Sales Organisation: Needs, Importance, Functions, and Structure
Sales organization consists of human beings or persons working together for the effective marketing of products manufactured by the firm or the products purchased for resale. Sales organization coordinates the efforts of members of a group to bring about a desirable result. It provides an efficient, economic, and flexible administrative set up to ensure the timely movement of products from the warehouse to the ultimate consumer. Thus it provides a satisfactory job to buyers and sellers.
A sales organization has a number of departments. It has a planned and well-coordinated structure. It performs the functions of planning, organizing, and controlling the marketing and distribution of products. The sales organization is a foundation for effective sales planning and sales policies. Systematic execution of plans and policies and programs of a sales organization control all the sales activities. As such it ensures maximum efficiency and profitability without losing consumer service and satisfaction.
According to Boiling, “A good sales organization is one wherein the functions or departments have each been carefully planned and coordinated towards the objective of putting the product in the hands of the consumers—the whole effort being efficiently supervised and managed so that each function is carried out in the desired manner.”
Need for a Sales Organisation:
“A sales organization is like a power station sending out energy, which is devoted to the advertising and selling of particular lines; and there is a tremendous waste of energy between the power station and the points where it reaches the consumers. Therefore, there arises the necessity of organizing the sales department.”
So long as the firm is a small one, there is no need for the sales organization, as the proprietor himself can sell all the output or in certain cases, he is assisted by one or two salesmen, under his direct control. But when the firm or the business itself expands, because of extension of markets, production in a large-scale, competitive market,s, etc., the need for a sales organization is felt.
The need arises because of the following 10 factors
- Production in anticipation of demand, which must be sold.
- To create demand for the products through efficient salesmen.
- Execution of orders without delay.
- Satisfactory action against complaints from customers.
- Collection of credit sales.
- Keeping enough stock by looking at the future demand.
- The maximum contribution to profit.
- To enforce proper supervision of salesforce.
- To divide and fix authority among the subordinates.
- To locate responsibility.
Importance of Sales Organisation:
A sales organization is the mechanism through which a sales manager’s philosophy is translated into action. The sales organization provides the vehicle for making decisions on planning, organization, selection, and training of salesmen, their motivation, directing, and controlling them. It also provides a vehicle through which these decisions are implemented.
“A business organization is like a home. It has a characteristic atmosphere. In some homes, the head of the household and all its members are vitally concerned about religion, politics, or some other interest—the occupations of the individual members being only of minor interest. In other homes where the personality of the head of the household dominates the activities and spirit of the members the opposite occurs. Like any group a business organization has its own culture, traditions, and to some extent its own language and climate.” —Hepner
“A sale organization is like a power station sending out energy which is devoted to the advertising and selling of particular lines and there is a tremendous waste of energy between the power station and the points where it reaches the consumers. Therefore, there arises the necessity of organizing the sales department.” —Boiling
“Sales are the lifeblood of business,” Sales organization is part and parcel of a business firm. All the departments are carefully plaited in a good sales organization.
The 7 importance of the sales organization, in brief, is:
- The blood circulation of a human body keeps a man alive and in sound health. Similarly, sales strengthen the organization. The more the sales, the more the profit.
- Increasing sales means the progress of the firm. If the sales fall down, it is fatal, because sales are the lifeblood of the business, as the blood is to a human body.
- Consumers are the kings. Manufacturers produce goods for consumers. They must be satisfied in the market which is full of competitors with products for similar use. So suitable products are necessary, and for this an organization is necessary.
- To move the products from the factory to the consumers, the sales organization is necessary— demand creation.
- To handle the orders promptly i.e., from the stages of inquiry to order at full satisfaction to consumers
- Collection of dues is also important. Several drops make an ocean; at the same time milking cows should not be neglected.
- To keep good public relations by redressing the complaints if any, and to create a good image of the firm.
16 Functions of a Sales Organisation
The modem sales organization is not only profit-oriented but also customer-oriented.
The following are the important functions of a sales organization:
- Analysis of markets thoroughly, including product and market research.
- Adoption of a selfishly sound but defensible sales policy.
- Accurate market or sales forecasting and planning the sales campaign, based on relevant data.
- Deciding about prices and terms of sales and pricing policies.
- Packaging for the consumer wants a container that will satisfy his desire for an attractive appearance, keeping qualities, utility, correct price, and many other factors.
- Branding the product.
- Deciding the channels of distribution.
- Selection, training, and control of salesmen and fixing their remuneration.
- Allocation of Territory and quota-setting.
- Sales programmers and sales promotion activities.
- Arranging for advertising and publicity.
- Order preparation and office recording.
- Preparation of customer’s record cards
- Scrutiny and recording of reports.
- Study of statistical records and returns.
- Maintenance of salesmen’s records.
Structure of the Sales Organisation:
The following ten factors are to be taken into consideration while designing the structure of a sales organization:
- Nature of the market
- Sales policies of the enterprise
- Nature of the product
- Number of products
- Availability of financial resources
- Level of the distribution system
- Size of the company
- Price of the product
- The ability of the professionals
- Position of competitors’ Products.
Sales management is concerned mainly with the management of the selling function. The sales function in a business is a basic function. Sales management represents one of the most important functional areas of business management, and all the principles of general management such as planning, organizing, directing, motivating, and controlling are applied to sales management too for securing better business performance, viz., reasonable profits through sales. Modem business is consumer-centered.
The American Marketing Association has defined sales management as “the planning, direction, and control of the personal selling activities of a business unit, including recruiting, selecting, training, equipping, assigning, rating, supervising, paying and motivating as these tasks apply to the personal sales force.”
Ten Functions of Sales Management:
The general functions of sales management or marketing management are as follows:
- Sales planning and policies
- Pricing policies and price-fixing
- Advertising and promotions
- Control of salesforce
- Marketing research
- Planning and control of sales
- Management of distribution channels
- Branding, packing, and labelling
- After-sale service
- Integration and coordination of all functions.
The Field of Sales Management:
The field of sales management includes the following ten tasks:
- Setting sales force objectives
- Human resource planning
- Recruitment and selection of salesmen
- Training of sales personnel
- Controlling the sales force
- Organizing and supporting the work of a salesman
- Designing sales force objectives
- Supervising and evaluating the sales force.
Different Types of Sales Organizational Structures
Are you trying to organize your sales team? Are you trying to figure out what the best sales organizational structure is or trying to identify the problem within your current structure?
Determining the best way to organize your sales team is important, and we’re sure that you’re looking to find the most efficient sales structure. Your sales team organization matters, because it can affect the sales that you make and the revenue you bring in.
Let’s talk about what the different kinds of sales organizational structures are and list some pros and cons. Then, we can discuss how you should go about organizing your own sales team.
Types of Sales Organizational Structures
Remember, before making a structure change, it’s important to identify and define the problem. Some solutions do require big sales structure changes. Others require smaller changes.
The sales structure problem often lies in asking your people to handle too many different aspects if the sales process. In our new IMPACT courses, we introduce the Rule of 3s and use them to determine if you have a People or Process problem. If more than 1/3 of your salespeople are underperforming in your top three performance metrics, you likely have a sales structure problem.
There are four main types of sales organizational structures:
- Functional Structure
- Geographic Structure
- Market-Based Structure
- Product Sales Force Structure
Each one has its own pros and cons that you should consider before implementing any of the structures in your business.
- Functional Structure
Functional 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 the sales dept. 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.
In addition, there may be some problems with duplicate information. As tasks and to-dos run around the office, it’s likely that multiple people are going to end up with the same account at the same time. This is because processes tend to run simultaneously in the sales team.
Having duplicate processes going around may sound efficient at first, but it can be detrimental to an account. This is especially if both sales associates are interacting with a customer at the same time. It can be overwhelming to perform multiple processes on the same client at once.
- Geographic Structure
Geographic sales structures sound like what they are. Sales teams that are run by this structure organize by location.
So, let’s say that you have some clients in Atlanta, others in Boston, and others in New York. With a geographic organizational structure, you’re likely to break your sales team between these cities. This is also known as a territorial sales force structure.
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 leave certain sales reps in certain areas. If you weren’t organizing based on region, you may have to move your sales reps all over the place, which can add up in cost over 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. Even if you have multiple, it’s likely that it’s a small team that will split up the clients in the area.
If customers get to know your sales representatives well, you’re more likely to make more sales and increase customer loyalty. This means more revenue in the future and better customer relations overall.
Plus, those existing customers may bring more in.
That being said, it may be difficult to decide on your layout. You need to know where to place territory lines for your sales reps to follow.
Plus, the sales reps that are located in these different areas won’t be able to specialize. This can make more difficult sales tasks harder to do on their own.
- Market-Based Structure
A market-based structure, also known as a customer sales force structure, refers to a sales team that is organized by customers or industry. More likely, they’re grouped by industry.
By placing your sales reps in a specific industry, you’re giving them a chance to specialize in that industry and the needs of the companies within that industry. Plus, by becoming experts, your sales reps will have a better chance to grow stronger relationships with your current and potential clients.
For companies that aren’t focused on one industry or a few industries, it’s likely that a market-based structure would be advantageous. This is especially given that higher-ups on the management team can bounce around from industry to industry where the sales reps are specialized.
By organizing your team strategically in this way, you’ll be able to make more sales and build stronger bonds with your clients.
Unfortunately, market-based structures come with higher costs and difficulties in sorting the location of different companies. Obviously, companies don’t base their location on what industry they’re in (entirely). This means that some tech companies are in San Francisco, others are in Nashville, and others are in Minnesota.
You’ll have to move your sales reps around a lot to make up for the splotchy geography of different industries. This can raise your costs and leave your sales reps whipping from one area to the next.
- 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 one 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.
Sales reps can get interwoven with too many factors. This may cause communication issues and the need for more coordination with each, individual sales rep.
How to Create a Sales Organizational Structure
You need an organized sales team. In fact, the Harvard Business Review performed a study that found that well-organized sales organizations perform much better than sales organizations without a distinct organizational structure.
So, if you’re looking to create an organized sales team, you need to figure out what the best organizational structure for your team is and where the problems are within your team and/or structure. This means that you need to determine the best way to organize your team based on what industries, products, and geographical locations your clientele consist of.
You should also consider what traits and specialties the sales reps within your team has. This means looking at what your team members have done in the past and how they’ve contributed to your company so far.
By creating the best sales organizational structure, you’ll find the following changes in your team:
- Reduce conflict between team members
- Increase engagement from the sales team members
- A more knowledgeable sales team that is ready to face a variety of situations
- Better coordination of activities between team members
- Better communication between coworkers
- Clearer communication of expectations and goals for the team
- Improved decision-making based on the team’s expectations and goals set prior
- Possibility for more customers and more sales with a more cohesive team.
You’ll be able to reap all of these benefits of a more organized team by taking the time to evaluate your industries, clients, and geographical locations. Once you evaluate this information, you can then place the right people in the right roles based on their individual strengths.
Implement Sales Team Structure
Every business needs an organized sales structure that brings every team member together. The better organized your team is, the better they will perform. This means that they’ll pull in more revenue for the company and may even start some new business relationships.
Our new IMPACT series (specifically the Process courses) takes a deep dive into sales structure and how to identify the problem, define the problem, solve the problem, and then roll it out. For example, if your know your problem is not enough new business development and your weakness is lead generation, then the solution is to make a structural change that fixes the bottleneck problem.
The sales structure is one component of our IMPACT Process Pyramid that is designed to help you determine if you have a sales structure problem, and if so, what process can you use to help determine a new structure.