BUSI 3334: Personal Selling & Sales Management Lecture 3: Sales Force Organization, Demand Estimation & Metrics \u00a9 Dr. Karen Blotnicky (2015). Mount Saint Vincent University, Halifax, NS Key Points in this Lecture \uf0a7 Know how to organize a sales force using geographic, product, customer and function layouts \uf0a7 Know when to use sales territories and how to design them \uf0a7 Know when to revise sales territories \uf0a7 Understand both objective and subjective methods of estimating demand \uf0a7 Know how to develop a quota plan \uf0a7 Be able to apply marketing metrics for sales and sales management \u00a9 Dr. Karen Blotnicky (2015). Mount Saint Vincent University, Halifax, NS \uf0a7 \uf0a7 \uf0a7 \uf0a7 \uf0a7 Customer lifetime value Sales force size Sales forecasting Quota setting Quota achievement 2 Sales Forecasts 1) Specific in numerical terms 2) Related to a time period 3) Measurable at the end of that time period 4) Realistic: not overly optimistic 5) Potential sales forecast is the best case scenario if all goes according to plan 6) Actual sales are usually less than potential sales; they will only be more if a windfall occurs, or if the sales potential was not accurately analyzed. \u00a9 Dr. Karen Blotnicky (2015). Mount Saint Vincent University, Halifax, NS 250 200 Industry Potential Industry Sales Company\u2019s Potential Company\u2019s Sales 150 100 50 0 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr 3 Demand Estimation Methods Subjective Methods Sales Force Composite Jury of Executive Opinion Objective Methods Buying Power Index SIC Codes Regression Analysis Time Series Analysis Market Tests ***Buyers Intentions Survey*** Delphi Technique Buyers Intentions Surveys (market surveys)are objective if done according to the rigours of scientific market research. Otherwise, they are subjective. \u00a9 Dr. Karen Blotnicky (2015). Mount Saint Vincent University, Halifax, NS 4 Purposes of Sales Force Organization \uf0a7 Specialization of Labour \uf0a7 When the task is complex, the sales force can be broken up by function\/activity. When the selling task is not complex, the organization must be broken up by area of responsibility in order to insure timely completion of tasks, and efficient allocation of resources. \uf0a7 Stability and Continuity \uf0a7 The organization is structured by activity\u2026not people. The tasks are built into the structure and people are hired to complete the tasks. This allows the organization to be less dependent on individuals and personalities and to grow as an independent entity over time. People come and go but organizations can last a very long time (Hudsons Bay Co.) \u00a9 Dr. Karen Blotnicky (2015). Mount Saint Vincent University, Halifax, NS \uf0a7 Coordination and Integration \uf0a7 All organizations must be integrated & co-ordinated to accomplish the same objectives. This happens on three levels: 1) Tasks integrated with customer needs (shouldn\u2019t need to spend hours waiting for service, etc.) 2) Selling activities coordinated between departments (order processing must work with shipping, accounting, etc.) 3) Functions integrated when a structure is organized by function (prospecting force must coordinate with sales force, etc.) 5 Types of Sales Force Organization Horizontal Structure \uf0a7 \uf0a7 \uf0a7 \uf0a7 Geographic Product Customer Function \u00a9 Dr. Karen Blotnicky (2015). Mount Saint Vincent University, Halifax, NS Vertical Structure \uf0a7 Line organization \uf0a7 Staff organization \uf0a7 Span of control 6 Span of Control \uf0a7 The flatter organization on top, has a higher span of control, therefore less supervision for each representative (5 reps to 1 manager). This can save money because there is less hierarchy, and it may be suitable for experienced reps who require a minimum amount of guidance. However, if less management means lower sales, this is not a bargain. \uf0a7 The steeper organization, on the bottom, has a lower span of control (3 reps to 1 manager). This is suitable for complex selling situations and\/or inexperienced sales people. It is more costly, but may be more profitable. \u00a9 Dr. Karen Blotnicky (2015). Mount Saint Vincent University, Halifax, NS Manager A Subordinate A Subordinate B Subordinate C Subordinate D Subordinate E Manager A Assistant Manager A Subordinate A Subordinate B Subordinate C 7 Line vs. Line & Staff Organizations Line Organization Line & Staff Organization Line organizations have all of the managers with the appropriate authority do all of the work: supportive and managerial. This can eat up time as well as result in conflicts of interest (eg: marketing research for sales may involve reporting on one\u2019s own efficiency as a manager which may stifle objectivity & reporting). Vice President Marketing Advertising Director Sales Director Staff departments have no line authority, and offer support to the line managers. They should answer direct to the head of the unit in order to see that all relevant managerial implications flow to the top. He\/she can then handle the department the way they feel is best if improvements are to be made. This is more costly, but frees up valuable time and may result in more qualified people doing the work. Marketing Research Vice President Marketing Advertising Director Research and Development Director Subordinates Sales Director Subordinates Research & Development Director Subordinates Training and Development \u00a9 Dr. Karen Blotnicky (2015). Mount Saint Vincent University, Halifax, NS 8 Geographic Organization Structure President & Chief Executive Officer Advertising Director Sales Manager Western Division Vice President Marketing Vice President Finance Sales Director Research & Development Director Sales Manager Central Division Sales Manager Eastern Division Sales Representative New Brunswick Sales Representative Nova Scotia & Prince Edward Island \u00a9 Dr. Karen Blotnicky (2015). Mount Saint Vincent University, Halifax, NS Vice President Operations Strengths: \u2022Simplicity \u2022Low cost of overhead & sales \u2022Direct customer\/representative interaction Weaknesses: \u2022No specialization by task \u2022Less managerial control over sales effort Sales Representative Newfoundland \u2022The most commonly used org structure \u2022Often combined with other methods 9 Product Organization Structure President & Chief Executive Officer Vice President Marketing Vice President Finance Advertising Director Sales Director Research & Development Director Sales Manager Western Division Sales Manager Central Division Sales Manager Eastern Division Sales Manager Nova Scotia & Prince Edward Island Sales Manager Computer Equipment Sales Manager Office Equipment Sales Representatives Sales Representatives \u00a9 Dr. Karen Blotnicky (2015). Mount Saint Vincent University, Halifax, NS Vice President Operations Strengths: \u2022Allows specialized knowledge to occur \u2022Meets tight logistical deadlines \u2022Allows greater level of managerial control Weaknesses: \u2022Many reps interact with a single user \u2022Costly \u2022Great level of co-ordination needed \u2022Rivalry between divisions may occur 10 Customer Organization Structure President & Chief Executive Officer Vice President Marketing Vice President Finance Advertising Director Sales Director Research & Development Director Sales Manager Western Division Sales Manager Central Division Sales Manager Eastern Division Sales Manager Nova Scotia & Prince Edward Island Sales Manager Business Division Sales Manager Consumer Division Sales Representatives Sales Representatives \u00a9 Dr. Karen Blotnicky (2015). Mount Saint Vincent University, Halifax, NS Vice President Operations Strengths: \u2022A natural extension of the marketing orientation designed to provide for customers\u2019 needs \u2022High level of managerial control over selling Weaknesses: \u2022Many reps interact with a single user \u2022Costly \u2022Hard to co-ordinate selling activities \u2022Rivalry may occur between divisions 11 Functional Organization Structure President & Chief Executive Officer Vice President Marketing Vice President Finance Advertising Director Sales Director Research & Development Director Sales Manager Western Division Sales Manager Central Division Sales Manager Eastern Division Vice President Operations Sales Manager Nova Scotia & Prince Edward Island Sales Manager Prospecting Division Sales Manager Selling Division Sales Manager Service Division Sales Prospecting Representatives Selling Representatives Service Representatives \u00a9 Dr. Karen Blotnicky (2015). Mount Saint Vincent University, Halifax, NS Strengths: \u2022Allows different abilities for different selling tasks \u2022Morale can be high because people can do what they do best Weaknesses: \u2022Many reps interact with a single customer \u2022Costly \u2022Difficult to co-ordinate selling tasks \u2022Rivalry possible between divisions 12 Why Use Sales Territories? Customer Related Reasons \u2022 Can increase market coverage \u2022 Can enhance customer service \u2022 May increase sales \u2022 Can enhance customer satisfaction Sales Person Related Reasons \u2022 Creates enthusiasm..like running their \u201cown business\u201d \u2022 Better performance evaluations \u2022 Less turnover among reps \u2022 Reward related to effort \u2022 Standardized basis for comparing reps Managerial Reasons \u2022 Enhanced cost control \u2022 Coordinated promotion \u2022 Expense reduction related to operations and promotion Do Not Use Sales Territories When: \u2022When the firm is too small: needs flexibility of market coverage \u2022When product\/service is sold on social basis (eg: insurance, investments, etc.) \u2022When there are only a small number of potential users for the product \u00a9 Dr. Karen Blotnicky (2015). Mount Saint Vincent University, Halifax, NS 13 Bases for Creating Sales Territories 1) Geographic \u2013 uses geographic boundaries to divide territories. Usually done, but often in combination with some other criteria like those below. 2) Potential \u2013 territories are usually created to allow \u201cequal\u201d sales potential for reps, an \u201ceven playing field\u201d, which is also essential to allow standardized performance evaluation & motivation. 3) Servicing requirements \u2013 territories designed on the basis of the time needed to service current & future clients. This is a good idea. 4) Workload \u2013 territories designed according to travel time, number and type of accounts, competition etc\u2026 An ideal system, but complicated to do. To some extent all of these bases should be addressed for good territories. \u00a9 Dr. Karen Blotnicky (2015). Mount Saint Vincent University, Halifax, NS 14 The Six Step Approach to Designing Sales Territories 1. 2. 3. 4. 5. 6. Select the Control Unit Estimate Market Potential Form Tentative Territories Perform a Workload Analysis Adjust Tentative Territories Assign Sales Reps to Territories Control units are basic building blocks that can be combined to form tentative territories, often based on geographic boundaries. Smaller is better\u2026easier to combine & break apart small units than divide larger ones. Small units also make it easier to see & measure the sales potential of each, when larger units can hide small areas of potential. (eg: CMA, CA, census tracts, postal code areas, counties, etc.). Combine adjacent units into larger ones of approximately equal sales potential. Consider future growth as much as possible. Some firms violate the equal potential rule by having territories with varying potential for training and then promotion. Territories should also be contiguous. Perform a workload analysis. Adjust territories to allow for workload to be approximately equal. Assign sales reps to territories, such that his\/her relative contribution to profit is the highest. Try to consider differential sales ability in the assignment. \u00a9 Dr. Karen Blotnicky (2015). Mount Saint Vincent University, Halifax, NS 15 Methods of Determining Sales Force Size Breakdown Method \u2022 Simple \u2022 Treats each sales person as a sales person \u201cunit\u201d that can produce a certain amount of sales \u2022 Sales force size = Company sales forecast\/Sales from one salesperson \u2022 Example: The sales forecast is $1,000,000. Each sales person can sell $250,000 per year. Therefore, you need 4 sales people. Workload Method Incremental Method \u2022 Complex \u2022 Need to analyze workload to get a realistic estimate of what the sales person can sell \u2022 The workload analysis addresses: \u2022 Number of prospects \u2022 Prospect classification into A, B and C accounts \u2022 Amount of time to spend with each \u2022 Amount of time spent nonselling (travel, record keeping, etc.) \u2022 Amount of time needed to service market (existing and new business) \u2022 Sales force size = Time required to service market\/Selling time for single sales rep \u2022 See example on subsequent slide in this presentation \u2022 Complex \u2022 Determines how much extra sales (incremental sales) will be achieved by adding one additional rep \u2022 The more reps you add, the less they will add to sales \u2022 Stop adding reps when incremental cost = incremental profit \u2022 See example in subsequent slide in this presentation. \u00a9 Dr. Karen Blotnicky (2015). Mount Saint Vincent University, Halifax, NS 16 Classifying Potential Accounts into A, B and C Prospects You will use arbitrary methods of deciding what constitutes an A, B, or C account. You will also use arbitrary means to determine how much time to spend per meeting and how many meetings to have annually with each account. Who are Your KEY Customers? \u201cA\u201d accounts may be very labour intensive. Sometimes B accounts are easier to build and maintain. \u201cC\u201d accounts may not be profitable enough to keep. \u00a9 Dr. Karen Blotnicky (2015). Mount Saint Vincent University, Halifax, NS \u2022 Who is most profitable \u2022 Who takes most of your time? \u2022 Where is the greatest return on investment (time & money) The Pareto Principle Time % 20% 30% 50% Sales % A B C 80% 15% 5% Check company records 17 Example for Workload Method of Determining Sales Force Size Workload Analysis: The average rep needs the following time each week: Selling time: 10 appointments \u2013 15 hours Travel time: (30 minutes each meeting) \u2013 5 hours Paperwork: 2 hours Servicing clients: 8 hours Prospecting: 5 hours Total time: 35 hours weekly Total for Selling and travel time weekly = 20 hours Total Selling and travel time annually (based on 50 work weeks per year) = 1,000 hours ABC Account Classification: Accounts: 10,000 businesses in region: 20% (2,000) are A\u2019s: 2,000, 30% (3,000) are B\u2019s and 50% (5,000) are C\u2019s Time Allocation: Call on A\u2019s once monthly (2,000 calls monthly\/24,000 calls yearly) Call on B\u2019s once every two months (3,000 x 6 calls yearly=18,000) Call on C\u2019s once every three months (5,000 x 4 calls yearly=20,000) Total time for servicing market: A\u2019s: 24,000 x 1.5 hours = 36,000 hours, B\u2019s: 18,000 x 1 hour = 18,000 hours, C\u2019s: 20,000 x 30 minutes = 10,000 hours, = Total time required to service the market: 64,000 hours Calculate Sales Force Size: Number of Reps required at 1,000 hours each: 64,000 \/ 1,000 = 64 reps Time per call: A\u2019s: 1.5 hours, B\u2019s: 1 hour, C\u2019s: Half-hour \u00a9 Dr. Karen Blotnicky (2015). Mount Saint Vincent University, Halifax, NS 18 Example for Incremental Method of Determining Sales Force size Total Reps Total Revenue Incremental Revenue Profit Incremental Incremental Profit Total Cost Cost 1 $250,000 $250,000 $75,000 $75,000 $25,000 $25,000 2 $375,000 $125,000 $112,500 $37,500 $50,000 $25,000 3 $450,000 $75,000 $135,000 $22,500 $75,000 $25,000 Decision: Stop adding reps after the second rep Why? Because the incremental profit for Rep 3 is less than the incremental cost: $22,500 <\/p>\n","protected":false},"excerpt":{"rendered":"
BUSI 3334: Personal Selling & Sales Management Lecture 3: Sales Force Organization, Demand Estimation & Metrics \u00a9 Dr. Karen Blotnicky (2015). Mount Saint Vincent University, Halifax, NS Key Points in this Lecture \uf0a7 Know how to organize a sales force using geographic, product, customer and function layouts \uf0a7 Know when to use sales territories and … Read more<\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-1712","post","type-post","status-publish","format-standard","hentry","category-essaywr"],"_links":{"self":[{"href":"https:\/\/academicwritersbay.com\/writings\/wp-json\/wp\/v2\/posts\/1712","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/academicwritersbay.com\/writings\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/academicwritersbay.com\/writings\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/academicwritersbay.com\/writings\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/academicwritersbay.com\/writings\/wp-json\/wp\/v2\/comments?post=1712"}],"version-history":[{"count":0,"href":"https:\/\/academicwritersbay.com\/writings\/wp-json\/wp\/v2\/posts\/1712\/revisions"}],"wp:attachment":[{"href":"https:\/\/academicwritersbay.com\/writings\/wp-json\/wp\/v2\/media?parent=1712"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/academicwritersbay.com\/writings\/wp-json\/wp\/v2\/categories?post=1712"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/academicwritersbay.com\/writings\/wp-json\/wp\/v2\/tags?post=1712"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}