Introduction to Sales Management TYBMS Sales & Distribution

CHAPTER 1. INTRODUCTION TO SALES MANAGEMENT

INTRODUCTION:
Sales refer to the exchange of goods or services for an amount of money or its equivalent in
kind. Selling is the most important and most difficult function in an organization. It is like
fuel to an engine. Without the sales function, a firm cannot stay in business for long.
Therefore, managing sales in an organization is a critical activity. If sales are so important to
an organization, then what is the role of other activities of the firm such as advertising,
marketing, public relations, and so on? Although these play a crucial role in creating a desire
for the product in the minds of the customers, it is ultimately the interactions that the
salespersons have with the customers that is critical in closing the sale. A company may
spend a large amount of money on advertising, marketing, public relations and promotional
activities to attract prospective customers, but all the money spent on marketing and
promotion will go down the drain if the salesperson is ineffective. Thus, it is important to
understand that sales are an important activity that can make or mar the future of an
organization.
CORE MARKETING CONCEPTS:
1. Target Market and Segmentation:
A Marketer cannot satisfy everyone’s need. Needs & Wants differs from person to person.
All do not have the same lifestyle, preferences. Not everyone likes the same soft drink,
automobile, restaurant. Thus marketer creates Market Segment. Market Segmentation is the
process of dividing the market based on the needs & wants of the customer. Marketers
identify & profile distinct groups of buyers with similar needs & wants. The opposite of
Market Segmentation is Mass Marketing. Mass Marketing focuses on having one product for
the entire market, whereas Segmentation focuses on having one product for each segment. A
marketer always targets a particular segment.
What is Market?
Traditionally, a “market” was a physical place where buyers & sellers gathered to exchange
goods & services for a monetary value. Economists now describe a market as collection of
buyers and sellers who transact over a particular product or product class. But marketers view
sellers as comprising the industry & buyers as constituting the market. Following diagram
shows the relationship between industry & market.

INFORMATION

COLLECTION Goods & Services COLLECTION

OF SELLERS OF BUYERS

Monetary Value
INDUSTRY MARKET

FEEDBACK

Sellers & buyers are connected by four flows. The sellers send goods & services &
communications (ads, direct mail) to the market; in return they receive money & information
(feedback/response)

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2. Marketplace, Market space & Metamarket:

Marketplace is physical, when one goes shopping in store. Market space is digital, as when
one goes shopping on the internet. In India, scope of Market space has not picked up well
except in few sectors like airlines, where the customers first preference is to book an airline
ticket online.
Metamarket is describes a cluster of complimentary products & services that are closely
related in the minds of customers but are spread across a diverse set of industries. Example:
an automobile metamarket consists of dealers, banks for financing the customers, component
manufacturers, tyre manufacturer, insurance, etc. all of them are related to automobile
industry.
3. Marketers and Prospects:
A Marketer is someone who is seeking a response from another party called prospect.
Marketer is one who initiates the 4 P’s of Marketing. A Prospect is a future or potential
customer. A prospect may or may not become customer.
4. Needs Wants and Demand:
Marketers try to understand the target marketers need, wants and demand. Needs describe
basic human requirements. People need food, water, clothing and shelter to survive. People
also have strong need for recreation, education and entertainment. These needs become wants
when they are directed to specific object that might satisfy the needs. Example: We need
food. But we want French fries, burger, pizza, etc. Wants are shaped by one’s society.
Demands are wants for specific product backed by ability to pay & willingness to buy. Many
people want a Mercedes; only few are able to and willing to buy one. Companies must major
not only how many people want the product but also how many would actually be willing and
able to buy it.
5. Product or Offering:
People satisfy their needs and wants with product. A product is any offering that can satisfy a
need or want. Major types of basic offerings are goods, services, experiences, events,
persons, places, properties, organization, information and ideas. Product is also known as
Market Offering as the marketer creates the product & offers the product in the market by
making the product available at all places.
6. Values and Satisfaction:
The product or offering will be successful if it delivers values and satisfaction to the target
buyer. The buyer chooses between different offerings on the basis of which is perceived to
deliver the most value. Value is defined as relation between Benefits & Costs. The customer
gets benefits at a cost. The benefits include Functional benefit and Emotional Benefit. The
cost includes monetary cost, time cost, energy cost and psychic cost. Thus value is given by:
Value = Benefit = Functional Benefit + Emotional Benefit
Costs Monetary Cost + Time Cost + Energy Cost + Psychic Cost
The marketer can increase the value of the customer offering in several ways;
 Raise Benefit
 Reduce Cost
 Raise Benefit and Reduce Cost
 Raise benefit by more than the raise in cost
 Lower benefit by less than the reduction in cost.

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7. Exchange and Transaction:

A person can obtain a product through exchange. Exchange is process which involves
obtaining a desired product from someone by offering something in return. Exchange that
involves a monetary value is a transaction.
Example: A sells TV to B for a monetary value of Rs. 15,000. Transaction may or may not
include the element of negotiation.
8. Competition:
Competition includes all actual and potential rivals offering and substitutes that a buyer might
consider.
 Brand Competition: A Company sees its competitors as other companies offering similar
product and services to the same customer at similar prices. Volkswagen might consider
Toyota, Honda, Renault & other manufacturers as major competitor It would not see itself
competing with Mercedes or Hyundai or Maruti.
 Industry Competition: A Company sees its competition and as all companies making
products and class of products. Volkswagen would see itself as competing against all other
automobile manufactures.
9. Marketing Mix:
Marketers use numerous tools to elicit desire responses from the target markets these tools
constitutes the marketing mix
Marketing Mix is a set of marketing tools that a firms uses to pursue its marketing objectives
in the target market.
McCarthy classifies these tools into 4 groups that he called 4P’s in marketing:
 Product
 Price
 Place
 Promotion
10. Customer & Consumer:
Traditionally speaking, customer is one who purchases the product & a consumer is one who
consumes or uses the product. But this interpretation is confusing for the marketer, whom
should it focus on: customer or consumer. Actually a marketer never differentiates between
customer and consumer. We are all customers of a specific brand & consumers of that
industry.
EVOLUTION OF THE SALES CONCEPT
Selling has been an important part of business throughout history and will continue to be so.
To understand the sales concept better, one needs to understand the evolution of selling
Evolution of sales can be divided into seven generations.
First generation: During the first generation, selling took place in the form of exchange of
goods. In other words, a barter system was followed. The barter system has been around since
the beginning of civilization and is the simplest form of exchange.
Second generation: The second generation of sales involved the evolution of the store
concept. Goods were stored for sale at one place from where the buyers could purchase
whatever they required. Thus, rather than purchasing goods on a one-to-one basis, a stockpile
of necessary or desired commodities was created. From the barter system of trade, sales
graduated to the inventory form of trading.
Third generation: In the third generation of sales, traders began peddling their wares by
searching for and locating customers, rather than waiting for customers to arrive and purchase
their wares from stores.

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Fourth generation: The fourth generation of sales can be considered as the first step toward
adopting a systematic approach to selling. In this stage, traders realized that certain customers
purchased goods from them repetitively and at regular intervals.
Fifth generation: The fifth generation of sales was marked by the advent of need- based
selling. Thus, the sales activity became more scientific in its approach. The emphasis of the
trader in this generation of sales was to identify the customer's need and fulfill it with a
product or service. This approach toward selling can be considered to have laid the
foundation for modem day sales techniques.
Sixth generation: The sixth generation of sales began somewhere around the late 60s. In this
period, the sales approach underwent considerable transformation. This was because there
was an increasing demand for salespersons to understand customers unique needs and offer
solutions for them. The efforts of salespersons to understand the unique needs of customers
gave rise to the ‘consultative selling’ approach wherein the salespeople and sales managers
assisted buyers in their purchase decisions. In the consultative selling approach, salespeople
give top priority to customers' needs. They also play the role of experts and try to resolve
consumers' problems by identifying and offering them a product that best satisfies their
needs.
Seventh generation: In the seventh generation, the salesperson assumes the role of a
moderator, his aim being to make the customer realize the implications of buying the product
or service. In this stage of selling, the salesperson's focus is not on selling the product but to
help the customer identify the long-term consequences of buying the product.
DEFINITION:
Sales management means the planning, direction and control of personal selling, including
recruiting, selecting, equipping, assigning, routing, supervising, paying and motivating as
these tasks apply to the personal sales force.
ROLE & RESPONSIBILITIES OF A SALES MANAGER
Sales managers are the front-line managers of a sales organization. Sales managers occupy
middle level positions in an organization with the top management above and tile sales
personnel below them. The quality of a sales organization is directly dependent on how well
its sales managers fulfill their responsibilities. Sales managers have several key
responsibilities.
1. Hiring:
The sales manager plays a key role in hiring sales personnel for an organization. He is
responsible for preparing job descriptions for various sales positions. A carefully worded job
description prevents the management from hiring the wrong kind of people for the sales
position thereby reducing the sales force turnover.
2. Training:
It is the responsibility of a sales manager to train the sales persons in his team to achieve their
sales targets. Sales training in a company may differ from that in another company. The
training may be offered by a professional sales trainer, the sales manager, or by some other
employee of the company having wide experience in sales. As part of the training, the sales
managers should address basic issues such as key attributes of the product, potential
customers, competitors and how to make the sale. The sales manager should also train sales
persons on how to handle objections and close a sale by summarizing the key attributes of the
product. Most organizations are willing to invest in sales training because they view it as a
return-on-investment. However, a direct correlation cannot always be established between
sales training and increased sales or enhanced performance of sales personnel.

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3. Coaching:
The sales manager should observe how his sales team performs in the field to identify the
training needs and gauge the effectiveness of the sales training. The sales manager should
provide honest and constructive feedback to the salesperson. Thus, the coaching function of
the sales manager involves identifying the reasons why the salesperson is not performing
satisfactorily and devising a solution to correct the problem.
4. Motivating:
The following three factors plays role in increasing the productivity of an employee – the
belief that his work is important, recognition of his accomplishments and a motivated leader.
The sales manager should ensure that it is not just the top performers in the sales force who
require to be praised. On the contrary, the salespersons who display only a slight
improvement in performance should also be praised to ensure that they show further
improvement. A sales manager also plays a vital role in designing compensation plans for
sales personnel. Different individuals are motivated by different factors. They motivate the
sales personnel by designing attractive financial and non-financial incentive schemes for
them.
5. Setting Targets:
A sales manager sets targets for the salespersons under his supervision. The sales targets may
be in the form of new accounts, amount of revenue to be generated, or it may even be in the
form of the ratio of sales per customer. The sales manager may even set additional targets for
the prospecting efforts of the salesperson. This may be in the form of number of phone calls
made, number of letters mailed or number of visits made in a week. However, the sales
manager should ensure that the targets set by him are realistic and achievable. After setting
the targets, it is the responsibility of the sales manager to constantly track and publicize their
achievement by posting the results on the company bulletin board or the intranet, as the case
may be. This acts as a great morale booster for those who have worked hard to achieve their
targets.
6. Conducting Sales Meetings:
One of the prime responsibilities of a sales manager is conducting sales meetings. These
meetings when conducted effectively serve as great morale boosters for the salespersons. To
conduct effective sales meetings, sales manager should send the agenda beforehand to the
participants so that they come prepared for the meetings. The sales manager while conducting
sales meetings must take care to cover the following aspects - review of the sales
performance of the organization, review of the performance of each individual salesperson,
recognize and reward excellent performers, offer effective sales tips present, motivational
lectures and video presentations, etc. Sales managers also need to ensure that during the
meeting, participants do not lose focus and issues and problems are resolved by the end of the
meeting.
7. Other Roles:
Other roles of a sales manager include that of:
i. A Sales Forecaster: As a sales forecaster, a sales manager forecasts the likely sales of
the organization.
ii. A Strategic Planner: As a strategic planner, he devises strategies that would help in
achieving organizational objectives.
iii. An observer of buyer behavior: As an observer of buyer behavior he observes the
buying behavior of prospective and existing customers on the basis of which he plans
future sales strategies for tile sales personnel.
iv. A market analyst: As a market analyst, he continuously monitors & analysis the
marketing environment & identifies opportunities & potential threats.

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v. A leader: the sales manager leads & guides the team & also motivates the sales force.
vi. A cost and profit analyst: As a cost & profit analyst, he analyzes the cost & profit
involved in various segments of the market
vii. A budget manager: As a budget manager, he sets the budget requirement of the sales
organization for carrying out various activities involved in personal selling process
viii. A communicator: He also plays a role of a communicator by transmitting information
from the marketing/strategy planners to the sales force.
ROLE OF SALES DEPARTMENT
Selling helps an organization achieve its business goals. It has other roles as well, such as that
of enhancing knowledge about both the internal and external environments, such as
customers, suppliers, distributors, employees and other people; developing a positive
relationship with the customers, suppliers and distributors; and negotiating with customers to
sell the company's products profitably. The sales team of an organization can play these roles
effectively only when it receives the required support from other departments. All the roles of
the sales team are interdependent and the success of one role depends upon the success of the
others. Information exchange among the departments of the organization is very crucial and
the sales department has to share necessary information with other departments such as
production. For instance, if the sales team forecasts a higher sale, then such information
should be communicated to the production department so that it can take the necessary steps
to increase the level of production.
The sales team continuously monitors the changes taking place in the external environment
regarding competitors, customers, government and other regulatory agencies; advances in
technology; and industry trends. This provides the sales personnel with vital information
regarding trends in organizational sales, product development, and budgets. By offering the
management vital inputs pertaining to such information, the sales team helps the management
in organizations to develop objectives.
There is another important role that selling has to play – the sales team should identify
potential prospects, qualify them, and develop a long-term relationship with such customers.
Locating new customers while retaining existing ones is the most important function of a
sales team. Sales personnel can locate new customers by obtaining information about them
from personal acquaintances, existing customers, & referrals from satisfies customers.
Developing & maintaining a good relationship with the customers is also an important
function of sales team.
QUALITIES OF A SALES MANAGER
There are two opinions on the characteristics or qualities required by sales managers.
(1) Sales abilities are inborn qualities
(2) Sales abilities are developed.
Some of the sales abilities like gift of gab, pleasing mannerism and extrovert nature are
inborn. However, others like analytical ability, negotiation skills, leadership, etc. can be
developed. Following qualities are identified:
(1) Leadership and Supervision: Motivating salesmen in a competitive environment needs
leadership qualities. Leadership means the ability to influence subordinates in a manner that
they willingly do their work meticulously. This involves proper delegation of authority,
effective supervision through direction and control, better communication skills etc. By
effective supervision, work is distributed based on capabilities and aptitudes of each.
Motivating each member by complimenting their success and encouraging them in lean
periods of sale is a hallmark of a great sales manager.

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(2) Planning and Foresight: Planning is vital for success in sales and the essential ability for
a manager is his capability to foresee far into the future. The rapid changes in lifestyle affect
market conditions. Technological changes affect products. Competitors launch new products
in market. Easy access to the internet and national & international trends make consumers
demand better and latest products. Sales manager must be able to foresee these changes in
advance and alert his management to take corrective actions in time to attain and sustain
competitive advantage in market. Furthermore, such changes must be incorporated in the
planning by updating or amending plans.
(3) Self-Direction and Self-Control: Sales executives are the "live wire" in an organisation
and are the revenue earners. Being at the centre stage of activities, sales manager must know
what the company expects from him. Whether defined or not, he must assign his own duties
and responsibilities and act accordingly. Being a specialist in his field, he does not look to
anyone in his organisation to guide and control him. As and when market conditions change,
he rewrites his own agenda and assumes responsibility of new tasks.
(4) Organizing Ability: Sales manager must be a good organizer and real "Go-Getter. He
must organise an effective team, make a structure suitable for a given situation, recruit and
select proper salespersons to manage different territories & products, delegate authority, co-
ordinate and control their activities, motivate and compensate their work, recognize their
efforts and acknowledge good work. He has to develop his team giving them adequate
monopoly & freedom of action; and at the same time maintaining control on their activities,
so that they do not lose sight of organizational objectives.
(5) Time-Management: Time is limited and vital when the sales manager has to manage
multiple product lines and respond quickly to market changes. Sales Manager has to balance
his time between planning functions and operating functions. He must also find time for
meeting his salesmen, distributors and some customers and as well as liaison with other
departments in the company.
(6) Innovativeness: It is important for a sales team manager to always think about how to get
the best out of their teams not just collectively, but individually as well. If something isn't
working in the sales process, a great manager can't look to others to solve the issue but must
determine ways to achieve success on his own. Looking ahead and solving these problems
before they occur is a key to success. The ones who win are those working on turning
weaknesses into strengths. Great sales managers should constantly assess his or her team
objectively and look for better ways to sell.
(7) Communication Skills: Whether the sales manager communicates with his team verbally
or in writing, he/she needs to be clear, effective and efficient. Without this skill he/she will
not be able to give clear instructions that can be understood and followed by the sales team.
(8) Teamwork: A sense of team can make a significant difference in whether the sales
manager meets the sales objectives. He/she should hold team meetings to share information,
tips and successes. Also it is vital to create and maintain a strong bond across the team. Better
human relations skill inculcates team spirit and enhances "empowerment". This reflects in a
sense of belongingness, work commitment and positive attitude of the sales team
INTERFACE OF SALES & OTHER MANAGEMENT FUNCTIONS:
1. Sales & Marketing Management:
As sales management is a part of marketing management, sales planning should be integrated
with marketing planning. A company's marketing team typically consists of two basic groups:
(a) Field selling (or personal selling) team, and

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(b) Head quarter marketing team. Field selling teams (or field sales force) are in their
territories (or branches, or regions) contacting existing and prospective (or new) customers.
The headquarter marketing team performs support and service functions or activities to assist
or help field salespeople in their jobs. These headquarter based service and support functions
are:
(a) Promotion: Consists of advertising, sales promotion, public relations, publicity, and direct
marketing.
(b) Marketing research: Collecting and interpreting information on customers, competitors,
products, markets and so on.
(c) Market logistics: Physical distribution of finished goods including warehousing,
inventory, transportation and order processing.
(d) Customer service: Pre-sales and post-sales" service as well as delivery service to existing
and prospective customers.
(e) Co-ordination: Sometimes there is a need to co-ordinate between customers, company's
salespeople and production or operations, by employing inside salespeople.
The support activities are either handled within the company or outsourced to specialists like
marketing research agencies and advertising agencies. The real integration between sales and
marketing teams would take place if there is a harmonious relationship that is built on the
understanding of common goals and effective process of delivering service to the consumers.
2. Sales & Logistics:
If Logistics & SCM is managed accurately, it helps in efficient sales to the customer. If
logistics is not managed properly it will impact the sales adversely. Because of non
availability of the product the customer may be disappointed & might shift to any other
brand. Efficient logistics department can become an effective sales tool.
3. Sales & HRM:
Quality of Sales Force i.e. Human Resources will determine the success of sales department.
Role of HRM includes (a) Recruitment & Selection (b) Training (c) Performance Appraisal
& (d) Motivating. All these roles are required for effective Sales management.
4. Sales & CRM:
Sales team should develop effective CRM with the existing customers with an objective of
customer retention.
DEVELOPMENT OF SALES MANAGEMENT
In the fast changing environment new trends are coming up in every field of business.
Marketing and selling are also undergoing such changes. The three environmental factors that
are driving the new trends or development in sales management are:
 Increasing competition
 Speed and efficiency in operations
 Greater focus on customers
Following are the major developments in the sales management:
1. Effectiveness to Efficiency
Effectiveness means plan-output relationship that indicates how much of the plan has been
fulfilled or realized. Efficiency, on the other hand, is input-output relationship that indicates
how much has, been produced or achieved per unit of input or cost. Thus effectiveness
focuses on contribution in relation to target or objective, and efficiency means contribution in
relation to cost. Even if both input and output are low, efficiency can be high. Similarly, even
if input and output are high, efficiency can still be low. Effectiveness is important, but the

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final focus should be on efficiency because every result or achievement has to be assessed in
terms of cost. To face competition effectively, companies are now concentrating on
improving efficiency to secure price competitiveness.
Efficiency can be achieved in two ways:
i) By increasing productivity.
ii) By reducing cost through better cost management.
The improvement in productivity can be at the manufacturing level and also during all
subsequent operations like logistics, distribution and selling. Cost management or cost
reduction can take place at various stages right from procurement of raw materials through
the entire supply chain.
2. Multi-Disciplinary Approach:
The focus on efficiency is forcing the companies to adopt a multidisciplinary approach to
marketing and selling. In manufacturing, increase in productivity or cost reduction involves
four different functions or departments - R&D, procurement, production process and quality
control or management - each of these being handled by different specialists or disciplines.
Hence 'total' marketing or selling activity / function becomes multidisciplinary in approach.
3. Internal Marketing:
Internal marketing focuses on the interaction between organization & its employees. It
emphasizes on motivating the employees of the organization. The logic is that if the
employees are satisfied, they will perform their job well & serve the customer efficiently.
4. Increasing use of internet:
Internet is being widely used by the companies for two basic reasons:
 Selling on the internet or e-commerce
 Information management (MIS)
Digital revolution and the management of information have greatly increased the capabilities
of consumers and marketing organisations. Buyers today can get information on products,
compare suppliers prices, and place orders on the Internet in a matter of seconds. Companies
can collect more information about markets, customers, prospects & competitors by using
internet. They can establish websites & communicate information about the company, its
products & services, & other things to the visitors. MIS in relation to sales management
relates to collection, storage (i.e creating/developing a database), analysis & dissemination of
information to required destinations in connection to sales. Through MIS, companies have
developed/ developing appropriate monitoring & control system so that sales be managed
with speed, consistency & reliability.
5. Customer Relationship Management (CRM)
Combining relationship marketing with information technology has resulted in customer
relationship management or customer relationship marketing (CRM). Customer relationship
management (or marketing) enables companies to provide excellent real-time customer
service by focusing on meeting the individual needs of each valued customer, through the use
of CRM software packages. CRM skill requires building a customer database and doing data-
mining to detect trends, segments, and individual customer needs. Many companies have
initiated CRM programmes to expand relationships with existing customers, because getting
new customers costs five times more than the costs involved in retaining existing customers.
CRM system integrates sales, customer service, and market information from various sources
with the help- of the software. It lives up-to-date information to the employees on each
valued customer to enable them to give superior service.

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6. Professionalism in Selling
Selling has increased in complexity, because competition is more intense, customers are more
sophisticated, and products and services have become more technical. Success mostly comes
to those salespersons that have a combination of natural ability and acquired skills. A study
on what do buyers like most in a salesperson indicated qualities like reliability, credibility,
professionalism, integrity and product knowledge as most valued4. The knowledge, skills,
and the right attitudes to meet complex and competitive market conditions of today are
acquired by the professional salesperson through intensive training and practice. Some of the
successful organisations have their own centers for training and management development.
Today's companies spend a lot of money each year to train salespeople in the art of selling
and to make them professional.
STRUCTURE OF SALES ORGANISATION:
Developing a successful sales organization involves adapting organizational processes and
structure to meet the demands of the ever-changing market place. A company decides on a
particular type of sales force structure depending upon factors such as type of market
(developing or fully developed), region or country, type of industry being operated in,
customers to which it caters, level of sales desired, size of the sales force and the width and
depth of the product mix.
On the basis of these factors, there can be five types of sales force structure – 1) Functional
based, 2) Product- based structure, 3) Market based, 4) Territory based & 5)
Combination/Hybrid structure. Usually organizations select the type by weighing the profits
that can be accrued from each structure against the costs involved in coordinating the sales
effort using that structure. They then choose the best option.
1. Functional Sales Organisation
In this sales organisation, the principle of specialization is fully used. Each staff specialist
manager, such as marketing research manager and promotion manager, has line authority (or
functional authority) of his/her function over salespeople. For example, marketing research
manager can directly issue instructions to all salespeople through area sales managers to
obtain certain market information. As shown in the diagram, salespeople receive instructions
from four different managers. A few large-sized companies, with many products and/or
market segments may use functional line organisation structure, with a modification of
limiting the number of staff managers who may use the functional line authority. The
advantages of qualified specialists guiding the sales force and high degree of division of
labour get nullified by confusion and frustration of salespeople, who have to respond to
several bosses. The main advantage of a functional sales organisation is its administrative
simplicity. However, its effectiveness is reduced as the company's products and market
segments increase. Besides, the marketing head has as a very difficult task of co-ordination of
competing functional heads reporting to him. The Disadvantages are: Reporting to multiple
bosses, effectiveness reduced as the company’s products & segment increases & difficult for
marketing head to co-ordinate

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Figure 1
2. Product Specialization:
Product specialization is useful when the company has a large number of products and/or
brands. There are two types of product specialization:
(a) Sales organisation with product managers (or divisional marketing managers with
responsibility for a group of products) as staff specialists, and (b) Sales organisation with
product specialized sales force. Figure 2(b) shows the company having two groups of
products-product group A and product group B. Each divisional marketing manager (usually
called product manager) has the responsibility for planning and implementing a marketing
plan for each group of products. They have no line authority over the field sales managers
and the sales force. They can only recommend or request to the regional sales managers.
Each salesperson sells all the products of groups A and B, as there is no specialization by
product.
In Figure 2(a), salespeople in each group sell only the products included in that group. The
regional and district sales managers are line managers and have no staff assistance. The
advantage of this organisation is that each product gets a specialized attention from
salespeople and territory sales managers. But the main disadvantage is that more than one
salesperson from the company calls on the same customer, resulting in customer
dissatisfaction and increase in selling cost.

Figure 2(a)
Organisation structure in Figure 2(b) corrects the problem of duplicate calls on a customer,
but its weakness is the lack of product specialization by salespeople.
Fast moving consumer goods (FMCG) companies like Proctor and Gamble use the product
staff specialization [Figure 2(b)] organisation to ensure adequate attention to product lines

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and brands at the planning level. The product managers develop a cost effective marketing
mix strategy for each product and brand, and react quickly to changes in market place. The
trend is to move from product or brand driven organisation (like Pepsodent toothpaste) to
category management (like any toothpaste category) to customer-need management (mouth
care). Thus, the focus of the organisation is on a basic customer need.

Figure 2(b)
Example: Many consumer goods companies like Proctor and Gamble and Pillsbury, and
some service organisations, such as large commercial banks, use sales organisations with
product, brand, or divisional marketing managers, who support specific product groups [see
Figure 2(b)]. Each product or brand manager is responsible to ensure effective planning,
coordination, development, promotion and achievement of objectives for the respective
product group or the brand.
Some other companies, which have wide range of products, like 3M Corporation, uses sales
organisation with product specialization sales force [see Figure 2(a)]. In 3M, separate groups
of salespeople sell different group of products, such as healthcare, safety and security, home
and leisure, displays and graphics, manufacturing and industry, and so on.
3. Market Based Structure
An increasing important type of specialization is market specialization. Market specialized
sales organisation is desirable when customers are classified by specific types, user industry,
or by channel of distribution, Figure 3 shows a sales organisation structure with market
specialization. In this structure, salespeople carry out all the selling activities for all products
but for certain specific customer groups. These customer groups, such as government,
commercial, and dealers have different buying practices and preferences. The use of market
specialization in sales organisation structure is increasing in recent years, while the use of
product specialization has been reducing.
The advantage of market specialization is that sales and marketing efforts are organized to
meet the needs of specific customer groups. This is consistent with the customer orientation
or market-centered philosophy of the company. There are several examples of companies
reorganizing along market specialization. Crompton Greaves, which had product groups
orientation, changed over to customer type sales organisation, as shown in Fig.3. Similarly
Xerox switched from a product-oriented sales organisation to a market-oriented structure.
Other examples of companies that have already changed over to the market specialization
sales organisations are IBM, General Electric, and Hewlett-Packard.

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There are some disadvantages of market specialization structure such as duplication of

territory coverage (different salespersons working in the same territory but covering separate
customer groups) and resulting in higher selling costs.

Figure 3
4. Geographic Specialization
Many large companies, selling in national markets, organize their sales operations along
geographic specialization. Typically, salespeople are assigned a geographic area and are
responsible for all selling activities to all customers within the assigned area. A reasonable
number of salespeople are placed under a territory manager. The territory sales manager is
generally called a branch, area, district, or regional sales manager.
Companies with large number of salespeople, often have two or three levels of territorial
sales managers, as shown in Fig. 4. There is a trend towards regionalization and localization.
The national market is subdivided into regional markets based on ethnic and demographic
segmentation, with different promotional strategies for each region.

Figure 4
Many companies now have local marketing managers (or area market managers) to support
local sales efforts at regional and district levels in high sales volume markets. These area
market managers help the company's marketing plan and strategies to adjust to the local
needs. They prepare regional and district plans for selling all the products of the company.
5. Combination/Hybrid Structure:
A structure that combines various types of structures and takes the best of each structure's
individual merits, while eliminating the demerits associated with it, is called a combination-
based sales force structure. Nowadays, companies are adopting a mix of product, customer
and geography-based sales force structures. This is effective for companies with a large sales
force, a wide range of products and widely dispersed customers. What has been discussed

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previously by comparing the advantages and disadvantages of sales organisation structures. It

is seen that the strengths of one organisation structure are the weaknesses of other sales
organisation structures. Due to this reason, many companies use combination or hybrid sales
organisation structures that include many specialization organisation structures discussed
earlier. These companies rninimise the disadvantages and maxirnise the advantages. One
example of combination or hybrid sales organisations is shown in Fig. 5. This sales
organisation structure combines geographic and market specializations. The basis of
specialization will vary from company to company, but some kind of specialization is needed
for firms to remain competitive.

Figure 5
Advantages of a combination based sales force structure:
A combination-based sales force structure offers flexibility to handle diverse product lines,
operate in territories with varying potential and operating conditions and cater to customers
having diverse needs. The appropriate structure can be used based on the variation in product
lines, territories and customers.
Disadvantages
A large number of staff with specialized skills is required to handle different functions within
the organization. This means high administrative costs.

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