ORGANIZING THE SALES

EFFORT
Chapter 4
 Chapter Four Outline
 Deciding on a Company Sales Force or Independent
Agents
 Horizontal Structure of the Sales Force
1. Geographic Organization
2. Organization by type of product
3. Organization by type of customer
4. Organization by selling function
• Organizing to service National and Key Accounts
• Multilevel Selling
• Vertical Structure of the Sales Organization
Deciding on a Company Sales Force or
Independent Agents
 There is no best way to divide the selling activities
among members of the sales force.
 Companies first have to decide if they should hire
their own salespeople or use outside agents.
 It is not uncommon for companies to use both its
salespeople and independent agents.
 The term outsourcing the sales force is used to
describe companies who use agents instead of their
own sales force.
Deciding When Outside Agents Are
Appropriate
 Four important sets of factors for a manager to
consider are
 (1) economic criteria,
 (2) control,
 (3) transaction costs, and
 (4) strategic flexibility.
Deciding on a Company Sales Force or
Independent Agents
 Types of Agents:
 The most common types of intermediaries that a
manufacturer uses to perform the selling function
are:
1. Manufacturer’s Representatives
2. Selling Agents
Deciding on a Company Sales Force or
Independent Agents
1. Manufacturers’ Representatives: Are
intermediaries who sell part of the output of their
principals-the manufacturer they represent-on a
extended contract basis.
 They take neither ownership nor physical
possession of the goods they sell but concentrate
instead on the selling function.
 They are compensated solely by commissions.
Deciding on a Company Sales Force or
Independent Agents
 Manufacturers’ Representatives do not have the
authority to modify the manufacturer’s instructions
concerning the prices, term of sale to potential
buyers.
 Manufacturers’ reps usually cover a specific and
limited territory and specialize in a limited range
of products.
 They may represent several related but
noncompeting product lines from different
manufacturers.
Deciding on a Company Sales Force or
Independent Agents
 2. Selling Agents are also intermediaries who do not
take title or possession of the goods they sell and are
compensated by commission from the manufacturer.
 IBM, Xerox,
 They differ from manufacturers reps in that they
represent the entire output of the manufacturer.
 Selling agents operate as the entire sales force for the
manufacturer rather than a representative in a single
territory.
 Selling agents usually have more authority to modify
prices and terms of sales.
 1. The starting point in organizing a sales force is determining the goals to be
accomplished, as specified in the firm's overall marketing plan.
 TRUE


 2. Division and specialization of labor increase productivity.

 TRUE


 4. Manufacturers' representatives are intermediaries who take neither ownership

nor physical possession of the goods they sell, but concentrate instead on the selling
function.
 TRUE


 5. One of the criteria for selecting a sales representative is finding someone with
compatible product lines.
 TRUE


 6. Large firms typically rely on external agents rather than creating their own sales
force.
 FALSE
 Horizontal Structure of the Sales Force

 Four common bases are used for structuring the

sales effort and each has special advantages:
1. Geographic Organization
2. Organization by type of product
3. Organization by type of customer
4. Organization by selling function
 1. Geographic Organization

 The simplest and most common way of organizing

a company’s sales force is by geographic
organization.
 Each salesperson is assigned to a separate
geographic territory.
 Each salesperson is responsible for performing all
the activities necessary to sell all the products in the
company’s product line to all potential customers in
the territory.
 1. Geographic Organization
 Advantages of a geographic organizational structure:
 1. Lower costs: Smaller territories which means less travel time and
expenses.
 Fewer managerial levels which also reduces cost.
 2. No confusion on who the salesperson in the territory is and who
the customer should talk to when there is a problem.
 Disadvantages of a geographic organizational structure:
 1. No benefit of the division of labor and specialization. Each
salesperson has to perform all the selling functions.
 2. Salespeople may focus most of their efforts on the selling
function that they do best and on the products and customers they
perceive to be the most rewarding even if it is not consistent with
management policy.
2. Organization by Type of product

 Some companies have separate sales force for each

product or product category in their line.
 Advantages of organizing a sales force by type of product:
 1. Salespeople develop familiarity with the technical
attributes, applications, and the most effective selling
methods associated with a single product or related
products.
 2. Closer cooperation between sales and production
because each product is produced in a separate factory.
 3. Allows sales management to control the allocation of
selling effort across various products in the company
according the selling needs of each product.
 2. Organization by Type of product
 Disadvantages of organizing a sales force by type of
product:
 1. Duplication of sales effort: Salespeople from
different product divisions are assigned to the same
geographic area and may call on the same customers.
 2. Higher selling and administrative expenses: More
coordination and more sales managers.
 3. Confusion and frustration among a company’s
customers who must deal with two or more salespeople.
 Product organization are used by companies who have
large and diverse product lines and highly technical
products.
 3. Organization by type of customer
 Organizing a sale force by customer type is a natural
extension of the marketing concept and reflects a strategy
of segmentation.
 Advantages of organizing a sales force by type of customer:
 1. Salespeople specialize in a particular type of customer
and gain a better understanding of the customer needs.
 This could lead to the discovery of new ideas for new
products and marketing approaches that will appeal to the
customer.
 The disadvantages of organizing a sales force by type of
customer is very similar to the disadvantages of organizing
a sales force by type of product.
 4. Organization by Selling Function
 Different salespeople specialize in performing different
selling functions.
 Examples of organizing the sales force by selling functions:
 1. One sales force specializes in prospecting for new
accounts and a second sales force specializes in
Maintaining and servicing the new customers.
 The problems with this approach is a prospect may
want to keep using the same salesperson after
becoming a customer.
 There maybe rivalry and jealousy between the two
sales forces.
 Organization by Selling Function
 2. Some companies use developmental salespeople in
addition to the regular sales force.
 Developmental salespeople are responsible for
assisting in the development and early sales of new
products.
 Developmental salespeople:
1. Conduct market research
2. Assist the firm’s research and development and
engineering departments.
3. Sell new products as they are developed.
 Organization by Selling Function
 3. Some companies use inside telephone salespeople and outside
field salespeople to accomplish separate selling objectives.
 Telemarketing is useful for carrying out the following activities:
1. Prospecting for and qualifying potential new accounts.
2. Servicing existing accounts quickly when unexpected problems
arise.
3. Seeking repeat purchases from existing accounts that cannot be
covered efficiently in person.
4. Gaining quicker communication of newsworthy developments, such
as the introduction of new or improved products or special sales
programs.
 Organizing to service National and
Key Accounts
 Companies have developed special organizational
arrangement for the major account management
function.
 1. Assigning key accounts to Sales Executives:
Important customers are served by people who are
high enough in the organizational to make decision
and provide flexible and responsive service.
 2. Create a corporate division to deal with major
accounts.
 3. Create a separate sales force for key accounts.
 Multilevel Selling
 In multilevel selling, the sales team consists of
personnel from various managerial levels who call
on their counterparts in the buying organization.
 Example: The selling company’s account manager
might call the buying company’s purchasing
department manager.
 When the interaction takes place at the highest
levels of both firms, the process is called top-to-top
selling.
 Vertical Structure of the Sales
Organization
 The vertical organizational structure clearly
defines what managerial positions have the
authority for carrying out specific sales
management activities.
 Two key questions that must be answered in
designing an effective vertical structure for a sales
organization:
 1. How many levels of sales managers should there
be?
 Tall or flat organization
 Vertical Structure of the Sales
Organization
 2. How many people should each manager
supervise or span of control?
 The span of control should be smaller and the
number of levels of management should be larger
when:
 1. The sales task is complex
 2. The profit impact of each salesperson
performance is high.
 3. The salespeople in the organization are well
paid and professional.
 Vertical Structure of the Sales
Organization
 Another important question to be addressed is how
much authority should each manager be given in
managing subordinates.
 Where should the authority to hire, fire, and evaluate
field salespeople be located in the organization?
 In some organizations, first-level field or district sales
managers have the authority to hire their own people.
(salespeople who perform routine selling tasks)
 In other organizations, the authority to hire and fire is
located at higher management levels. (professional
salespeople who perform complex selling tasks and
have a major impact on profit.
 8. The simplest and most common method of organizing a company's sales force is
to assign individual salespeople to separate geographic territories.
 TRUE

 9. The major disadvantage of geographic sales organization is its emphasis on

specialization of labor.
 FALSE

 10. The major disadvantage of a sales force organized by product type is

duplication of effort.
 TRUE

 11. A manufacturer of security systems that organized its sales force by home
owner, store owner, warehouse owner and manufacturing facility would be
organizing by product type.
 FALSE

 12.A company that has organized its sales force into telemarketers and outside
field salespeople has organized by selling function.
 TRUE
 81.How does telemarketing fit within a sales
strategy?
 Telemarketing is good for prospecting, quick
servicing of accounts, seeking repeat business from
existing accounts and quick dissemination of
information, new product changes and other news.
 87. Why do most sales and marketing managers
believe company salespeople are more likely to
produce a higher volume of total sales than agents?
 Company salespeople concentrate entirely on the
firm's products, are usually better trained and tend
to be more aggressive since their future depends on
the company's success. Also, customers prefer to
deal directly with a supplier.
 Intronics Corporation, a manufacturer of electronic
circuit boards, reaches the market through the
services of 75 manufacturers’ agencies. Most of the
agencies average two sales agents who call on
Intronics customers. The agents also represent seven
to eight other manufacturers that produce
noncompetitive products. Intronics wants to eliminate
the agents and develop its own company sales
force. How many salespeople do you think Intronics
will have to hire? What issues affect your
assessment of how many salespeople are needed?
 References
 Johnston & Marshall (2016) , Sales Force
Management, 12th edition, McGraw-Hill,
International Edition.