Sales Management

Lecture IV
 Goals/Objectives/Culture
• Mission and objectives drive customer
management approaches
• A well-defined mission + successful corporate
history + top management values = strong
corporate culture
 Personnel
• Modern sales organizations are highly
complex and dynamic
• Often difficult to expand to take advantage of
growing markets
• Utilizing outside specialists can help firms
meet need to expand
 Financial Resources
• Lack of financial resources can:
– constrain ability to develop new products
– limit promotional budget
– limit size of sales force
 Production and Supply Chain
Capabilities
• Production capacity
• Location of production facilities
• Transportation costs
• Ability to ensure seamless distribution and
service after the sale
 Service Capabilities
• Opportunity for strong competitive advantage
• Difficult for other firms to compete for same
customers
• Customers reluctant to switch regardless of
price
R&D and Technological Capabilities
• Excellence in design and engineering provide
major promotional appeal
• Ability to communicate technological
sophistication as value-add helps prevent
over-reliance on price to get sales
 Trends Affecting
Personal Selling
Salespeople must adapt to 3 major trends in
order to enhance their effectiveness and
efficiency.
1. Behavioral Forces
• More Expert and Demanding Buyers
• Rising Customer Expectations
• Micro-Segmentation of Domestic Markets
• Expanding Power of Retailers
• Globalization of Markets
2. Technological Forces
• Portable computers
• Electronic Data Interchange
• Sales Force Automation
• Videoconferencing
• Portable phones and Satellite Pagers
• Voice mail
• Facsimile machines
• Electronic mail
• Electronic commerce
• Virtual Sales Office
3. Managerial Forces
• Selling Cost Reduction Efforts
• Shift to Direct Marketing Alternatives
• Certification of Salespeople
 Four Major Trends in
Information Management
1. Database Marketing
• A database is a large computerized file of customers’
and potential customers’ profiles and purchase
patterns.
2. Data Warehousing
• A very large, corporate-wide database, built with data
from a number of information systems already in place
in the company.
3. Data Mining
• Refers to the process of using statistical analysis to detect
relevant patterns or relationships between and among
variables in a database.

4. Push Technology
• Push technology is the latest iteration of e-mail
combined with data warehousing to discern what your
customers need and exactly when they need it.
 Information Management and
Relationship Selling

• Information management and relationship

selling go hand-in-hand as part of the
evolutionary development of a marketing
strategy called one-to-one marketing to build
relationships:
 Information Management and
Relationship Selling

– One-to-One Marketing
• Instead of trying to increase market share by selling
more goods to more customers, one-to-one marketing
concentrates on selling more goods, more profitably to
fewer selected customers
– Salespeople One-to-One Relationship Builders
• Building trust and long-term relationships with
customers will determine the success of one-to-one
marketing strategies, especially in business-to-business
markets
 Professional Salespeople as Micro-
marketing Managers
• In addition to selling products, today’s sales representatives
must serve customers as consultants who can offer expert
advice for improving a customer’s lifestyle or making their
business operations more profitable
– Customer partners
– Market analysts and planners
– Buyer-seller team coordinators
– Customer service providers
– Buyer behavior experts
– Opportunity spotters
– Intelligence gatherers
– Sales forecasters
– Marketing cost analysts
– Allocators of scarce products
– Field public relations people
– Adopters of advanced sales technology
Key Account Selling
 Definition of Key Account
What is a Key Account?
• Key Accounts are the 20% of customers who provide
80% of your profits
• Key Accounts are defined as the prospects or existing
customers who have the potential or now fall in the
80/20 category.
• Any customer that is of strategic importance to your
company – loss of it of inability to secure potential
future revenue would cause a significant impact.
ACCOUNTS PROFITS
20%

80%
80%

20%
 80/20 principle
• For all corporations, some form of 80/20 rule
operates.
• e.g. 80% of the firm’s revenues is supplied by 20% of
its customers.
• If this rule, or a close variant (90/10; 75/25),
operates in the firm’s customer environment, the
critical business implication is that these 20% (or
10% or 25%) of customers have an importance to the
firm’s long-run future that exceeds that of the
“average” customer
 Definition of
Key Account Selling
A systematic set of processes in identification &
profiling of key accounts, design and
adaptation of information-based & value-
added selling strategies, profiling own market
positioning for high sustainability of growth in
sales.
• Key account management is a strategy used by suppliers to target
and serve high potential customers with complex needs by
providing them with special treatment in the areas of marketing,
administration and service. In order to receive key account status, a
customer must have high sales potential.

• A second characteristic is that of complex buying behaviour; for

example, large decision-making units with many choice criteria are
often found in dispersed geographical locations. The decision-
making unit may be located in a different functional area. Third, key
account status is more likely to be given to customers willing to
enter into a long-term alliance or partnership.

• Such relationships offer buyers many benefits including reliability of

supply, risk reduction, easier problem solving, better
communications and high levels of service.

• Key accounts that are geographically spread are often called

national accounts.
 According to Hise and Reid, conditions needed to
ensure the success of key account management are:
• integration of the key account programme into the company’s
overall sales effort

• senior management’s understanding of, and support for, the key

account unit’s role

• clear and practical lines of communication between outlying sales

and service units

• establishment of objectives and missions

• compatible working relationships between sales management and

field salespeople

• clear definition and identification of customers to be designated for

key account status.
• Key account handling requires a special kind of
attention from the seller that may be beyond the
capacity of the regular field sales force.
• Some of the key responsibilities of key account
managers are: planning and developing relationships
with a wide range of people in the customer firms,
mobilising personnel and other resources in their own
firms to assist the account, and coordinating and
motivating the efforts and communication of their
company’s field salespeople in their calls on the various
departments, divisions and geographical locations of
the key account.
What are the long-term benefits of running Key
Account program
• Economies of scale in selling
– Improved understanding of key account’s goals, and
requirements
– Enhanced ability to manage complex relationships
• Sustainability of sales
– Increased key account switching costs
• Credible reference for greater market penetration
• Constant feedback to research and development for
product and service improvements
What is the value of a Key Account program for
the individual key account customer?
• A single point of contact
• Lower overall costs
• Enhanced value with prioritized attention from
distributor
• Guaranteed delivery when capacity is short
• Long-term relationship
– Joint identification of opportunities and solutions to
problems in win-win partnership
 What has it to do with 80/20
principle?
• Understand who are your 80/20 customers, their
needs and profile
• Redeployment of sales efforts and resources
• Understand your own ranking, positioning, growth
potential or 80/20 status in your key customers
suppliers profile – seek improvement – adopt
aggressive growth strategy
 Redeployment of sales efforts and
resources
• High value customers should be treated
differently from the “average” customers
• They should receive a disproportionate share
of resources and are worthy of greater
managerial attention
 How about the small customers?
• 20% of your firm’s revenues are derived from
80% of its customers.
• Stop serving small customers?
• Identify less expensive methods for the firm to
deal with these accounts
Cautions for Key Account Management
• Too many eggs in one basket
• Insufficient benefits to the distributor
• Insufficient benefits to the potential key
account
• Limitation of opportunities
• Cost and Bureaucracy
• Significant organizational change
Selecting Key Accounts - Criteria
• Direct Sales Revenue and Profit
– Current Sales Revenue
– Current Profits
– Future Sales Volume and Profit
– Financial Security
– Acquisition Potential
• Key account effort on firms likely to be acquired may be
wasted if the acquiring organization is given the dominant
procurement responsibility
• Selecting potential acquirers as key accounts may bring long-
run benefits
 Selecting Key Accounts - Criteria
• Organizational Interrelationships
– Coherence with firm strategy
• Key account selection is a strategy implementation
decision
– Supplier valued by the customer
• Customer believes, or can be persuaded, that
distributor can meet its needs over the long run
– Cultural Fit
 Selecting Key Accounts - Criteria
• Indirect Potential Volume & Profits…
Strategic Key Account
– Opinion Leadership
– Example: Leading financial services group ICICI was the 1st
Indian company listed on NYSE. One of ICICI’s key
accounts is Infosys, India’s fastest growing software
company, well-known for its commercial success, product
quality, and high ethical standards, and the first Indian
company listed on NASDAQ. Although ICICI transacts little
business with Infosys, it regards as a key account because
of its exemplary reputation.
 Compensatory Approach for Calculating Key
Account Attractiveness

1. Attractiveness Criteria for Key 2. Importance 3. Customer 4. Col.2 X Col.3

Accounts Weights for X’s Score on
Criteria This Criterion
“We like key accounts that …”

a. Are a good cultural fit with our 25 4 100

firm
b. Provide us high volume 20 5 100
c. Provide us high gross margins 15 7 105
d. Offer good potential for future 15 8 120
growth
e. Are technologically sophisticated 15 3 45
f. Act as opinion leaders in their 10 4 40
industry

Total 100 510

 Strategic Accounts Defined
• A strategic account is more than just a large
customer
• A strategic customer requires:
– A high level of customer contact and customer
support
– Structure of the supplier's account team
– More account penetration than nonstrategic
accounts
– Far more complex planning
 Three Elements of Strategic Accounts

• Accounts are strategic with respect to:

– Revenues, profits, and growth opportunities for
the future
– The nature of the relationship (partnership)
between the seller and the buyer
– The development of new products and services
 Size of Account
• Strategic accounts will likely be large accounts,
with sales volume as the determinant of size
– Some minimum volume requirements must be
established
• Often the largest account in terms of sales
volume is not the most profitable account
• Only the most profitable accounts can justify the
higher expenditure in resources dedicated to
these partnerships
Criteria for Establishing Account Priorities
Size of account

Account has multiple

Buying locations

Centralized influence on
Purchasing decision

Medium High
High Priority Priority
Potential
Value
Low Medium
Low Priority Priority

Low High

Probability of Achieving Potential

 Partnering on a Strategic Level
• Companies interested in partnering on a
strategic level must employ:
– A multilocation mind-set
– A strategic mind-set
 Centralized Purchasing
• Buyers are located typically, in a centralized
facility (i.e., headquarter office) and are
responsible for dispersing products to remote
offices
 Developing the Strategic
Account Planning Process
• The strategic account planning process should
be specific and actionable, and include
– Objectives and activities
– Action plans designed to meet the objectives
– Assigned responsibilities and accountabilities
– A listing of the resources required to implement
the plans
 Facilitating Buy-In
• Training and education programs can facilitate
buy-in within the selling organization
• Sales education programs must emphasize the
value that sales representatives and sales
managers can provide to these strategic
accounts
 Providing Guidance for Plan Development and
Implementation
• Key Account Managers provide much
guidance and leadership to their account
representatives
• They require ongoing support from top
management
• Some companies have implemented a senior
executive sponsor program for strategic
accounts
 A Senior Executive Sponsor
Program for Strategic Accounts

• Provides key account managers with a senior level advocate to

further insure that the needs of the strategic account are being
met
• Shows the key account that the supplier organization is
committed to a long term relationship
• Serves as a sounding board to the key account manager in the
development and implementation of a strategic account plan
• Assists the key account manager in securing resources if normal
channels are unsuccessful
• Provides all senior management with greater exposure to
strategic customers
 Characteristics of
Key Account Managers
• Key account managers must be:
– Observant
– Able to recognize patterns
– Able to lead cross-functional teams
– Comfortable working across boundaries
– Able to work well with ambiguity
• They must orient and opt under uncertain conditions
– Very creative in developing structured solutions
for clients from often-vague situations
 Key Account Manager Responsibilities

• Four areas of responsibilities in servicing

strategic accounts are:
– Strategy
– Investments/operations
– Account quality assurance
– Executive role
 Major Account Selling
versus Smaller Account Selling
Major Account
A series of meetings over an
extended period of time with
many different people
Works directly with the
ultimate decision maker
Size of the sale is larger
Time horizon for purchasing
differs
Closing techniques can
sometimes cost the
salesperson business
Objection prevention
Longer sales cycle
Small Account
Face-to-face meetings
between just the salesperson
and a prospect
No direct access to the
ultimate decision maker
Closing techniques may be
effective
Objection handling
Shorter sales cycle
Strategy and Sales Program
Planning
 Strategic management planning.
Level 1
Top Mgt Business strategy Marketing strategy
decision

Go-to-mkt CRM
Level 2 Strategy

Strategy SCM Mgt Product Dev

Implementati Mgt
on Decision

activities structure
Level 3 Acc relatnship
Sales force strategy
competencies leadership
Program decision
 Strategic management planning.
LEVEL 1: Top Mgt Decisions
• First Strategic planning is used to make better use of
company resources & create a competitive
advantage.
• Involves designing mission – which provides a sense
of direction to employees. Should address
customers, competitors and the company itself.
• Design specific objectives by which performance can
be measured (in terms of profit, sales volume, mkt
share).
• Translate objectives into strategies (low cost,
differentiation or niche).
• Second is marketing strategy which involves
addressing the value requirements of
customers.
• Need to segment the market & select target
markets on which to concentrate their efforts.
Level 2: Strategy Implementation Decisions
• Implement a positioning strategy based on
4P’s. deals how the consumer views the
product & brand. Strong 4P’s very important.
• Sales force with other depts as finance,
operations, logistics etc.. need to work
together on the above strategies.
• Third is strategic implementation decisions – set
of process org needs to develop to create
customer value & gain competitive advantage.
• Decisions company make are:
- how will customers be accessed (go-to-mkt
strategy)
- how will new products be developed & existing
products improved (product dev mgt)
- how will physical products be created &
delivered to customer (SCM)
- how customer relation be enhanced (CRM)
 Go – To – Market Strategy:
A world class sales force is a powerful resource for a
company. Other options are advertising, promotions,
value added resellers, internet, telemarketing.
• Segmenting the mkt
• Essential activities include interest creation, pre-
purchase, purchase, post purchase.
• Face to face selling alternative – independent sales
agent, resellers, integrators (unaffiliated service
supplier), alliances.
 Product Development Mgt
• Success of a company often depends on how
it develops, produces & market new products.
• Sales force are the most important source of
information for new product dev.
• Sales force also plays an important role in the
launching of new products.
 Supply Chain Mgt
• integration & organisation of information & logistics
activities across firms in a supply chain for the
purpose of creating & delivering goods that provide
customer value.
• Companies have seen whiplash of too much or too
little inventory.
• Sales force impacts SCM because they are the
contact points to the customer.
• Need to have knowledge of entire SC, think
strategically about partnering, good lines of
communication & influence of top mgt.
 Customer Relationship Mgt
• Involvement of sales force
• Importance of information
• 4 skills important to sales professionals in CRM:
- collaboration having each stakeholders interest in
mind
- relationship mgt effective listening, analyzing &
interpersonal communication.
- financial & business skills
- consultative skills
Level 3: Sales Program Decisions
• is a tool for planning how sales force will
perform its role in achieving the firm’s
objectives.
• The process begins with objectives, target
markets specified in the marketing plan.
• The tools and techniques for estimating sales
potential and forecasting are discussed later in
the topic.
 Mkting objs, strategy, & strategy
implementation program
Estimates of sales
potential & forecast
Acc relationship strategy

Desired selling actions &

behaviors

Estimates of sales
Org. structure
force size & budget

Competency Dev
program

Leadership system

feedback
 Account Relationship Strategy
Refers to the type of relationship it intends to develop
with its customers (acquiring, maintaining &
developing customers).
• Transactional Relationship – because a business can
switch suppliers easily. Relationship is based on the
need for a product of acceptability quality,
competitively priced & process & relationship
convenient for the buyer. Good TR involves personal
relationship based on history of trust, creation of
value, meeting or exceeding customers expectations.
• Consultative Relationship – in industrial
markets based on the customers demand &
willingness to pay for a sales effort that
creates new value & provides additional
benefits outside of the product itself.
- more time is spent learning special needs of
individual customer
• Enterprise Relationship – customers
downsizing their supplier base to a small
number of possible long term relationships. To
the selling organization customer is the most
important.
 Developing Your Competencies
• Strategic Action
• Technology
• Coaching
• Team building
• Self management –
- closing (can aggressively initiate personal contacts
- consultative (possess patience, good interpersonal
skills & aggressiveness)
- relationship (discipline & take responsibility)
- display (need to have something to do, high
physical energy level)
 Business Organisation
• Organisation by type
• Global businesses – complex organisation
structures
• National – organisation possibly stretches
throughout the country
• Regional – could be through a county or wider
area (North West, South East, etc.)
• Local – small organisations serving local area or
community
 Business Organisation
• Authority – the right to make decisions and carry out tasks
• Span of control – the number of people a superior
is responsible for
• Chain of Command – the relationship between different
levels of authority in the business
• Hierarchy – shows the line management
in the business and who has specific responsibilities
• Delegation – authority to carry out actions
passed from superior to subordinate
• Empowerment – giving responsibilities to people
at all levels of the business to make decisions
 Organisation Charts
Hierarchical Structure

Managing Director

Marketing
Sales Director Finance Director
Director

A B C D Market Strategy Purchasing Sales Accounts

Research Manager Manager Manager
 Organisation Charts

Pyramidal Structure
MD

Senior
Management

Middle
Management

Workers
 Organisation Charts
Centralised/Entrepreneurial

Finance

R&D Production

MD

Marketing Sales
 Organisation Charts
Collaborative
Sales

Accounts Marketing

Production
 Organisation Charts
Circular/Flat
R&D Marketing

Finance Sales

Production
 Organisation Charts
Matrix Structure

Marketing
Sales R&D

Project

HR
Production
Finance
 Sales Organization is a department of the organization which establish for
the purpose of directing, coordinating and controlling the sales
organization.
A sales organization structure evolved in such a way that sales people and
sales manager carry out their activity effectively and efficiently. It gives a
blue print that “what activity is performed by which person”. The basic
concept include are following:
i. Centralisation
ii. Specialization
iii. Staff position
iv. Marketing orientation
v. Co-ordination
vi. Control
Factors determining the structure of Sales Organization
1. Price of Product
2. Nature of Product
3. Nature of Market
4. Size of the enterprise
5. Ability of the Executives
6. Sales Policies of the Enterprise
7. Distribution System
8. Finance
9. Number of Products
10. Miscellaneous
Functions of Sales Organisation
The functions of sales organisation can be classified as follows
1. Planning functions
a. Sales forecasting
b. Sales budgeting
c. Selling policy
2. Administrative functions
a. Selecting salesmen
b. Training salesmen
c. Control of salesmen
d. Remuneration of salesmen
3. Executive functions
a. Sales promotion
b. Selling routine—execution of customers’ orders.
Role of Sales Organisation
Once the sales plan has been formulated, the next logical step is to organise a sales force
to achieve the organisational objectives.
Major Qualified Sales Objectives

Overall Objectives Break Up or Division

1. Total volume of products 1. Quarter, month and week

2. Total annual value of products 2. Product line and range

3. Total annual selling costs 3. Region and sales area

4. Total annual profit contribution 4. Type of customer

Sales Organisations: Basic Purposes

1. Define the line of authority

2. Ensure that all necessary activities are assigned and performed

3. Establish lines of communication

4. Provide for coordination and balance

5. Provide insights into avenues of advancement

6. Economics of executive time.

Sales organisation also depends on the type of sales force which is used, for
example, field sales force, national account management, team selling,
telemarketing, part-time sales forces, direct selling, etc.
Developing a Sales Organisation
Sales organisation development refers to the formal, coordinating process of
communication, authority and responsibility for sales groups and individuals.

A sales manager must recognise and deal with some basic problems faced by
organisations, when developing his own sales organisation. The five major
issues are:

1. Formal and informal organisations

2. Horizontal and vertical organisations

3. Centralised and decentralised organisations

4. The line and staff components of organisations

5. The size of the company.

Field Sales Organisation
The following are the important field sales Organisations:

1. Geographic sales specialisation organisation

2. Product-based sales specialisation organisation

3. Customer-based specialisation organisation

4. Activity/function-based specialisation

5. Hybrid sales organisation

6. Team-based organisation.
Product,
Market, and
Geographic
Structures
 Types of Divisional Structures
• Product Structure
– Managers place each distinct product line or
business in its own self-contained division
– Divisional managers have the responsibility for
devising an appropriate business-level strategy
to allow the division to compete effectively in its
industry
 Product Structure
• Allows functional managers to specialize in
one product area
• Division managers become experts in their
area
• Removes need for direct supervision of
division by corporate managers
• Divisional management improves the use of
resources
 Types of Divisional Structures
• Geographic Structure
– Divisions are broken down by geographic location
• Global geographic structure
– Managers locate different divisions in each of the
world regions where the organization operates.
– Generally, occurs when managers are
pursuing a multi-domestic strategy
 Types of Divisional Structures
• Global Product Structure
– Each product division takes responsibility for
deciding where to manufacture its products and
how to market them in foreign countries
worldwide
 Global Geographic and
Global Product Structures
 Types of Divisional Structures
• Market Structure
– Groups divisions according to the particular
kinds of customers they serve
– Allows managers to be responsive to the needs
of their customers and act flexibly in making
decisions in response to customers’ changing
needs
 Matrix Design Structure
• Matrix Structure
– An organizational structure that simultaneously
groups people and resources by function and
product.
• Results in a complex network of superior-
subordinate reporting relationships.
• The structure is very flexible and can respond rapidly
to the need for change.
• Each employee has two bosses (functional manager
and product manager) and possibly cannot satisfy
both.
Matrix Structure
 Product Team Design Structure
• Product Team Structure
– Does away with dual reporting relationships and
two-boss managers
– Functional employees are permanently assigned
to a cross-functional team that is empowered to
bring a new or redesigned product to work
 Product Team Design Structure
• Product Team Structure
– Cross-functional team is composed of a group of
managers from different departments working
together to perform organizational tasks.
Product Team Structure
 Hybrid Structures
• Hybrid Structure
– The structure of a large organization that has
many divisions and simultaneously uses many
different organizational structures
THE LINE ORGANIZATION
In the pure line organization, the chief
executive – usually the president – does
the decision making for the firm. The
president has complete authority.
Specialized Design

Functional organizational design is the

grouping of work according to its
characteristics.
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.
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.
Managerial Vice President
Level of Marketing

National Sales
Manager
Operating
Level
Eastern Divisional Central Divisional Western Divisional
Sales Manager Sales Manager Sales Manager

7 Regional Sales 6 Regional Sales 5 Regional Sales

ManagersA ManagersA Managers A

35 District Sales 30 District Sales 25 District Sales

Managers B Managers
B
Managers B

240 Salespeople C 240 Salespeople C 200 Salespeople C

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.
Customer Specialization

Companies with several separate and distinct

markets accounting for major portions of their
sales often organize based on these markets or
customers.
Combination of Design Elements

Many companies organize on the basis of some

combination of functional, geographic, product,
or customer design.
MULTIPLE DESIGN FACTORS

President

Functional Vice President Vice President Vice President

Production Marketing Engineering

Geographic U.S. International

Marketing Marketing
Manager Manager

Customer Consumer Industrial International

Goods Goods Sales
Managers Managers Manager

Product Soap Products Paper Products Food Products Latin Asian and
European
Divisional Divisional Divisional American African
Division
Manager Manager Manager Division Division

Eastern Central Western

Sales Sales Sales
Division Division Division
Companies use four basic organizational
methods.

1. A separate division to deal with major

accounts.
2. Select members of the current sales
force.
3. Sales managers.
4. A combination of 1, 2, and 3.
NEW FORMS OF ORGANIZATIONS
Strategic Alliances

A strategic alliance is a formal relationship created with

the purpose of joint pursuit of mutual goals.
CROSS-FUNCTIONAL SELLING TEAM

Customer

Technical
Sales Marketing Manufacturing
Support
Supplier Selling Team
Team based Organizations

Many organizations are more responsive to their

environment because they use work teams as
their basic building blocks.
 Sales Organization Concepts

Specialization
The degree to which individuals perform some of the required
tasks to the exclusion of others. Individuals can become
experts on certain tasks, leading to better performance for the
entire organization.

Centralization
The degree two which important decisions and tasks performed
at higher levels in the management hierarchy. Centralized
structures place authority and responsibility at higher
management levels.
 Sales Force Specialization Continuum

Generalists Specialists
Some specialization
All selling activities Certain selling
of selling activities,
and all products to activities for certain
products, and/or
all customers products for certain
customers
customers
Span of Control vs. Management Levels

Flat Sales Organization

National

Management Levels
Sales
Manager

District District District District District

Sales Sales Sales Sales Sales
Manager Manager Manager Manager Manager

Span of Control
Span of Control vs. Management Levels

Tall Sales Organization

National Sales
Manager

Management Levels
Regional Sales Regional Sales
Manager Manager

District District District District District District

Sales Sales Sales Sales Sales Sales
Manager Manager Manager Manager Manager Manager

Span of Control
 Line vs. Staff Positions

National Sales Manager

Sales Training Manager

Regional Sales Managers

Sales Training Manager

District Sales Managers

Staff Position

Salespeople Line Position

 Selling-Situation Factors and
Organizational Structure

Organizational Environmental Task Performance

Structure Characteristics Performance Objective

High Envir.
Specialization uncertainty Nonroutine Adaptiveness

Low Envir.
Centralization Uncertainty Repetitive Effectiveness
Customer and Product Determinants
of Sales Force Specialization
Customer Needs Different
Market- Product/Market-
Driven Driven Specialization
Simple Specialization Complex
Product Range of
Offering Geography- Product- Products
Driven Driven
Specialization Specialization

Customer Needs Similar

Geographic Sales Organization

National Sales Manager

Sales Training Manager

Eastern Region Sales Manager Western Region Sales Manager

Zone Sales Managers (4) Zone Sales Managers (4)

District Sales Managers (20) District Sales Managers (20)

Salespeople (100) Salespeople (100)

 Product Sales Organization

National Sales Manager

Office Equipment Sales Manager Office Supplies Sales Manager

District Sales Managers (10) District Sales Managers (10)

Salespeople (100) Salespeople (100)

 Market Sales Organization
National Sales Manager

Commercial Accounts Government Accounts

Sales Manager Sales Manager

Sales Training
Manager

Zone Sales Managers (4) District Sales Managers (5)

District Sales Managers (25) Salespeople (50)

Salespeople (150)
 Functional Sales Organization

National Sales Manager

Field Sales Manager Telemarketing Sales Manager

Regional Sales Managers (4) District Sales Managers (2)

District Sales Managers (16) Salespeople (40)

Salespeople (160)
 Identifying Major Accounts

Large Large Major

Account Account
Size of Account

Regular Complex
Small Account Account
Simple Complex
Complexity of Account
 Major Accounts Options

Develop Major Account Salesforce

Assign Major Accounts to

Sales Managers

Assign Major Accounts to Salespeople along

with Other Accounts
 Comparison of
Sales Organization Structures

Organizational
Structure Advantages Disadvantages

• Low Cost
• Limited specialization
• No geographic duplication
• Lack of management
Geographic • No customer duplication
control over product or
• Fewer management levels
customer emphasis

• Salespeople become experts

• High cost
in product attr. & applications
Product • Geographic duplication
• Management control over
• Customer duplication
selling effort
 Comparison of
Sales Organization Structures

Organizational
Structure Advantages Disadvantages
• Salespeople develop
better understanding of
unique customer needs • High cost
Market
• Management control over • Geographic duplication
selling allocated to different
markets

• Efficiency in performing
Functional
selling activities
• Geographic duplication
• Customer duplication
• Need for coordination
Hybrid Sales Organization Structure

National Sales Manager

Commercial Accounts Government Accounts

Sales Manager Sales Manager

Major Accounts Regular Accounts Office Equipment Office Supplies

Sales Manager Sales Manager Sales Manager Sales Manager

Field Sales Telemarketing

Manager Sales Manager

Western Eastern
Sales Manager Sales Manager
 Salesforce Deployment

Sales Force deployment decisions can be viewed as

providing answers to three interrelated questions.
1. How much selling effort is needed to cover accounts and prospects
adequately so that sales and profit objectives will be achieved?

2. How many salespeople are required to provide the desired amount

of selling effort?

3. How should territories be designed to ensure proper coverage of

accounts and to provide each salesperson with a reasonable
opportunity for success?
 Interrelatedness of
Sales Force Deployment Decisions

How much selling effort is needed to cover accounts and

Allocation of
prospects adequately so that sales and profit objectives will
Selling Effort be achieved?

Sales Force How many salespeople are required to provide the desired
Size amount of selling effort?

How should territories be designed and salespeople assigned

Territory to territories to ensure proper coverage of accounts and to
Design provide each salesperson with a reasonable opportunity for
success?
“It’s amazing to me that our competitors
think the customer is the dealer.”
Michael Dell

“Sales Leader: Tops in Global Basis.”

Be Direct: DELL
 Introduction
• Before Michael Dell, innovation was
about well-schooled engineers in R&D
labs inventing high-margin products and
technologies.
• Dell instead trained his eye on finding the
most efficient way to get tech products
into the hands of the consumers.

• Perfected the credo— “Cut out the

middleman.”
 Introduction

• Perfected the credo— “Cut out the

middleman.”
• DELL eliminated the need for inventory or
middlemen and gave itself a built-in price
advantage, which it in part keeps as profit
and in part passes on to customers.”
Fortune 11/28/2005
 Introduction

• Michael Dell: “The

only constant thing about
business is that every-thing is
changing. We have to take
advantage of change and not
let it take advantage of us.”
 Introduction
• “Selling tech products by
telephone and then the
Internet… Michael broke the
paradigm about how to run a
computer business; they
haven’t been so great at
finding the next paradigm.”
BusinessWeek 3/6/06
 Introduction
• Michael Dell is the chairman of the Board
of Directors of Dell, the company he
founded in ’84 for $1,000.
• With an unprecedented idea---build
relationships directly with consumers
(born in February ‘65).
• Dell’s commitment to consumer value, to
the team, to being direct, to operating
responsibly and, ultimately to winning.
Continues to differentiate Dell from other
companies.
 Introduction
• DELL did not want the “unsophisticated”
customer.
• DELL wants to sell to the “educated” customer.
• DELL wants the consumer to buy their third or
fourth system from DELL. It’s more profitable
and easier.
 Introduction
• Why DELL case: We’ll look at direct marketing
and marketing strategies.
• Look at more efficient way of going to market.
• Just-in-time (JIT) manufacturing.
• VAR’s (Value-added resellers), solutions for
vertical markets like banking, manufacturing
and retailing.
 Introduction

• The Future: The power of laptops

became compatible with desktops,
because of design, manufacturing
and usage.

• Added: Printers, Servers, Projectors, TV’s,

Handhelds, Software, Peripherals, Storage,
Networking, Workstations and more.
 SWOT Analysis
Business to Consumer Business to Business
Strengths Opportunities Strengths Opportunities
Customization Server Market
Customization Server Market
Price International strategy
Price Internationalstrategy
Customer Focused Additional markets
Customer Focused Product extensions
Technical Knowledge Product extensions
Technical Knowledge
Market Diversification Strategic partnerships
Market
Diversification Strong
Brand/Positioning
Strong
Brand/Positioning Media Savvy

Media Savvy Direct Marketing

Model
Direct Marketing
Model Non-myopic strategy

Non-myopic strategy

Technology Market Competition across

Tangibility Competition across markets
Inventory
TechnologyMarket markets
Commodity pricing
Commoditization Commodity pricing
(shrinking margins)
Inventory (shrinking margins)
Complexity of Mgmt.
Complexity of Mgmt.
Growth exceeding
Growth exceeding productivity
productivity

Weaknesses Threats Weaknesses Threats

 Case Questions
1. What impresses you about this company?
2. What is your assessment of the job Michael Dell has
done, as CEO? Senior management?
3. How did Dell segment its customers? What types of
customers? What were they like?
4. Who’s the competition for “transaction” customers?
5. Who’s the competition of the other segmented
customer?
6. What are the advantages of this direct marketing and
direct manufacturing model?
7. With its past distribution agreements with Staples,
CompUSA, and Sam’s Clubs, why did Dell have a
problem with the retail entry?
 Wrap Up: Now and Then
• Avoiding dealers means less mark-ups, less
overhead and delivers lower prices to the
customers for DELL.
• DELL: Number One in PC Sales
• DELL is one of the Most Admired Companies
Fortune’s Annual issue
• In 2003, generated 80% of profits from sales to
businesses.
• With one week of parts on hand, DELL turns over
its inventory 52 times a year. Compaq and HP turn
over is 13.5 and 9.8.
 Summary

• Three Golden Rules of DELL:

1. Disdain inventory
2. Always listen to the customer
3. Never sell indirect.