SALES & DISTRIBUTION

MANAGEMENT
UNIT -2
Prepared By: Prakhar Porwal
Sales Organisations
 Sales organization is a structural framework, specifying the formal authority and
responsibility between persons working in the organization. It consists of group of
individuals working jointly to attain qualitative and quantitative selling
objectives.
 Effective sales executives appreciate the importance of sound organization.
Today’s sales executives recognize that sales organization must be shaped to
achieve both qualitative and quantitative personal selling objectives.
 A sales organization defines the duties, roles, and the rights and responsibilities
of salespeople engaged in selling activities meant for the effective execution of
the sales function. This demands a coherent and unified effort of individuals in
the organization for achieving a common goal. A sales organization is designed
to execute functions which go beyond just achieving sales through the
department.
 A sales organization thus undertakes managerial functions such as the selection
and recruitment of quality manpower, their induction and training for better
performance, and the effective supervision of subordinates in the field force.
The organization also motivates them to stay loyal and committed to achieve
organizational goals and adequately compensates them for their efforts.
 In the words of H. R. Tosdal, “A sales organization consists of human
beings working together for the marketing of products
manufactured by the firm or the commodities which have been
purchased for resale.”

 In the words of C. L. Boiling, “A good sales organization is one where

functions of departments have been carefully planned and
coordinated towards the objective of pulling the product in the
hands of the customers, the whole effort being efficiently supervised
and managed so that each functions is carried out in the desired
manner.”
Characteristics of a Sales Organization

 Sales organization is a part of the total enterprise dealing with sales

activities.
 It consists of a group of people engaged in selling activities.
 It works for the attainment of common objectives of selling.
 There exist formal and informal relationships between persons engaged in
selling activities.
 It defines the duties, responsibilities and rights of people in the selling jobs.
 It establishes departmentalization of selling activities separately.
 It is a means to the efficient execution of the sales functions and
accumulation of resources to perform those functions.
 The success of sales organization depends on the unified and coordinated
efforts of salespersons.
Criteria for Setting a Successful Sales
Organization

Before a sales organization is developed, the management should know the criteria for
setting a successful sales organization.

 Sales organization should specify precisely the functions of the sales department and

plan and coordinate the activities of the salespeople and superiors in a coherent

manner.

 Proper allocation of resources should be made with a view to reach customers with

the right marketing mix. The goals are – customer satisfaction and target return on

investment.

 Sales organizations should lead to a sales force structure that can effectively and

efficiently control the sales operations. This means whatever the sales structure is, it

must adequately cover the market and control the cost of selling operations.
Principles of a Sales Organization

1. Span of control.

2. Unity of command.

3. Stability and continuity.

4. Centralization and decentralization.

5. Line and staff positions.

6. Coordination and integration.

7. Specialization.
1. Span of Control:
 Span of control refers to the number of subordinates that a sales manager can
supervise at a particular time. It is related to a manager’s ability to control to
coordinate the activities of salespeople working under him and integrate them
with other activities of the organization. A narrow span of control endorses tall
structures of organization with more layers of supervision where only the field
salesperson can reach to the level of end users.
 A wider span of control encourages a flat organizational structure with lesser
levels of supervision. Coordination between the lower- and higher-level
employees is a bonus to such structure. Depending on the span of control, a
sales manager has the capacity to manage his subordinate sales staff.
2. Unity of Command:
 The unity of command principle says that no subordinate should be responsible
to more than one supervisor. Each person should report to only one superior.
However, this is too rigid to fit well with the modern organization where
horizontal communication has a major role to play particularly in multi-specialty
organizations such as – multi-speciality hospitals, IT firms, etc.
 Moreover, flexibility in work culture is crucial to get warm cohabitation of
managers and subordinates. For example, a territory manager is given a free
hand to decide a sales budget for a particular project in a particular territory. It
has been seen that an organization thrives more where the role of the superior
leads the salespeople from the front rather than directing them to carry out the
instructions.
3. Stability and Continuity:
 It is suggested that jobs should not be assigned without giving due regards to
the talent and preferences of the current employees. Managers should
distribute job responsibilities according to the specializations of the salespeople
where the latter has the knowledge and skill to execute the task.
 To maintain stability in a firm, this becomes the key to an organization’s
perpetual success and continuity which steadies the growth of business. For
example, in a customer-based sales organization, salespeople are assigned to
deal with customers where they have an experience to handle both new and
existing customers.
4. Centralization and Decentralization:
 The concept of centralization and decentralization refers to the degree to
which control and authority are vested to the top management in an
organization. Centralization means that authority and control are concentrated
to the top of the organization and decentralization indicates the same has
been distributed from the top to the lower levels of working units.
 In a centralized operation, staffing, training, motivating, compensating, and
evaluating sales performance are controlled by a core management group
located at the upper rung of the organization, whereas, in a decentralized firm
the field sales managers are given the authority to perform these activities.
5. Line and Staff Positions:
 A line of authority is exercised by immediate superiors over their subordinates and a chain
of command is directed downwards through various levels of the organization. One
subordinate is responsible only to one person on the next higher level. The chief executive
officer takes the decision and this decision flows down the line for implementation.
 So lines of authority move vertically down the structure and the members at the
organizational level are independent of all others on that level. This type of organization is
known as line organization. In line sales organization, sales managers control a number of
subordinates and report directly to the next higher level in the organization.
6. Coordination and Integration:
 Traditional sales organizations relied more on direct communication with customers
through the sales force. The sales department in these traditional firms acted as the front
office where they could deal with customers directly and assistance from the other
functional areas such as – R&D, production, finance, etc., could be called for whenever
required. Flow of communication was more or less unidirectional and no coordination
amongst functional areas was ever felt.
 But, modern organizations prescribe different roles for different departments. For instance,
the sales department is responsible for solving customer problems. The communication
flow, here, in these organizations is a two-way process between sales and other
departments.
7. Specialization:
 A sales organization is a combination of different sales and marketing activities and
requires the presence of managers and sales personnel with specializations in their
respective fields. A sales manager is said to be capable of making call plans, prepare
routing, and work scheduling for the salespeople. It is important to note that salespeople
should be efficient in treating customers and handling their problems as well. For example,
a financial firm needs salespeople with knowledge in accounting and finance. And a
technologically oriented firm requires salespeople with technical qualifications.
Significance of Sales Organization
 To plan purchase

The sales of the company depend on the sales anticipation. The sales will increase only when the consumer purchases the goods
or serv ices. Therefore, the company has to plan the sales according to the consumer need and want, meaning where they want
the product, what they want etc. The planning and dev elopment is done accordingly to satisfy the need of consumer.

 To create pattern of demands for products

The demand of the product is created to lead to sell in the market. When a product is manufactured in the factory, it is not sold
automatically. Salespersons push the product to consumers. But even they cannot force the consumer to buy the product. The
sale depends on the consumer’s need and perception. This need is created by the selling skills, promotions through
adv ertisements, etc., which in turn help in creating demand in market.

 To handle the orders received

This is an important step where the salesperson has to answer the calls and queries of the customers, receive orders and make
the product ready as per the demand of consumers.

Finally, the products are packed and dispatched as per the expectation of consumer; all these are imperativ e and effective
tasks.

 To collect the dues

Sales cannot alw ays be done for cash. Bulk sales are made on credit. I t’s v ery difficult for an organization to perform only on the
basis of cash sales; in this competitiv e market, credit sales play a crucial role.

After the credit sales hav e been done, the organization has to collect dues. I t is a v ery challenging task as the salesperson has to
retain the business and still get the task done.

 To handle the task of personnel management

Ev ery organization wants best sales personnel to enhance the sales. This depends on training. The organization has to select,
train, motiv ate, monitor and control its sales personnel. Here the company has to make an inv estment in sales personal.
Types of Sales Organization

 An organization is designed in a manner where we can identify the work or

activity performed by an individual or group. The roles and responsibilities
are defined, which helps in building relationships to enable people to work
effectively and efficiently. This helps in achieving the goals of the
organization. The following are the four types of sales organizations −
 Functional Type

 Function structure refers to the sales organization structure that focuses

on specialization within the marketing team. This means that everyone
has their own purpose to fulfill within the team based on their
specialties, interests, and other factors.
 Having a sales team that runs by a functional structure is more
efficient, but it does come with a plethora of problems. It may sound
great to have each person specialize in their tasks, but sales is a very
interwoven department. This means that people need to coordinate a
lot in a sales team that runs by a functional structure.
 Having specialization can also be difficult when you're handling clients
and accounts from different geographic regions. Some people may
not be able to handle multi-lingual accounts or they may not know
how to interact with people of different cultures.
Advantages of functional type

The following are the advantages of a functional type of organization −

 Specialization − In the figure, we can see the division has been made
according to the functions. By this, we can expect each function is
specialized in its activity.

 Flexibility − The number of departments can be added or removed as per

the requirements.

 Decision making − Decisions can be made quickly as the person would be

an expert in his department and will be aware of the impact of his decision.

 Co-ordination − The co-ordination between functions can be done easily

Disadvantages of functional type

 Let us now understand the disadvantages associated with functional type of

organization −
 Due Attention − Each department is only specialized in their own activity; hence
there is no attention focused on the product.
 Delay − There is delay in making decisions because of co-ordination between
all the departments.
 Co-ordination − From the figure, we can see that all departments report to the
General Manager. Therefore, .in peak times, it may become difficult for the
General Manager to maintain co-ordination between the departments.
 Conflicts − There is always conflict between departments due to being
specialized only in one core area and lack of cross training.
In general, functional type of organization is suitable where the organization
structure is small having limited products.
Product Sales Force Structure

 The product sales force structure focuses on the products that clients make.
This can be based on individual products or product types. This
organizational structure is the most specialized of all of these options.
 With this kind of sales organizational structure, you may find that your sales
reps are more attuned to how to sell to certain companies based on the
products they have. In fact, you'll have sales reps that can handle one
product type at once company and the same product type at another
company.
 This kind of specialization is great if your company focuses on one industry,
but it can become a little much when you're bringing multiple industries
with multiple products in at once.
Advantages of Product Type

 Due Attention − Due to the division according to the product, each

product gets required attention.

 Specialization − The salesperson is specialized in specific products; hence

he/she has an advantage in handling the department.

 Responsibility − The responsibility can be easily assigned to a salesperson

because all the salespersons are specialized in their product/ department
and are well acquainted with the product, which helps them to handle
customers smoothly.
Disadvantages of Product Type

 Co-ordination − There would be problem of co-ordination between two product

departments.
 Selling Cost − The selling cost of product may increase due to the division according to the
products.
 Operational Cost − Operational cost may also increase due to each product being
treated differently.
 Freedom − There is no cap on the freedom enjoyed by employees because the
salesperson is specialized only on his/her product/department and will not be able to
handle other product/department.
Suitability of Product Type
 Product type is suitable in the following cases −
 Where the organization has many products and it can divide the departments according
to the products.
 For organizations selling highly priced products.
 When the products of an organization are more technical oriented, the organization can
divide the departments according to the products as the salesperson will be efficient and
effective to discuss the product with the customer in an effective way.
Consumer Specialization Type

 According to consumer specialization, the departments are divided on the

basis of the costumers to whom the products are offered. Most of the time,
market appearance plays an important role in knowing the consumer
needs and to divide the departments accordingly.
Advantages of Consumer Specialization
Type

 Consumer − Here the division is according to consumers, so each consumer

gets due attention.

 Consumer satisfaction − Consumer satisfaction is the first priority; as

maximum services are provided to the consumer.

 Planning and policies − The sales planning is done in a proper way and
policies are designed keeping each category in focus to achieve the goal.

 Brand − The organization is able to fulfil consumer needs and wants and
create its own brand to gain market share.
Disadvantages of the Consumer
Specialization Type

 Expenses − The expenses for the company to build and plan according to

consumer and develop the market are huge.

 Sales activities − It becomes difficult for the sales manager to co-ordinate

the sales activities of salesperson.

 Investments − In this case of specialization, the investments are high and

sometimes repeated, which in turn, is loss to the company.

 Suitability of the Consumer Specialization Type

Consumer type is suitable in the following cases −

 When there is a large number of consumers who are looking out for special

services.

 The costumer is ready to pay for the services offered. Here, the target is mostly

premier customers.
 Geographic Structure

Geographic sales structures sound like what they are. Sales teams that run by this structure organize
by location.
 Geographic sales structures are extremely popular in the sales world. They come with too many
benefits to ignore.
 First, sales teams that are organized based on the geographical location of their clients cost
much less. It doesn't take a lot to leav e certain sales reps in certain areas. If you weren't
organizing based on region, you may hav e to mov e your sales reps all ov er the place, which can
add up in cost ov er time.

 Second, a successful sales team in one geographic area leads to continued growth in that area
as well as the surrounding areas. By taking care of one region at a time, you're more likely to be
successful in caring for that region.

 Third, clients in a certain geographical area will come to know your sales rep in that area
extremely well. Ev en if you hav e multiple, it's likely that it's a small team that will split up the clients
in the area.
Advantages of Area Type

 Products − Customers can be served with the latest products and customized
products.

 Transport cost − Transport cost can be reduced because the division has been
made according to areas.

 Customer service − Company can provide better customer services as the

division is made according to area. Thus, the company can understand the
customer psychology and perception better.

 Sales performance − The sales performance can be compared according to

zones and steps can be taken to improve
Disadvantages of Area Type

 Costly − It is costly as compared to other types and increases expenses of

the company.

 Markets − It becomes difficult for co-ordination for the General Manager for

different markets.

 Conflicts − There may be conflicts regarding resource allocation between

zones.
Suitability of Area Type

The area type of organization is suitable in the following cases −

 When the area or the territory for market is very large.

 Where the market is different based on zone.

 Where the product is differentiated depending on zone.

 Where the sales volumes are high and generate more revenues.
Sales department external relations
Distributive Network relations
An organization is concerned with maintaining a healthy relationship with
suppliers and customer, with whom they interact daily. However, for an
organization to be successful, it has to maintain healthy and fruitful relation
with all the stakeholders. These stakeholders may or may not be directly
involved in the market. But they impact how business will function in the
market.
The external stakeholders are a large and diverse group. They include

 Government and other legal bodies

 Financial Institutions and Creditors
 Consumers Rights Organization and Environmentalist
 Media
 Industry Associations
Government Relationships

 Allorganizations are affected in some way or the other by the government and
legal bodies in for legislation, act or tax policy. These bodies could be operating
at national level (e.g. Central Board of Taxes) or at local level (e.g. Municipality)
or at international level (e.g. World Trade Organization).
 The amount of impact of these bodies on the organization is dependent of
sphere at which it operates i.e. local market, national market and international
market.
 Any government’s economic policy or central bank’s monetary policy has an
indirect or direct impact on the organization. A direct impact would be passing
legislation to break cartels or monopoly or price regulation.
 Government’s role is just not restricted to economic and monetary policy, but it
sphere of influence includes society, the environment, and culture fabric of the
country. Regulation around food and health safety directly impacts the function
of the organization. For example, cigarette manufacturers anxiously await
budget hoping government does not increase sales/excise tax, thereby
increasing the selling price.
 Political environment also plays an important in impacting functioning of the
organization. Any sudden animosity between neighboring countries can result in
government imposing trade embargo thereby halting commerce.
Financial Institutions and Creditors

 Financial institutions, banks, creditors, lenders do not serve as direct

customer for an organization, thereby not really forming the inside core of
relationship marketing. However the influence they have on the overall
working of the organization make them important element of relationship
marketing. This aspect of relationship marketing is called Public Relationship
or Investor Relationship management.
 For an organization, it is important to have loyal and long term customer,
but it is equally important to have loyal and long term investor who will stay
invested in the company. Long term investors provide financial stability to
the organization and also help companies avoid hostile takeover bids.
 Financial performance as understood by an external stakeholder like an
analyst will also determine the fate of the company. If the analyst expresses
a positive response to the financial performance, it is likely that company
will attract steady investors and also keep supplier confidence going. By
providing quality company information to financial analyst, PR team can
develop strong relationship with them.
Consumer Groups and External Pressure
Group
 Another extension of external stakeholders is public pressure groups like consumer activist,
environmentalist, human and animal activists, ideological groups, local leaders etc.
 Consumer groups are created to fight for the rights of consumers and sometimes represent
a portion of customers. It is generally perceived that consumer group exists to provide
customer satisfaction. However, they may be constituted to take on organization
perceived with too much power or control over the market. These consumer groups can
exert pressure through boycotts or protests.
 Environmentalist groups like Greenpeace, World Wildlife Fund, PETA raise issue against
companies which they believe are hurting the environment. Some of the issues raised by
this group are illegal dumping of industrial waste in rivers, water wastage, plastic usage,
pesticide usage.
 Some of ideological and animal rights groups are difficult to deal and negotiated with. It
requires a different PR strategy from company to protect its interest.
 Public opinion leaders, civil rights leaders, TV Hosts are high profile individuals who
command substantial public support. Any opinion expressed by them against any
company can generate a negative environment for the company.
 Essentially, companies are left with two options in dealing with pressure groups. The first
option is to go alone and develop its own corporate social responsibility agenda and
develop wider public acceptance. The second option is to develop working relationships
with pressure groups and gaining their favorable opinion.
Mass Media

 In the current world with 24x7 media and the flow of information, it is very
important to pay particular attention on strategies to deal with mass media.
Typically, organizations need to develop strategies to tackle news reporters
and editors, investigative journalist, and sectorial analyst.
 Organization need to develop a proactive approach in dealing with mass
media. By creating open channels of communication with them. This could
be achieved through providing them with actual and crucial business
information from the senior management interview or product testing etc.
Industry Associations

 Sometimes companies join hands in delivering value to customers. This so

called alliance and collaborations have their own set of challenges. These
collaborations can be divided into four categories internal (within the
industry), external (outside industry), informal (business network) and formal
(trade associations and alliances)

 There are so many external relationships, organizations have to deal with. It

has to determine which one of it is going to impact it most and develop
strategies around that. Relationships with external stakeholders can make
or break the success of an organization.