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Sales organisation sales force management(2)

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Sales organisation sales force management(2)

  1. 1. SDM-Ch.5 1 Chapter 5 Organising and Staffing the Salesforce
  2. 2. SDM-Ch.5 2 In an organisation Difference between marketing and sales departments Should sales manager be reporting to marketing manager? Should sales be an independent function? Relations with Advertising, HR, Finance, Production, Accounts, Legal deptts. Should sales be an independent function?
  3. 3. SDM-Ch.5 3 Sales organisation depends on: Own sales effort or thru agents? Direct selling or through intermediaries: wholesale, C&F agent, distributor, retailer? Telesales or salesmen Payment terms, Inventories Targets Integration with management goals
  4. 4. SDM-Ch.5 4 Organising salesforce Order takers, order creators, or order getters, missionary? Geographic or product/brand? Salesmen compensation, motivation Authority, co-ordination, conflict avoidance How much centralisation? Line organisation, line-and-staff, and functional organisation Brand organisation
  5. 5. SDM-Ch.5 5 Learning Objectives To understand the concepts of the sales organisation, and the basic types of sales organisations To know specialization within the sales organisation, and alternative organizational approaches for major accounts To determine the size of the salesforce by using various methods To understand the major stages of salesforce staffing process, consisting of planning, recruiting, selecting, hiring, socialisation and assimilation To realise the importance of the various steps included in planning, recruiting, and selection stages
  6. 6. SDM-Ch.5 6 Concepts of Sales Organisation A sales organisation assists the sales manager to carry out needed tasks efficiently and effectively to achieve results The basic concepts of the sales organisation are: • Degree of centralisation • Degree of specialisation • Line or staff positions • Market orientation • Effective co-ordination
  7. 7. SDM-Ch.5 7 Basic Types of Sales Organisations Sales organisations are generally classified into four basic types: • Line Organisation • Line and staff organisation • Functional organisation • Horizontal organisation We shall discuss main characteristics, advantages, and disadvantages of each type of sales organisation
  8. 8. SDM-Ch.5 8 Line Organisation 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 Head Marketing Sales Manager Area Sales Manager1 Area Sales Manager3 Area Sales Manager2 Area Sales Manager4 salespeople salespeople salespeople salespeople
  9. 9. SDM-Ch.5 9 Line and Staff Organisation Characteristics: Specialist staff managers are available for senior marketing / sales managers. Staff managers’ 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 Head-Marketing 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
  10. 10. SDM-Ch.5 10 Functional Organisation 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 Head-Marketing Marketing Research Manager Promotional Manager Customer Service Manager Sales Manager Area Sales Manager #4 Salespeople
  11. 11. SDM-Ch.5 11 Horizontal Organisation Characteristics: Removes management levels & departmental boundaries. Except planning team, all others are members of cross- functional teams. Used by firms having partnering relationships with customers. Advantages: Reduction in supervision, unnecessary tasks, & cost; Improved efficiency and customer responses. Research & Design Team: •Customer Research •Product / Service Design Planning Team: •Strategic Planning •Accounts, Finance •HR, Administration •Chief Operation Officer Operations Team: •Production / Operations •Quality Assurance •Systems Engineering Customer Support Team: •Information •Service •Training Customer Satisfaction Team: •Sales & Marketing •Pricing, Promotion •Channels, Logistics
  12. 12. SDM-Ch.5 12 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) salesforce abilities, (3) demands of selling job, (4) customer and market facts
  13. 13. SDM-Ch.5 13 Geographic Specialisation Characteristics: salespeople, assigned geographic areas, are responsible for all selling activities to all customers within assigned areas. Branch sales managers adjust marketing plan to local needs Advantages: Better market coverage and customer service, more control over salesforce, quick response to local conditions & competition Disadvantages: Limited specialisation of marketing tasks. Hence, it is combined with product / market sales organisation Head-Marketing Marketing Research Manager General Sales Manager Promotion Manager Customer Service Manager Branch Sales Manager-1 Branch Sales Manager-2 Branch Sales Manager-3 Branch Sales Manager-4 Salespeople Salespeople Salespeople Salespeople
  14. 14. SDM-Ch.5 14 Product Specialisation Used when the company has many products and / or brands Two types of product specialisation (x). Sales organisation with product specialised salesforce (y). Sales organisation with product managers as staff specialists Head-Marketing Marketing Research Manager General Sales Manager Sales Training Manager Promotion Manager Area Sales Managers – Product Group ‘A’ Area Sales Managers – Product Group ‘B’ Salespeople – Product Gr. ‘A’ Salespeople – Product Gr. ‘B’ Fig. ‘x’ Sales Organisation with product specialised salesforce
  15. 15. SDM-Ch.5 15 Fig. ‘y’ Sales Organisation with Product Managers as Staff Specialists In fig. ‘x’: Characteristics: Salespeople in each product group sell only the products in that group Advantage: Each product gets specialised attention from the salesforce Disadvantage: Sometimes, more salespeople contact the same customer, resulting in customer dissatisfaction and higher cost In fig. ‘y’: Characteristics: Each product manager plans and implements marketing plan, for a product group Advantage: Corrects the problem of duplication calls on a customer by salespeople Disadvantage: Lack of product specialisation by salespeople Head-Marketing Marketing Research Manager Promotion Manager Product Manager Product Gr. ‘B’ Product Manager Product Gr. ‘A’ General Sales Manager Area Sales Managers Salespeople Product Specialisation (Continued)
  16. 16. SDM-Ch.5 16 Market Specialisation  Characteristics: Desirable when customers are classified by type, user industry, or channel. Salespeople carry out all activities for all products only for specific customer groups  Advantages: Meets needs of specific customer groups, implements customer- centred philosophy of the company  Disadvantages: Geographic duplication, high cost General Sales Manager Sales Manager- International- Markets Sales Manager- Commercial Sales Manager- Consumer Markets Sales Manager- Government Area Sales Mgrs International Sales Executives Area Sales Manager- Commercial Salespeople Area Sales Manager- Government Salespeople Area Sales Mgrs- Consumer Markets Salespeople
  17. 17. SDM-Ch.5 17 Combination Sales Organisation Characteristics: Many firms use some combination of specialisation organisations, called hybrid or combination sales organisation, with a view to minimise disadvantages and maximise advantages of specialisation organisations Figure above shows combination of geographic and market specialisations Director – Sales & Marketing General Manager Sales - North General Manager Sales - East General Manager Sales - South General Manager Sales - West Regional Sales Mgr. – Govt. Regional Sales Mgr. - Dealers Regional Sales Mgr. - Commercial Salespeople Salespeople Salespeople
  18. 18. SDM-Ch.5 18 Alternatives for Major Accounts Major accounts / customers are called by various names like key accounts, corporate accounts, house accounts They make up a large share of a firm’s sales volume and profits Firms use the following alternative approaches to deal effectively with them • Create a position of major / national account manager • Use existing territory sales managers • Create a separate division • Create a separate salesforce
  19. 19. SDM-Ch.5 19 Size of the Salesforce How many salespeople needed (or salesforce size) to achieve a firm’s 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:
  20. 20. SDM-Ch.5 20 Workload Method  Assumption: All salespeople have equal workload  Steps involved to  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 )5( )3( nsalespersoperavailabletimesellingtotal workloadmarkettotal =
  21. 21. SDM-Ch.5 21 Workload Method (Continued) Advantages: simple method, conceptually sound, used for all types of selling situations Disadvantages: Neglects sales productivity & salesforce turnover Sales Potential / Breakdown Method The formula used is: , where N=Number of salespeople needed, or salesforce 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 salesforce turnover Advantages: Simple and straight forward Disadvantages: Conceptually weak; lead time needed for a new salesperson to reach average productivity )1( T P S N +=
  22. 22. SDM-Ch.5 22 Incremental Method It is based on marginal analysis theory of economics 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
  23. 23. SDM-Ch.5 23 Salesforce Staffing It is one of the most challenging and important responsibilities / activities of sales management Salesforce Staffing Process includes following stages: • Planning • Recruiting • Selecting • Hiring • Socialisation We shall briefly discuss each of the above stages
  24. 24. SDM-Ch.5 24 Planning Stage It consists of three steps: • Establish responsibility for staffing process • Decide number of salespeople needed • Outline the type of salespeople needed Establish responsibility for staffing process • Company management decides responsibilities for various stages / activities of staffing process • Generally in a medium / large size company, middle and senior levels H.R. and sales managers are responsible • Proper coordination needed between sales, marketing, and HR executives
  25. 25. SDM-Ch.5 25 Planning Stage (Continued) Decide the number of salespeople needed  Steps followed by each territory sales manager to plan requirement of sales people: 1) Decide optimum salesforce size (using methods discussed earlier) 2) Add number of promotions, retirements, transfers out, terminations, resignations expected from existing salespeople 3) Subtract expected transfers into the territory and existing salesforce 4) Make a total of new salespersons needed  Territory sales managers submit their requirements to national / general sales manager, who calculates the total number of new salespersons to be hired
  26. 26. SDM-Ch.5 26 Outline Type of Salespeople Needed The steps involved in the process are: • Conducting a job analysis • Preparing a job description • Developing job qualifications / specifications Conducting a Job Analysis • It is done by a person from sales / H. R. department, or a consultant. It consists of two tasks: (1) Analyse environment in which the salesperson would work – E.G. nature of customers, competitors, products. (2) Determine duties and responsibilities of the salesperson. Obtain information from sales managers, customers, etc.
  27. 27. SDM-Ch.5 27 Preparing a Job Description It is a written document developed from the job analysis The detailed job description is a useful tool for recruiting, selecting, training, compensating, and evaluating salespeople Some of the points it generally covers are: • Job title, reporting relationship, types of products / services sold, types of customers, duties and responsibilities, location and geographic area to be covered
  28. 28. SDM-Ch.5 28 Developing Job Qualifications / Specifications These are generally based on job description Job specifications / qualifications include education, sales experience, skills, and personality traits Many studies done, but no generally accepted job qualifications for selecting salespeople, due to many types of sales jobs Some methods used for developing job specifications are as under: • Study job description. Useful for a new company • Analyse personal histories of salespersons • Ask customers
  29. 29. SDM-Ch.5 29 Recruiting Salesforce Recruiting include activities to get individuals who will apply for the job The general purpose of recruitment is to get enough qualified candidates, to enable company select the right persons H.R. and sales managers must update information on government employment regulations Recruiting stage / process includes following activities: • Finding the sources of sales recruits • Evaluating and selecting recruiting sources • Contacting candidates through the selected source
  30. 30. SDM-Ch.5 30 Finding the Sources of Sales Recruits For identifying prospective candidates, firms use internal and external sources. They include: Internal Sources External Sources • Employee referral programmes • Current employees • Promotions and transfers • Advertisements in newspapers and journals / magazines • The Internet (job sites) • Educational institutions • Employment agencies • Job fairs • Other companies
  31. 31. SDM-Ch.5 31 Evaluating and selecting Recruiting Sources Recruiting sources are evaluated based on the database built over number of years Evaluating factors are: • Performance rating of salespeople, after 2 years working • Percentage of salespeople retained, after 2 years working • Total cost of recruiting • Selecting most effective source of recruiting at least cost • For a new company, selection depends on cost Contacting candidates through the selected source is done by H. R. department
  32. 32. SDM-Ch.5 32 Selecting Salesforce Selection process consists of seven major selection steps / tools Companies differ in using selection tools, depending on expenditure budget and time available Major selection tools / steps are: • Screening resumes • Application blank • Initial interview • Intensive interview • Testing • Reference check • Physical examination
  33. 33. SDM-Ch.5 33 Screening Resumes It is done when the company receives many resumes This step / tool not required, if somebody else like employment agency does initial screening Initial screening of resumes are done by comparing with job specifications Application Blank Widely used, it is a methodical way of collecting relevant information from the applicant Advantages of using application blank (also called “formal application form”) are: (1) Easy comparison of many applicants (2) Useful for asking question during interview sessions
  34. 34. SDM-Ch.5 34 Interviews Widely used selection tool A good predictor of the candidate’s performance Initial interviews are used for screening candidates Intensive interviews are conducted to get indepth view of candidates Interview structure / type of interviews: • Structured / patterned / guided interviews • Unstructured / non-directed / informal interviews • Semi-structured interviews • Behaviour and performance based interviews • Stress interviews Purpose is to decide a candidate’s fitness for a job
  35. 35. SDM-Ch.5 35 Testing Many firms use tests as a selection tool – EG P&G, IBM Purpose of testing: To find whether applicants have traits / characteristics that lead to success in sales job Type of selection tests: • Aptitude tests measure ability for selling and learning • Intelligence tests find out mental intelligence or intelligence quotient (IQ) • Interest tests find out level of interest in a sales career • Knowledge tests measure knowledge of products, markets, etc • Personality tests find out attitude or traits like empathy, self- confidence Tests must have reliability and validity Tests should be one of the selection tools and not the only tool
  36. 36. SDM-Ch.5 36 Reference Checks They are important due to possibilities of resume frauds and false personal information They are done by letters / e-mails, telephones, or personal visits Instead of candidate’s references, previous employers / customers to be included for reference checks Physical Examination Objective is to find a physical problem that may prevent job performance of an applicant Most companies want their prospective employees to undergo physical examination Increasing number of firms ask applicant to complete the health information form without seeing a medical doctor
  37. 37. SDM-Ch.5 37 Hiring Stage After completing selection process, a list of candidates to be hired is made In hiring stage, two activities are performed: (1) The company making the job offer (2) Persuading the applicant to accept it Socialisation Stage It is the process through which new salespeople learn values, norms, attitudes, and behaviour of people working in the firm Socialisation process starts before the new salesperson accepts the job offer and continues until the person is assimilated into the company culture Assimilation is the second stage of socialisation process Companies have this process, in order to retain new salespeople
  38. 38. SDM-Ch.5 38 Key Learnings A sales organisation assists a sales manager to carry out needed tasks efficiently and effectively Basic types of sales organisations are : (1) line, (2) line and staff, (3) functional, (4) horizontal Specialisation within sales organisation, which are needed to increase effectiveness of salespeople, are: (a) geographic, (b) product, (c) market, (d) combination Companies use alternate approaches to deal effectively with major accounts Methods available for deciding optimum salesforce size are: workload, sales potential, and incremental
  39. 39. SDM-Ch.5 39 Key Learnings (Continued) Salesforce staffing process includes five stages: planning, recruiting, selecting, hiring, socialisation Planning stage includes (1) establishing responsibilities, (2) deciding number of salespeople needed, (3) profiling the type of salespeople needed Recruitment stage consists of (a) finding sources of sales recruit, (b) evaluating and selecting recruitment sources, (c) contacting candidates Selection process consists of seven steps / tools: (1) screening resumes, (2) application blank, (3) initial interview, (4) intensive interview, (5) testing, (6) reference check, (7) physical examination Hiring stage includes (a) making the job offer, (b) persuading applicant to accept it Socialisation stage is required to retain new salespeople