Sales Organization Structure and Sales Force Deployment

1. Sales Organization Structure and Sales Force Deployment Module Four

2. Action Merging Two Sales ForcesAn Expert’s 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.

3. Result Merging Two Sales ForcesAn Expert’s 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.”

4. 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.

5. 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

6. 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.

7. Generalists All selling activities and all products to all customers Specialists Certain selling activities for certain products for certain customers Some specialization of selling activities, products, and/or customers Sales Force Specialization Continuum

8. Flat Sales Organization National Sales Manager Management Levels District Sales Manager District Sales Manager District Sales Manager District Sales Manager District Sales Manager Span of Control Span of Control vs. Management Levels

9. Tall Sales Organization National Sales Manager Regional Sales Manager Regional Sales Manager Management Levels District Sales Manager District Sales Manager District Sales Manager District Sales Manager District Sales Manager District Sales Manager Span of Control Span of Control vs. Management Levels

10. National Sales Manager Regional Sales Managers District Sales Managers Sales Training Manager Sales Training Manager Salespeople Staff Position Line Position Line vs. Staff Positions

11. 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) Geographic Sales Organization Simplest and most common

12. Sales territories

13. National Sales Manager Office Equipment Sales Manager Office Supplies Sales Manager District Sales Managers (10) Salespeople (100) Salespeople (100) District Sales Managers (10) Product Sales Organization Duplication? P&G product managers

14. P & G, $43 billion in sales • Thirteen of P&G's brands are billion-dollar sellers (Always/Whisper, Ariel, Bounty, Charmin, Crest, Downy/Lenor, Folgers, Iams, Olay, Pampers, Pantene, Pringles, and Tide). • P&G bought haircare giant Clairol (Nice 'n Easy, Herbal Essences, Aussie)

15. National Sales Manager Commercial Accounts Sales Manager Government Accounts Sales Manager Sales Training Manager Zone Sales Managers (4) District Sales Managers (25) District Sales Managers (5) Salespeople (50) Salespeople (150) Market Sales Organization

16. National Sales Manager Field Sales Manager Regional Sales Managers (4) Salespeople (40) District Sales Managers (2) District Sales Managers (16) Telemarketing Sales Manager Salespeople (160) Functional Sales Organization

17. Large Size of Account Small Simple Complex Complexity of Account Sales Organization Structures:Identifying Major Accounts Large Account Major Account Regular Account Complex Account

18. Develop Major Account Salesforce Assign Major Accounts to Sales Managers Assign Major Accounts to Salespeople along with Other Accounts Sales Organization Structures:Major Accounts Options

19. Organizational Structure Advantages Disadvantages • Low Cost • No geographic duplication • No customer duplication • Fewer management levels • Limited specialization • Lack of management • control over product or • customer emphasis Geographic • Salespeople become experts • in product attr. & applications • Management control over • selling effort • High cost • Geographic duplication • Customer duplication Product Comparison of Sales Organization Structures

20. Organizational Structure Advantages Disadvantages • Salespeople develop • better understanding of • unique customer needs • Management control over • selling allocated to different • markets • High cost • Geographic duplication Market • Geographic duplication • Customer duplication • Need for coordination • Efficiency in performing • selling activities Functional Comparison of Sales Organization Structures

21. National Sales Manager Major Accounts Sales Manager Regular Accounts Sales Manager Office Equipment Sales Manager Office Supplies Sales Manager Field Sales Manager Telemarketing Sales Manager Commercial Accounts Sales Manager Government Accounts Sales Manager Western Sales Manager Eastern Sales Manager Hybrid Sales Organization Structure

22. Sales Force deployment decisions can be viewed as providing answers to three interrelated questions. Salesforce Deployment • How much selling effort is needed to cover accounts and prospects adequately so that sales and profit objectives will be achieved? • How many salespeople are required to provide the desired amount of selling effort? • How should territories be designed to ensure proper coverage of accounts and to provide each salesperson with a reasonable opportunity for success?

23. 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

24. Allocation of Selling Effort:Single 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 notconsidered in assigning sales call coverage

25. Allocation of Selling Effort:Decision 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

26. 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

27. 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 needed—putting “the cart before the horse.” [where did the “average sales per person” come from] Salesforce size = Forecasted sales / Average sales per person

28. Total selling effort needed Number of salespeople = Average selling effort per salesperson Sales Force Size: Analytical Tools The Workload Approach determines how much selling effort is needed to adequately cover the firm’s 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.

29. 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.

30. 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

31. Analyze Planning and Control Unit Opportunity Select Planning and Control Unit Finalize Territory Design Assess Territory Workload Form Initial Territories Territory Design Procedure