Department
 Factors to make decision

• Sales Force Abilities

• Market & Customer Considerations
• Nature of the Product
• Demands of the Selling Job
 Geographic Specialisation
• The most widely used system for dividing
responsibility and line authority over sales
operations
• The sales force is grouped on the basis of physical
territories.
 Geographical Sales Organization

Chief Marketing Executive

Advertising Marketing General Sales Sales

Manager Research Sales Promotion Analyst
Manager Manager Manager

Western Regional Southern Regional

Sales Manager Sales Manager

4 Area 4 Area
Sales Managers Sales Managers

Salespeople each Salespeople each

with own territory with own territory
 Benefits Drawbacks
• This structure usually ensures • There is usually no
better coverage of the entire specialization of marketing
market, as well as better activities. e.g.
control over the sales force An ASM may have to work in
and sales operations. advertising, sales promotion,
• A firm can meet local and marketing research, in
competition and adjust to addition to managing a sales
local conditions by having an force.
executive responsible for a
limited segment of the
market.
• Local management also can
act more rapidly in servicing
customers and handling their
problems.
 Product Specialisation
• The type of product sold is used as a basis for
dividing the responsibilities and activities within a
sales department.
• The 2 most widely used structures featuring
product specialization organization are
– Product operating
– Product staff organizations
 Product Operating Specialisation
• Product operating specialization is likely to be used when a
company is selling:
– A variety of complex, technical products, as in the electronics field.
(B2B)
– Many thousands of products—a hardware wholesaler, for example.
– Very dissimilar, unrelated products—a rubber company may use
three sales forces to sell (MRF)
• (a) Truck and auto tires
• (b) Rubber footwear
• (c) Industrial rubber products such as belts, bushings, and insulating
materials. 
• 3M Corporation uses separate sales forces to sell its wide
product lines.
 Sales Organization with Product-
Specialized Sales Force
Chief Marketing Executive

Advertising Marketing General Sales Customer

Manager Research Sales Promotion Relations
Manager Manager Manager Manager

Sales Manager Sales Manager Sales Manager

Product A Product B Product C

Salespeople Salespeople Salespeople

Product A Product B Product C
 Advantage
• The sales force can give
specialized attention to each
product line.
• Each line gets more executive
attention because one person
is responsible for a particular
product group.
Drawback
• Sometimes more than one
salesperson from a company
calls on the same customer.
Such duplication of coverage
not only is expensive but also
can evoke ill will from the
customers.
• Product sales managers have
no staff assistants in
advertising, sales promotion,
or other specialized marketing
activities.
 Product Staff Specialisation
• Commonly used when management wants to use staff
assistants who specialize by product, product category
or Brand.
• Each bears responsibility for planning and developing a
marketing program for a separate group of products.
• These people have no line authority over the sales force
or the sales force managers. They can only advise and
make recommendations to the line managers.  
• This specialisation is frequently used by consumer
product companies such as Hindustan Unilever Ltd.
 Sales Organization with Product-
Managers as Staff Specialists

Chief Marketing Executive

Advertising Marketing General

Manager Group Product
Research Sales
Manager Manager Manager Laundry

Regional Sales Manager Manager

Manager
Brand A Brand B

Manager
Area Sales
Manager Brand C

Salespeople
 Advantage Disadvantage

• A company can use this • Not having salespeople

structure when it wants specialize in a limited line
some of the advantages of products.
of specialization by
product line at the
planning level but does
not need the
specialization at the
selling level
 Market Specialisation
• Divide the line authority in the sales departments on
the basis of type of customer, classed either by
industry or by channel of distribution.
• The sales manager in charge of each industry group is
a line-operating executive with authority over one
group of salespeople.
• These executives have no staff assistants under them.
• Each sales rep sells the full line of products used by
the customer group.
 Sales Organization Specialized by Type
of Customer

Chief Marketing Executive

Advertising Marketing General Sales Customer

Manager Research Sales Promotion Relations
Manager Manager Manager Manager

Sales Manager Sales Manager Sales Manager

Transportation Steel Industry Petroleum Industry
Industry

Salespeople Salespeople Salespeople

• Market specialization is consistent with the
customer orientation philosophy that underlies
the marketing concept.
• Among the companies that already have made
the market specialization move in their sales
organizations are such well known names as
Bharti Airtel,SBI & Infosys.
• The reps are industry experts who sell primarily
to customers within specific industries. This
focus on customers is widely credited for the
company's double-digit sales growth.
 SBI Customer Departmentation

PRESIDENT

Community Corporate Govt banking

banking banking

NRI Agricultural
banking

Wholesale SME
banking banking
 Limitations

• It causes overlap in territorial coverage and

therefore is costly.
• Also, unless separating the sales force by markets
results in some product specialization, the
customer-based organization may include the
disadvantages of full-line selling.
 
Organizational Options for the 2000s

Strategic account
management

Independent Organizational
E-commerce and
reps Options for the telemarketing
2000s

Team selling
1. Strategic Account Management
 Buying Centers

• The buying center may be defined as all the individuals

involved in the purchasing decision process.
• A buying center usually includes people who play any
of the following roles:
– Users of the product.
– Influencers who set the product specifications.
– Deciders who make the actual purchasing decision.
– Gatekeepers who control the flow of purchasing
information.
– Buyers (purchasing agents) who process the purchase
orders.
 The Relationship Between a
Sales Team and a Buying Center
Organizational Sales- Exchange Purchasing Organizational
selling center person Process Agent buying center

Marketing Information
Purchasing
Sales Problem Solving
Manufacturing
Manufacturing Negotiation
Friendship, Trust R&D
R&D
Engineering Product/Services Engineering
Payment
Physical Marketing
Distribution Reciprocity
2. Team Selling
 Otis,Carrier & UTC Fire &
Security to work in Concert
• The market for commercial air conditioning,
elevators & security systems to double from $3.2
Bn(2010) in next 5 years.
• Rapid urbanisation & upgrade of infrastructure to
drive growth.
• UT wants to increase its share from 15% in 2010
to 30%.
• UT expects buy-in from architects and city
planners for such integrated offerings.
• Air Conditioning,elevators and security systems are
bought by real estate developers for residential &
commercial buildings,airports,hotels & hospitals.
• Instead of selling each of these products separately
to the developer,UT will offer all together in one
solution.Surveillance equipment, for instance can
detect when a conference room is unoccupied &
turn the AC down automatically. Smart elevators
can reduce travel time within buildings.
• For the developer,it is lesser hassle,some savings &
optimisation of operating expenses.
 Betting on Green
• India has stringent emission targets for 2020.
• Buildings account for 40% of emissions & that can be
improved by 70% by using better technologies.
– Buyers of otis have the option to buy ReGen, a regenerative
elevator.When it goes down & gravity takes over,it becomes a
generator and converts potential energy into electrical energy.
– Carrier offers variable speed chillers which cut operational
expenditure by 40%.
– Marioff fire extinguishers use 90% less water than conventional
sprinklers, & do not damage the site of the fire-they term a thin
film on the surface which can just be wiped away with a piece of
cloth.
• Environment friendly equipment is expensive but the
payback is not more than 2-3 years.
 Building Synergies
• To integrate the 3 businesses,UT has formed 3 councils:
• Marketing Council – It ensures that all sales pitches are made
by a team that has representatives from all 3 Co’s.The potential
customer gets to see one face of UT.
• Operations Council
– It looks at synergies in sourcing products like steel,services like
logistics & manpower.
– Manufacturing Excellence – All UT factories across the world are
ranked gold,silver or bronze on the basis of their competitive
excellence.
– New Production Capacities
– Vendor Development
• HR Council – It focusses on how the 3 Co’s can share talent to
grow the business.
3.Independent Sales Organizations
3.1 Independent Agents
3.2 Brokers
3.3 Wholesale Distributors
Independent versus Company Reps
 Captive versus independent sales rep

Rs Cost
Independent rep

Captive rep

Rs Sales
 E Commerce and Telemarketing

• Identify prospective customers

• Screening, qualifying leads
• Sales solicitation: small customers, reorders
• Order processing
• Product service support
• Account management
• Customer relations
• Competitive reporting
• Expense reporting
Choosing an Independent Agent
Managing the Independent Sales Force
Organizing for International Sales