DESIGNING THE SALES FORCE
Personal selling is a key element in promotion, one of the four Ps in the marketing mix. But not all sales representatives do exactly the same kind of selling. In business settings, McCurry has distinguished these six types of sales representatives, ranging from the least to the most creative types of selling
- Order taker: A salesperson who acts predominantly as an inside order taker (the salesperson standing behind the counter) or outside order taker (the soap salesperson calling on the supermarket manager).
- Missionary: A salesperson whose major task is to build goodwill or to educate the actual or potential user, rather than to sell (the medical “detailer” representing an ethical pharmaceutical firm).
- Technician: A salesperson with a high level of technical knowledge (the engineering salesperson who is primarily a consultant to client companies).
- Demand creator: A salesperson who relies on creative methods for selling tangible products (vacuum cleaners or siding) or intangibles (insurance or education).
- Solution vendor: A salesperson, whose expertise lies in solving a customer’s problem, often with a system of the firm’s goods and services (such as computer and communications systems).
➤ Prospecting: Searching for prospects, or leads,
➤ Targeting: Deciding how to allocate their time among prospects and customers,
➤ Communicating: Communicating information about the company’s products and services,
➤ Selling: Approaching, presenting, answering objections, and closing sales,
➤ Servicing: Providing various services to customers—consulting on problems, rendering technical assistance, arranging financing, expediting delivery,
➤ Information gathering: Conducting market research and doing intelligence work, and
➤ Allocating: Deciding which customers will get scarce products during shortages.
As this list suggests, the sales representative serves as the company’s personal link to its customers and prospects while bringing back much-needed information about customers, markets, and competitors. Therefore, smart companies look carefully at the design of the sales force, including the development of sales force objectives, strategy,structure, size, and compensation.
Sales force structures
Territorial: Each sales representative is assigned an exclusive territory. This structure results in a clear definition of responsibilities and increases the rep’s incentive to cultivate local business and personal ties. Travel expenses remain relatively low, because each rep travels within a small area.
Product: The importance of sales reps’ knowing their products, together with the development of product divisions and product management, has led many companies to structure their sales forces along product lines. Product specialization is particularly useful for product lines that are technically complex, highly unrelated, or very numerous. Kodak uses one sales force for its film products that are intensively distributed, and another sales force to sell complex products that require technical support.
Market: Companies often specialize their sales forces along industry or customer lines. IBM set up a sales office for finance and brokerage customers in New York, another for GM in Detroit, and still another for Ford in Dearborn. Market specialization helps the sales force become knowledgeable about specific customer needs, but the major disadvantage is that customers are scattered throughout the country, requiring extensive travel.
Complex: When a company sells a diverse product line to many types of customers over a broad geographical area, it often combines several structures, with sales forces specialized by territory-product, territory-market, product-market, and so on. A sales representative might then report to one or more line and staff managers.
Sales force size
Once the company clarifies its sales force strategy and structure, it is ready to consider sales force size, based on the number of customers it wants to reach. One widely-used method for determining sales force size is the five-step workload approach:
(1) Group customers into size classes by annual sales volume;
(2) Establish call frequencies, the number of calls to be made per year on each account in a size class;
(3) Multiply the number of accounts in each size class by the call frequency to arrive at the total yearly sales call workload;
(4) Determine the average number of calls a sales rep can make per year; and
(5) Divide the total annual calls (calculated in step 3) required by the average annual calls made by a rep (calculated in step 4) to see how many reps are needed.
Sales force compensation
The compensation package is a critical element in attracting top-quality sales reps, starting with the level and components. The level of compensation must bear some relation to the “going market price” for the type of sales job and required abilities.
If the market price for salespeople is well defined, the individual firm has little choice but to pay the going rate. However, the market price for salespeople is seldom well defined. Published data on industry sales force compensation levels are infrequent and generally lack sufficient detail.
The company must next determine the four components of sales force compensation— a fixed amount, a variable amount, expense allowances, and benefits.
1). The fixed amount, a salary, is intended to satisfy the sales reps’ need for income stability.
2). The variable amount, which might be commissions, a bonus, or profit sharing, is intended to stimulate and reward greater effort.
3). Expense allowances enable sales reps to meet the expenses involved in travel, lodging, dining, and entertaining.
4). Benefits, such as paid vacations, sickness or accident benefits, pensions, and life insurance, are intended to provide security and job satisfaction. Fixed compensation receives more emphasis in jobs with a high ratio of nonselling to selling duties and in jobs in which the selling task is technically complex and involves teamwork.
Variable compensation receives more emphasis in jobs in which sales are cyclical or depend on individual initiative.
Fixed and variable compensation give rise to three basic types of compensation plans—straight salary, straight commission, and combination salary and commission.
Only one-fourth of all firms use either a straight-salary or straight-commission method, while three-quarters use a combination of the two, though the relative proportion of salary versus incentives varies widely.
Straight-salary plans provide sales reps with a secure income, make them more willing to perform nonselling activities, and give them less incentive to overstock customers.
From the company’s perspective, they provide administrative simplicity and lower turnover. Straight-commission plans attract higher sales performers, provide more motivation, require less supervision, and control selling costs.
Combination plans offer the benefits of both plans while reducing their disadvantages.
Such plans allow companies to link the variable portion of a salesperson’s pay to a wide variety of strategic goals. One trend is toward deemphasizing volume measures in favor of factors such as gross profitability, customer satisfaction, and customer retention. For example, IBM now partly rewards salespeople on the basis of customer
satisfaction as measured by customer surveys.