Sales Organization Structure and Sales Force Deployment

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Sales Organization Structure and Sales Force
Deployment

• Module Four

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Merging Two Sales ForcesAn Experts Viewpoint
Zeneca and Astra were two independent
pharmaceutical companies that merged, forming
AstraZeneca. Integrating the two sales forces
was a major challenge, for example, Astra was
more decentralized and Zeneca was more
centralized. The decision was made to develop a
new sales model that blended the advantages of
centralization and decentralization, and they
decided to move to a market-oriented sales
organization structure.
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Merging Two Sales ForcesAn Experts Viewpoint
The new sales organization has been successful in
generating significant sales and market share
growth. Tony Zook, vice president of sales at
AstraZeneca, thinks that by bringing together
two winners, you can create a champion.
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ASTRAZENECA PLC

• SEVEN IMPORTANT  AREAS OF HEALTHCARE SUCH AS
  GASTROINTESTINAL, CARDIOVASCULAR, ONCOLOGY, 
  RESPIRATORY AND INFLAMMATION, CENTRAL NERVOUS
  SYSTEM, PAIN CONTROL AND  INFECTION.
• THE GROUP HAS MANUFACTURING SITES IN 20
  COUNTRIES.
• Brands include   LOSEC/PRILOSEC, NEXIUM,
  SELOKEN/TOPROL-XL, PLENDIL, ZOLADEX, CASODEX, 
  ARIMIDEX, NOVALDEX, PULMICORT, OXIS, SYMBICORT,
  ACCOLATE, RHINOCORT,  SEROQUEL, ZOMIG, DIPRIVAN,
  NAROPIN, XYLOCAINE, ATACAND, ZESTRIL, AND 
  MERREM/MERONEM.

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ASTRAZENECA PLC

• Sales in 2002
• 17.8 billion with 2.8 billion in profits or 16
  profit on sales
• 303,000 sales per employee
• 58,700 employees

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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.

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Sales Force Specialization Continuum
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Span of Control vs. Management Levels
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Span of Control vs. Management Levels
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Line vs. Staff Positions
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Selling Situation Contingencies
Selling-Situation Factors and Organizational
Structure
Organizational Structure
Environmental Characteristics
Task Performance
Performance Objective
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Selling Situation Contingencies
Market- Driven Specialization
Product/Market-Driven Specialization
Geography- Driven Specialization
Product- Driven Specialization
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Geographic Sales Organization
Simplest and most common
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Sales territories
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Product Sales Organization
Duplication?
PG product managers
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P G, 43 billion in sales

• Thirteen of PG's brands are billion-dollar
  sellers (Always/Whisper, Ariel, Bounty, Charmin,
  Crest, Downy/Lenor, Folgers, Iams, Olay, Pampers,
  Pantene, Pringles, and Tide).
• PG bought haircare giant Clairol (Nice 'n Easy,
  Herbal Essences, Aussie)

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Market Sales Organization
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Functional Sales Organization
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Sales Organization StructuresIdentifying Major
Accounts
Large Account
Major Account
Regular Account
Complex Account
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Sales Organization StructuresMajor Accounts
Options
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Comparison of Sales Organization Structures
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Comparison of Sales Organization Structures
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Hybrid Sales Organization Structure
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Salesforce Deployment

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?

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Interrelatedness ofSales Force Deployment
Decisions
How much selling effort is needed to cover
accounts and prospects adequately so that sales
and profit objectives will be achieved?
Allocation of Selling Effort
Sales Force Size
How many salespeople are required to provide the
desired amount of selling effort?
How should territories be designed and
salespeople assigned to territories to ensure
proper coverage of accounts and to provide each
salesperson with a reasonable opportunity for
success?
Territory Design
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Allocation of Selling EffortAnalytical
Approaches to Allocation of Selling Effort
Single Factor Models
Portfolio Models
Decision Models
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Allocation of Selling EffortSingle Factor Models

• Easy to develop and use/low analytical rigor
• Accounts classified into categories based on one
  factor, such as market potential
• All accounts in the same category are assigned
  the same number of sales calls
• Effort allocation decisions are based on the
  analysis of only one factor and differences among
  accounts in the same category are not considered
  in assigning sales call coverage

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Allocation of Selling EffortSingle Factor Model
Example
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Allocation of Selling EffortPortfolio Models

• Account Opportunity - an accounts need for and
  ability to purchase the firms products
• Competitive Position - the strength of the
  relationship between the firm and an account

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Allocation of Selling EffortPortfolio Model
Segments and Strategies
Competitive Position
Strong
Weak
Segment 1
Segment 2
High
Account Opportunity
Segment 4
Segment 3
Low
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Allocation of Selling EffortDecision Models

• Simple Basic Concept - to allocate sales calls to
  accounts that promise the highest sales return
  from the sales calls
• Optimal number of calls in terms of sales or
  profit maximization

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Sales Force Size Key Considerations

• Sales Productivity - the ratio of sales generated
  to selling effort used
• In early stages, the addition of salespeople
  increases sales considerably more than the
  selling costs. As salespeople continue to be
  added, sales increases tend to decline until a
  point is reached when the costs to add a
  salesperson are more than the revenues that
  salesperson can generate.
• Salesforce Turnover
• Is very costly
• Should be anticipated

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Sales Force Size Analytical Tools
The Breakdown Approach is used to determine the
number of salespeople needed to generate a
forecasted level of sales. This approach is easy
to develop. However, it is weak conceptually.
The concept underlying the calculations is that
sales determine the number of salespeople
neededputting the cart before the horse.
where did the average sales per person come
from
Salesforce size Forecasted sales / Average
sales per person
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Sales Force Size Analytical Tools
The Workload Approach determines how much selling
effort is needed to adequately cover the firms
market. Then the number of salespeople required
to provide this amount of selling effort is
calculated. This approach relatively simple to
develop and is sound conceptually.
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Sales Force Size Analytical Tools
The Incremental Approach is the most rigorous for
calculating salesforce size. Its basic concept
is to compare the marginal profits and marginal
costs associated with each incremental
salesperson. The major advantage of this
approach is that it quantifies the important
relationships between salesforce size, sales, and
costs. However, the incremental method is
difficult to develop, and it cannot be used for
new sales forces where historical data and
accurate judgments are not possible.
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Designing Territories

• Territories consist of whatever specific accounts
  are assigned to a specific salesperson. The
  territory can be viewed as the work unit for a
  salesperson.
• Territory Considerations
• Trading areas
• Present effort
• Recommended effort

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Territory Design Procedure