Def: This defines how activities such as task allocation, coordination and supervision are directed towards the achievement of organizational aims.
This is a system that is used to define the hierarchy within an organization. It identifies each job, its function and where it reports to within the organization.
This is a diagrammatic representation showing how departments or divisions in an organization, as a large corporation, are related to one another along lines of authority.
Forms of Organizational structures
- Geographical structure
- Product specialization structure
- Industry – based structure
- Account size structure
- This is a structure where each salesperson is assigned a territory over which to have sole responsibility for sales achievement.
- Salesperson close geographical proximity to customers encourages the development of personal friendships which aids sales effectiveness.
- Compared with other organizational forms, e.g. product or market specialisation, travelling expenses are likely to be lower.
- This form has an advantage of its simplicity.
- Salesperson is required to sell the full range of the company’s products
- Sales person may be very different technically and sell into a number of diverse markets.
- Salespeople in disconnected geographical territories are relatively weak in interpreting buyer behaviour patterns and reporting changes in the operational circumstances of customers compared with salespeople organised along more specialised lines.
Product specialization structure
This can be along;
- Along product lines
- This structure is conducive to a firm offers a wide range of technically complex and diverse products and where key members of the decision-making unit of the buying organizations are different for each product group.
- Incase company’s products sell essentially to the same customers, problems of route duplication, higher travel costs and customer annoyance can arise.
- Improper use of the method can lead to a customer being called upon by different salespeople representing the same company on the same day.
NB: A move from geographic to a product-based structure raises costs as keeping the same number of salespeople means increased territory size.
- This is where sales force are divided according to new and existing products
- In industrial selling, firms sometimes separate their sales forces into development and maintenance sales teams.
- The development salespeople are highly trained in handling very technical new products. They spend considerable time overcoming commercial, technical and installation problems for new customers.
- Companies move to a development/maintenance structure is belief that one of the causes of new product failure is the inadequacy of the salesforce to introduce the product. The cause of failure is the psychological block each salesperson faces in terms of possible future problems with buyer–seller relationship if the product does not meet expectations.
- Employment of a development sales team can reduce this problem, although it is often only large companies that can afford such a team.
- This approach allows salespeople to specialise in the skills needed to sell new products, ensures that new products receive the attention needed to sell them, and eliminates competition for a salesperson’s time between the selling of new and existing products providing clarity of purpose. Some pharmaceutical companies use this form of salesforce organisation.
Industry based structure
- This structure has a problem of the same customer being served by product divisions of the same supplier or company
- There is the complexity of buyer behaviour, which requires not only input from the sales function but from other functional groups (such as engineering, finance, logistics and marketing).
- Due to centralisation of purchasing and the immense value of some customers, the supplying firms have been forced to rethink how they organise their salesforce.
- Companies are increasingly organising around customers and shifting resources from product or regional divisions to customer-focused business units.
- Another method of specialization is by the type of market served.
- Often industrial selling the market is defined by industry type where the range of products sold is essentially the same.
- Examples of such industries are banking, manufacturing companies and retailers where different industry groups have widely varying needs, problems and potential applications.
- This structure allows salespeople to gain greater insights into these factors for their particular industry
- It also enables them to monitor changes and trends within the industry that might affect demand for their products.
- The cost of increased customer knowledge is increased travel expenses compared with geographically determined territories.
- This structure is employed in many trade and industrial markets that experience importance of a few large customers and leads to establishment of a key or major account salesforce.
- The team comprises senior salespeople who specialise in dealing with large customers that may have different buying habits and demand more sophisticated sales arguments than smaller companies.
- The team needs to be conversant with negotiation skills since they are likely to be given a certain amount of discretion (judgement) in terms of discounts, credit terms, etc., in order to secure large orders.
- Some organisations adopt a three-tier system, with senior salespeople negotiating with key accounts, ordinary salespeople selling to medium-sized accounts, and a telemarketing team dealing with small accounts.
Advantages for a key account salesforce structure
- Close working relationships with the customer – The salesperson knows who makes what decisions and who influences the various players involved in the decision. Technical specialists from the selling organisation can call on technical people (e.g. engineers) in the buying organisation and salespeople can call upon administrators, buyers and financial people armed with the commercial arguments for buying.
- Improved communication and co-ordination – The customers know that a dedicated salesperson or sales team exists hence know who to contact when a problem arises.
- Better follow-up on sales and service – Due to extra resources devoted to the key account mean there is more time to follow up and provide service after a major sale has been made.
- More in-depth penetration of the DMU (Decision Making Unit) – There is more time to cultivate relationships within the key account. Salespeople can ‘pull’ the buying decision through the organisation from the users, deciders and influencers to the buyer, rather than the more difficult task of ‘pushing’ it through the buyer into the organization.
- Higher sales – Most companies who have adopted key account selling claim that sales have risen as a result.
- The provision of an opportunity for advancement for career salespeople – A tiered salesforce system with key account selling at the top provides promotional opportunities for salespeople who wish to advance within the salesforce rather than enter a traditional sales management position.
New/Existing account structure
- A further method of sales organisation is to create two teams of salespeople. The first team services existing accounts, while the second concentrates on seeking new accounts.
This structure recognizes the following:
- Gaining new customers is a specialised activity demanding prospecting skills, patience, ability to accept higher rejection rates than when calling upon existing customers, and the time to cultivate new relationships.
- Placing this function in the hands of the regular salesforce may result in its neglect since the salespeople may view it as time which could be better spent with existing customers.
- Salespeople may prefer to call upon long-established customers whom they know, rather than prospects where they might face rejection and unpleasantness.
- New account salespeople spend more time exploring the prospect’s needs and provide more information to management regarding buyer behaviour and attitudes than salespeople working under a conventional system.
- The deployment of new account salesforces is applicable for large companies with many customers
- Can also be deployed where continual turnover of key accounts have to be replaced.
- This structure allows better planning of this vital function and eliminates competition between prospecting and servicing.