Types of Sales Organizations and their Structure
The grouping of activities into positions and the charting of relationships of positions causes the organization to take on structural form. When sales department is set up in an organization it follows one of these general structures – Line, Line and Staff, Functional and Committee.
The line sales organization
- This is the oldest type used in smaller firms and in firms where there is a small selling force. This limitation restricts them to narrow product line in limited geographical area.
- All executives have line authority and each subordinate is responsible only to one higher-up.
- They have fixed responsibilities and sales personnel reports directly to the chief sales executive
- Lines of authority and responsibility are clear and logical, and it is difficult for individuals to shift or evade responsibilities
- Not appropriate when there is a large sales staff
The line and staff sales organization
- Found in large and medium sized firms selling diversified product lines over a wide geographical area
- Provides the top sales executive with a group of specialists and experts in dealer and distributors relations, sales analysis , sales organization, sales personnel, sales planning, sales promotion, sales training, service, traffic and warehousing
- Staff sales executives do not have authority to issue orders or directives.
- Staff recommendations are submitted to the top sales executives and after approval, transmit necessary instructions to the line organization
- Gives time to the staff executives time to study problems before recommendations.
Functional sales organization
- Based upon the concept that each individual in an organization, executive and employee, should have as few distinct duties as possible
- Salespeople receive instructions from several executives but on different aspects of their work
- All specialists have line authority and they have a function authority
- There is a great improved performance
- Not feasible for small and medium sized firms
Committee sales organization
- The executive group plans policy formulation while implementation of plans and policies is done by individual executives
- Many firms have a sales training committee
- Before policies are made and action is taken, important problems are deliberated by committee members and are measured against varied viewpoints.
Structure of sales organizations
- Geographical Structure
An advantage of this form of organization is its simplicity. Each salesperson is assigned a territory over which to have sole responsibility for sales achievement.
Their close geographical proximity to customers encourages the development of personal friendships which aids sales effectiveness. Also, compared with other organizational forms, e.g. product or market specialization, travelling expenses are likely to be lower.
A potential weakness of the geographical structure is that the salesperson is required to sell the full range of the company’s products. They may be very different technically and sell into a number of diverse markets.
In such a situation it may be unreasonable to expect the salesperson to have the required depth of technical knowledge for each product and be conversant with the full range of potential applications within each market. This expertise can only be developed if the salesperson is given a more specialized role.
- Product Specialization Structure
One method of specialization is along product lines.
Conditions that are conducive to this form of organization are where the company sells a wide range of technically complex and diverse products and key members of the decision-making unit of the buying organizations are different for each product group.
If the company’s products sell essentially to the same customers, problems of route duplication (and hence higher travel costs) and customer annoyance can arise.
Inappropriate use of this method can lead to a customer being called upon by different salespeople representing the same company on the same day.
- Customer-based Structures (Industry-Based Structure)
The problem of the same customer being served by product divisions of the same supplier, the complexity of buyer behavior, which requires not only input from the sales function but from other functional groups (such as engineering, finance, logistics and marketing), centralization of purchasing, and the immense value of some customers have led many suppliers to rethink how they organize their sales-force.
Companies are increasingly organizing 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 in industrial selling the market is defined by industry type.
Thus, although the range of products sold is essentially the same, it might be sensible for a computer firm to allocate its salespeople on the basis of the industry served, e.g. banking, manufacturing companies and retailers, given that different industry groups have widely varying needs, problems and potential applications.
Specialization by market served allows salespeople to gain greater insights into these factors for their particular industry, as well as 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.
- Customer-based Structures (Account-size Structure)
Some companies structure their sales-force by account size. The importance of a few large customers in many trade and industrial markets has given rise to the establishment of a key or major account sales-force.
The team comprises senior salespeople who specialize in dealing with large customers that may have different buying habits and demand more sophisticated sales arguments than smaller companies. The team will be conversant with negotiation skills since they are likely to be given a certain amount of discretion in terms of discounts, credit terms, etc., in order to secure large orders.