Chapter Five:

Choices in Sales Force Organization

 5.1. Principles of Organization
1. Principle of Objective:
The enterprise should set up certain aims for the
achievement of which various departments should
work. A common goal so devised for the business as a
whole and the organization is set up to achieve that
goal.
2. Principle of Specialization:
The organization should be set up in such a way that
every individual should be assigned a duty according
to his skill and qualification. The person should
continue the same work so that he specializes in his
work. This helps in increasing production in the
concern.
3. Principles of Co-ordination:
The co-ordination of different activities is an important principle of the
organization. There should be some agency to co-ordinate the
activities of various departments.
In the absence of co-ordination there is a possibility of setting up
different goals by different departments.
4. Principle of Authority and Responsibility:
The authority flows downward in the line.
Every individual is given authority to get the work done. Though
authority can be delegated but responsibility lies with the man who
has been given the work. If a superior delegates his authority to his
subordinate, the superior is not absolved of his responsibility, though
the subordinate becomes liable to his superior.
The responsibility cannot be delegated under any circumstances.
5. Principle of Definition:
The scope of authority and responsibility should be
clearly defined.
Every person should know his work with definiteness. If
the duties are not clearly assigned, then it will not be
possible to fix responsibility also.
6. Span of Control:
Span of control means how many subordinates can be
supervised by a supervisor. The number of
subordinates should be such that the supervisor
should be able to control their work effectively.
7. Principle of Balance:
The principle means that assignment of work should be such
that every person should be given only that much work
which he can perform well. Some person is over worked
and the other is under-worked, then the work will suffer in
both the situations.
8. Principle of Continuity:
The organization should be amendable according to the
changing situations.
Everyday there are changes in methods of production and
marketing systems. The organization should be dynamic
and not static. There should always be a possibility of
making necessary adjustments.
9. Principle of Uniformity:
• The organization should provide for the distribution of work
in such a manner that the uniformity is maintained. Each
officer should be in-charge of his respective area so as to
avoid dual subordination and conflicts.
10. Principle of Unity of Command:
There should be a unity of command in the organization. A
person should be answerable to one boss only. If a person is
under the control of more than one person then there is a
like-hood of confusion and conflict. He gets contradictory
orders from different superiors. This principle creates a sense
of responsibility to one person. The command should be from
top to bottom for making the organization sound and clear. It
also leads to consistency in directing, coordinating and
controlling.
11. Principle of Simplicity:
The organizational structure should be simple so that it is easily
understood by each and every person. The authority,
responsibility and position of every person should be made
clear so that there is no confusion about these things.
13. Principle of Efficiency:
The organization should be able to achieve
enterprise objectives at a minimum cost. The
standards of costs and revenue are pre-
determined and performance should be
according to these goals.
14. Scalar Principle:
This principle refers to the vertical placement of
supervisors starting from top and going to the
lower level. The scalar chain is a pre-requisite
for effective and efficient organization.
 Cont…
▪ A sales force is a complex selling unit of the firm. Its
organizational design and structure are built around its
customers and markets.
▪ Marketing is the process of planning and executing the
conception, pricing, promotions, and distribution of ideas,
goods, and services to create exchanges that satisfy individual
and organizational objectives.
▪ Market is group of customers buying our product
Salespeople work in two markets
✓ Consumer
✓ Business
 Choice of Basic Selling Style
▪ The salesperson's roles or activities can vary from
✓ company to company,
✓ depending whether sales involve goods or services,
✓ the firm's market characteristics,
✓ and the location of customers.
• For example, a person selling Avon Products performs similar,
but somewhat different, job activities than the General Electric
salesperson.
• Nevertheless, sales job roles can be grouped into
four basic styles that cut, to a large degree, across
industry and company boundaries: trade selling,
missionary selling, technical selling, and new-
business selling.
• Trade selling. The trade salesperson develops and
maintains long-term relations with a stable group of
customers. This selling style, which predominates in
marketing food and apparel and in wholesaling,
applies primarily to products that have well
established markets.
• Advertising and other forms of promotion are more
vital to overall marketing strategy than personal
selling.
• One important responsibility of the trade
salesperson is to help customers build up their
volume through providing promotional assistance.
• For example, the salesperson for a line of breakfast
cereals devotes much time to promotional work with
retailers and wholesalers—taking inventory, refilling
shelves, suggesting reorders, setting up displays, and
the like.
• Missionary selling. The missionary salesperson’s main job
objective is to increase the company’s sales volume by
assisting customers with their selling efforts.
• The missionary salesperson is concerned only incidentally
with securing orders, since orders result from the
missionary’s primary public relations and promotional
efforts with customers of the customers (indirect
customers).
• The missionary salesperson’s job is to persuade indirect
customers to buy from the company’s direct customers.
For example, the salesperson for a pharmaceutical
manufacturer calls on the physician to acquaint the latter
with a new product and to urge the him or her to prescribe
the product to patients (indirect customers). Also, the
missionary seeks to persuade pharmacists to buy from
drug wholesalers, who are the direct customers
Technical selling. The technical salesperson deals
primarily with the company’s established accounts,
and the main job objective is to increase their
volume of purchase by providing technical advice
and assistance.
• The technical salesperson performs advisory
functions similar to those of the missionary
salesperson but, in addition, sells direct to
industrial users and other buyers.
• The ability to identify, analyze, and solve
customers’ problems is important.
New-business selling. The new-business
salesperson’s main job is to find and obtain new
customers, that is, to convert prospects into
customers.
• The salesperson specializing in new-business
selling should be unusually creative and ingenious
and possess a high degree of resourcefulness.
• some experts advocate the specialization of sales
personnel into two separate groups, one to
concentrate on retaining existing accounts and
the other to focus on converting prospects into
customers.
▪ Most people believe a salesperson only makes sales
presentations, but the job involves much more than person-to-
person selling.
▪ The salesperson functions as a territorial manager—planning,
organizing, and executing activities that increase sales and
profits in a given territory.
▪ A sales territory is composed of a group of customers assigned
within a geographic area.
As manager of a territory, the salesperson performs the following
Eight functions:
1. Provides solutions to customers' problems. Customers have
needs that can be met and problems that can be solved by
purchasing goods or services. Salespeople seek to uncover
potential or existing needs or problems and show how their
products or services can satisfy those needs or solve those
problems.
 Cont…
2. Provides services to customers. Salespeople provide a wide
range of services including handling complaints, returning
damaged merchandise, providing samples,
3.Suggesting business opportunities, and developing
recommendations on how the customer can promote products
purchased from the salesperson. salespeople may even
occasionally work at the customer's business.
4. Sells to current and new customers. The new accounts is the
lifeblood of a business & brings new revenues territory is to grow.
Although new accounts are crucial, salespeople also strive to
increase the sales volume of their current customers by
encouraging them to purchase additional items.
5. Helps customers resell products to their customers. A major
part of many sales jobs is for the salesperson to help wholesalers
and retailers resell the products they have purchased
6. Helps customers use products after purchase. The
salesperson's job is not over after the sale is made. E.g. after a
customer buys an IBM computer system, technical specialists
help the buyer learn how to operate the equipment.
7. Builds goodwill with customers. A selling job is people
oriented, entailing face-to-face contact with the customer.
Many sales are based, to some extent, on friendship and trust.
The salesperson needs to develop personal, friendly, and
businesslike relationships with everyone ….
8. Provides company with market information.
Salespeople provide information to their companies on
such topics as competitors' activities, customers' reactions
to new products, complaints …market opportunities, and
their own job activities. This information is so important
to many companies that their sales people are required to
send in weekly or monthly reports on competition
activities in their territory. When combined and properly
carried out, these seven sales job activities produce a
successful sales performance.
 Sales jobs are varied and can be classified
Seven major categories:
1. Category One – inside order taker. who takes payment for products
2. Category Two – deliverer to retailers…delivery of a product to household consumers
3. Category Three – an order taker but also works in the field.
4. Category Four – is not expected or permitted to take an order but is
asked only to build goodwill or to educate the actual or potential
customer.
5. Category Five – major emphasis is placed on technical knowledge.
Engin. Salesperson who dominantly consult customer Industries like steel, chemicals, and
heavy machinery need technical inputs during negotiations with customers.

6. Category Six – demands the creative (specialty) sale of tangibles. Sales

person for Encyclopedia, automobiles, refrigerators
7. Category Seven – requires the creative sale of intangibles. Insurance,
ads….
 Applications of the sales job classifications
• An Order Taker can be defined as a sales person who collects orders but does not attempt to

find new customers or persuade existing customers to increase the size or frequency of their
orders.

• An Order Getter/Maker can be defined as a sales person who increases the firm’s sales
revenue by acquiring orders from new customer and more orders from the existing customers.

• Order takers – wait for the customer to order.

– The main problem with order takers is that they create only one distinction in the customer’s
mind: price.

• Order getters – obtain, retain, and increase business with customers.

– This salesperson must often create discontent with what the prospect already has and has to
overcome the most powerful and obstinate resistance.
Order getters build relationships.
– They develop relationships with customers though :-
• They listen more than talk.
• Their sales calls are more productive.
• They have an objective in mind.
• They evaluate and respond to the customer’s changing needs.
true salespeople are hard to find - People with the prerequisite
traits and attributes for success in creative sales are rare.
• Often, 100 to 150 or even more applicants must be interviewed to
find one qualified candidate.
• Order-getters are salespeople who actively seek
orders, and use creative and problem-solving
selling. Creative selling includes sales maintenance
(from existing customers) and sales development
(from new customers).
 Determining the Size of the Sales Force
• Having determined the kind of salesperson that
best fits the company’s needs, management now
determines how many are required to meet the
sales volume and profit objectives.
• If the company has too few salespersons,
opportunities for sales and profits go
unexploited, and if it has too many, excessive
expenditures for personal selling (even though
they may bring in additional sales dollars) reduce
net profits.
• It is difficult, perhaps impossible, to determine
the exact number of salespersons that a
particular company should have.
• Three basic approaches are used in
approximating this number:
1. The Break down Approach
2. The work-load method,
3. The incremental method.
a) The Break down Approach
• The break down approach is used to determine
the number of sales people needed to generate
a forecasted level of sales.
Sales Force Size=Forecasted Sales /Average Sales
Person
• A firm that has a forecasted sales of birr 5
million and in which each salesperson unit could
be expected to sell birr 250,000.
The sales force size would be 20 people.
• This approach fails to account for differences in:
» Ability levels of salespeople
» Potential in the market they service, and
» Levels of competition across sales territories
b)The workload approach
– In the work load method the basic assumption is that
all sales personnel should equal work loads.
The workload approach allows the number of
salespeople needed to be calculated, given that the
company knows the number of calls per year it
wishes its salespeople to make on different classes of
customers.
……..The number of salespeople could be
calculated by following a series of steps:
1. Customers are grouped into categories according to the
value of goods bought and potential for the future.
2. The call frequency (number of calls on an account per
year) is assessed for each category of customer.
3. The total required workload per year is calculated by
multiplying the call frequency and number of customers in
each category and then summing for all categories.
4. The average number of calls per week per salesperson is
estimated.
5. The number of working weeks per year is calculated.
6. The average number of calls a salesperson can make per
year is calculated by multiplying (4) and (5).
7. The number of salespeople required is determined by
dividing the total annual calls required by the average
number of calls one salesperson can make per year
• The formula is:

• The seven steps in applying the work load approach are

shown in the following example:
1. Classify customers, both present and prospective, into
sales volume potential categories.
Class A, large 150 accounts
Class B, medium 220
Class C, small 510
2. Decide on the length of time per sales call and
desired call frequencies on each class
• Class A: 60 minutes/call x 52 calls/year = 52
hours/year
• Class B: 30 minutes/call x 24 calls/year = 12
hours/year
• Class C: 15 minutes/call x 12 calls/year = 3
hours/year
3. Calculate the total work load involved in covering the
entire market. In our example, this calculation is
4. Determine the total work time available per salesperson.
Suppose that management decides that salespeople
should work 40 hours per week, 48 weeks per year
(allowing 4 weeks for vacations, holidays, sickness, etc.)
40 hours/week x 48 weeks = 1,920 hours/year
5. Divide the total work time available per salesperson by
task. Assume that management specifies that sales
personnel should apportion their time as follows:
6. Calculate the total number of salespeople
needed. This is a matter of dividing the total
market work load by the total selling time
available per sales person:
 Example 2
Customer groups No. of firms Call frequencies per Total
year
A 200 X 12 2400

B 1000 X9 9000

C 3000 X6 18000

D 6000 X3 18000

Total annual =47400

workload
Steps (1), (2) and (3) can be summarized as in Table
Step (4) gives: Average number of calls per week per salesperson = 30
Step (5) gives: Number of weeks ……………………………………………..= 52
Less:
Holidays……………………………………………..4
Illness ………………………………………………..2
Conferences/meetings ……………………..3
Total no. of non working weeks…………………….9
Number of working weeks
……………………………………………………………………………………..=43
Step (6) gives:
Average number of calls per salesperson per year = 43 × 30 = 1,290
Step (7) gives: Sales force size= 47,400 /1,290 =37 salespeople
ABC Ltd provides following information:
The company has three groups of buyers, such as:
i. Class A – Heavy Users:
There are 500 heavy users and desired call frequency is
10 calls a year.
ii. Class B – Medium Users:
There are 2000 medium users and desired call frequency
is 6 calls a year.
iii. Class C – Light Users:
There are 5500 light users and desired call frequency is 4
calls a year.
Based on experience and study, a company has concluded
that in an industry an average salesmen can make 1000
calls in a year.
Let us calculate sales force size for ABC Ltd,
Sales force size can be calculated as:
Sales force size = Total workload / Average number
of calls per salesman
= 39000 /1000
= 39
Company’s sales force size is 39 salesmen. It needs
39 salesmen to meet its workload.
C) The Incremental Approach
• This method is the most rigorous for calculating sales force
size.
• It compares the marginal profits and marginal costs
associated with each incremental salesperson.
• The major advantage is that it quantifies the important
relationships between sales force size, sales, and costs.
• However, this method is difficult to develop, and it cannot
be used for new sales forces where historical data and
accurate judgments are not possible.
 Sales organizational design
▪ Organization is a structure as well as a process of putting
together this structure.
▪ Sales organization is a structural framework,
specifying the formal authority and responsibility
between persons working in the organization.
▪ It consists of group of individuals working jointly to
attain qualitative and quantitative selling objectives.
▪ Organizational structure :- is the relatively fixed, formally
defined relationship among jobs within the firm.
▪ Organizational design refers :- to the formal,
coordinated process of communication, authority, and
responsibility for sales groups and individuals.
▪ Purposes and importance of job design
• Content
• Qualifications required to perform
• Returns and rewards for performance
 types of Sales organizations
• Sales organizations can be classified into four
basic types:
1. Line Organizations:
• Line organizations are the oldest and simplest
form of sales organization structure.
• This is the oldest type used in smaller firms and in
firms where there is a small selling force. This
limitation restricts them to narrow product line in
limited geographical area.
• All executives have line authority and each
subordinate is responsible only to one higher up.
• They have fixed responsibilities and sales
personnel reports directly to the chief sales
executive
• Lines of authority and responsibility are clear
and logical, and it is difficult for individuals to
shift or evade responsibilities
• Not appropriate when there is a large sales
staff
2. Line and Staff Sales Organizations:
• Found in large and medium sized firms selling
diversified product lines over a wide
geographical area
• Provides the top sales executive with a group
of specialists and experts in dealer and
distributors relations, sales analysis , sales
organization, sales personnel, sales planning,
sales promotion, sales training, service, traffic
and warehousing
• Staff sales executives do not have authority to
issue orders or directives.
• Staff recommendations are submitted to the top
sales executives and after approval, transmit
necessary instructions to the line organization
• Gives time to the staff executives time to study
problems before recommendations
 3. Functional Sales Organizations:
• Based upon the concept that each individual
in an organization, executive and employee,
should have as few distinct duties as possible
• Salespeople receive instructions from several
executives but on different aspects of their
work
• All specialists have line authority and they
have a function authority
• There is a great improved performance
• Not feasible for small and medium sized firms
4. Horizontal Organizations:
• Horizontal organizations are found to remove
management levels and departmental
boundaries.
• It is generally used by firms who have partnership
relationships with customers. Some of the major
advantages of horizontal organizations are
reduction in supervision, cutting on unnecessary
tasks and costs and enhancing the efficiency to
customer queries and complaints
 Staff Positions with Line Authority
▪ Line authority means that people in management positions have
formal authority to direct and control immediate subordinates.
▪ Staff authority is narrower and includes the right to advise,
recommend, and counsel in the staff specialists’ areas of expertise.
Schemes of Specialization within Sales Organizations
▪ Geographic Specialization :- Many large corporations are organized
by geographic territory. This type of organization is generally used
by companies with more than strictly local distribution of their
products. Salespeople assigned to geographic areas are responsible for selling activities to
all customers within assigned areas
▪ Product Specialization:- Another common type of organization in
large companies is based on the firm’s product. The entire company
may be organized by product, with separate sales, advertising,
marketing, and so on, along with staffs for each, or some functional
units may remain centralized.
 Cont…
▪ Customer Specialization :- Companies with several separate
and distinct markets accounting for major portions of their sales
often organize based on these markets or customers.

▪ Functional Specialization The common form where activities

are grouped based on similarity in function or content. It is
grouping jobs according to the functions of an organization.
▪ Combination of Design Elements :- Many companies organize
on the basis of some combination of functional, geographic,
product, or customer design.
__ is a combination of various types of specialization mention
 Comparison of Sales Organization Structures

Organizational
Structure Advantages Disadvantages

• Low Cost
• No geographic duplication • Limited specialization
Geographic • No customer duplication • Lack of management
• Fewer management levels control over product
or
• Salespeople become experts customer emphasis
in product attr. &
applications • High cost
• Management control over
Product • Geographic duplication
selling effort
• Customer duplication
 Comparison of
Sales Organization Structures
.
Organizational
Structure Advantages Disadvantages
• Salespeople develop
better understanding of • High cost
unique customer needs • Geographic duplication
Market • Management control over
selling allocated to different
markets

• Geographic duplication
• Efficiency in performing • Customer duplication
Functional
selling activities • Need for coordination