Chapter 4 – Organizing the Sales Effort
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Chapter 4
Organizing the Sales Effort
Learning Objectives for Chapter 4
Organizing the sales force is one of the most important decisions made by sales management. It has
significant impact on every aspect of a salesperson’s performance.
• Identify the purposes of sales organization.
• Understand the different horizontal organizational structures of a sales force.
• Outline the major issues in key account and team selling.
• Discuss key vertical structure issues in sales organizations.
• Identify important issues in starting a new sales force from the ground up.
Definition of Key Terms in Chapter 4
• Division and specialization of labor
o Dividing a function into its component activities and assigning each activity to a
specialist who can increase the efficiency with which almost anything is performed.
• Line organization
o Vertical organization in which the chain of command runs from the chief sales executive
down through levels of subordinates. Each subordinate is responsible to only one person
on the next higher level, and each is expected to perform all the necessary sales
management activities relevant to his or her own level.
• Line and staff organization
o Several sales management activities, such as personnel selection, training, and distributor
relations, are assigned to separate staff specialists.
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• Outsourcing the sales force
o Term used to indicate use of agents.
• Manufacturer’s representatives
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• Telemarketing
o Selling functions are performed over the telephone.
• Major or key accounts
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• Span of control
o The number of people each manager supervises.
Chapter Outline
I. The Increasing Importance of Sales Organization Decisions
II. Purposes of Sales Organization
A. Division and Specialization of Labor
B. Stability and Continuity of Organizational Performance
C. Coordination and Integration
III. Horizontal Structure of the Sales Force
A. Deciding on a Company Sales Force or Independent Agents
a. Types of Agents
b. Deciding When Outside Agents Are Appropriate
B. Geographic Organization
C. Product Organization
D. Organization by Customer Type or Markets
E. Organization by Selling Function
F. The Role of Telemarketing
IV. Organizing to Service Key Accounts
A. Team Selling
B. Multilevel Selling
C. Co-Marketing Alliances
D. Logistical Alliances and Computerized Ordering
V. Vertical Structure of the Sales Organization
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A. Selling Responsibilities
B. Sales-Related Functions
C. The Impact of New Technologies
D. Staff Support and Outsourcing
VI. Additional Sales Organizational Issues
VII. Summary
VIII. Key Terms
IX. Breakout Questions
X. Leadership Challenge: Internal or Outsourced Sales Force
XI. Role-Play: Blue Tern Mills—Part A
XII. Minicase: Fondren Publishing, Inc.
PowerPoint Program—each chapter of the text has been captured in animated PowerPoint slides.
Chapter Outline with Suggestions
Using PowerPoint slides 4.1 and 4.2 give an overview of Chapter 4 and present PowerPoint slide 4.3 to
discuss the Importance of Sales Organization Decisions.
• The Increasing Importance of Sales Organization Decisions
Suggestion: PowerPoint slides 4.4 through 4.15 present the purpose and provide discussion bullet points
for organizational structures
• Purposes of Sales Organization
o Division and Specialization of Labor
o Stability and Continuity of Organizational Performance
o Coordination and Integration
• Horizontal Structure of the Sales Force
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• Outsourcing the Sales Force
Suggestion: Next, discuss the horizontal structure of the sales force. Identify the nature, advantages, and
disadvantages of the different approaches to horizontal organization. Use PowerPoint slides 4.16 through
4.23 to summarize the four organizational approaches.
o Geographic Organization
o Product Organization
o Organization by Customer Type or Markets
o Organization by Selling Function
Suggestion: PowerPoint slide 4.24 reviews the role of telemarketing.
• The Role of Telemarketing
Suggestion: The use of major or key account designations has increased rather dramatically in recent
years. The purpose and methods for organizing national account sales forces is illustrated in PowerPoint
slide 4.25.
• Organizing to Service Key Accounts
Suggestion: Benefits and types of team selling are presented in PowerPoint slides 4.26 and 4.27.
• Team Selling
Suggestion: Alternative selling organizations of multilevel selling, co-marketing alliances, and logistical
alliances and computerized ordering are bulleted in PowerPoint slides 4.28 and 4.29.
• Co-Marketing Alliances
• Logistical Alliances and Computerized Ordering
Suggestion: Next, review vertically structuring the sales organization by asking: (1) How many levels of
sales managers should there be? (2) How many salespeople should each sales manager supervise? and (3)
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How do sales managers spend their time? Use PowerPoint slides 4.30 through 4.33 for the span of control
discussion.
• Vertical Structure of the Sales Organization
Suggestion: The discusson of the building blocks for creating a new sales force begins with PowerPoint
slide 4.34.
• Startup of a New Sales Force
Answers to Breakout Questions
1. Intronics Corporation may want to use a workload approach that requires number of accounts by
size category, frequency of calls, and length of calls. Using the workload method allows Intronics to
2. IBM, Xerox, P&G and others have created worldwide teams with Key Account Managers who are
targeted at their best customers. Targeting your best customers involves evaluating their purchase
3. The theory of transaction cost analysis holds that, when substantial amounts of transaction-specific
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4. An inside telephone sales force might engage activities such as the following:
a. Qualify leads from inquiries before turning them over to the sales force
b. Sell products to marginal accounts and accounts too small to justify personal coverage
c. Follow up on orders, deliveries, and complaints
5. A division would have an effect as follows:
a. Recruiting for the technical sales group would be different. People with technical
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c. Compensation may or may not be affected depending on differences in complexity of the
6. An effective Web site can be a tremendous asset to the telemarketing and database marketing
initiatives of successful sales organizations. A telemarketer can refer a customer to the Web site for more
information, to place an order, and to follow up later on that order. The customer contact at the Web site
provides an important touchpoint at which customer information can be collected or updated. Customers
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1. Hiring its own salespeople would provide a number of benefits for Satin Organic Product.
First, the company would be able to identify, select, and recruit individuals it feels would be represent the
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On the other side, the single biggest negative to maintaining the sales force internally is the cost. Staffing
and running a sales force is expensive. Outside sales agents are almost always paid on a commission and,
2. First, it is entirely possible to choose the “outside sales agent solution.” It offers certain very clear
advantages, and a case can be made for getting people out in the field quickly. However, my choice for
Satin would be to create a company sales force. I would make that choice for two reasons. First, Satin
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Role-Play: Blue Tern Mills A
This role-play sets the stage for students to develop a recommendation for a new organization plan for the
sales force at Blue Tern Mills. Blue Tern needs to revise its organization because its sales force is about to
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• After the role-plays, instructors are encouraged to compare and contrast the various
approaches presented and come to an overall decision about what organizational form best
suits Blue Tern’s new situation. Also, it will be important to comment on the realism of the
implementation plans proposed, as often students underestimate the work necessary to change
a sales organizational structure.
Minicase: Fondren Publishing, Inc.
Teaching Notes
This case illustrates how a company like Fondren should structure its sales force based on the customers it
serves and the products offered. It also addresses how to handle key accounts and adds an issue of the
benefits of a team selling approach.
The goal in designing a sales organization is to divide and coordinate activities so the group can
accomplish its common objectives better by acting as a group than by acting as individuals. As described
in the chapter: (1) Activities should be divided and arranged in such a way that the firm can benefit from
the specialization of labor; (2) The organizational structures should provide for stability and continuity in
the firm’s selling efforts; and (3) The structure should provide for the coordination of the various
activities assigned to different persons in the sales force and different departments in the firm. Remember
the mantra, “Organize activities, not people.”
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Answers to Minicase Questions
1. First, Fondren should continue to use its own sales force rather than using outside agents. With
By Geographic Location:
• (+) Low cost, little confusion because of one-to-one salesperson to customer.
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• (+) Used with large and diverse product lines.
• (-) Duplication of effort.
• (-) Different product salespeople in the same geographic area calling on the same
customer.
• (-) Higher expenses.
• (-) Confusion.
By Customer Type or Markets:
• (+) Reflects market segmentation strategy
• (+) Salespeople gain better understanding of customers’ needs and requirements.
• (+) Salespeople more likely to discover ideas for new products and marketing approaches
for customers.
• (+) Allows marketing managers to control allocation of selling effort to different markets
by varying the size of the specialized sales forces.
• (-) Higher expenses and costs.
• (-) Duplication of effort causing confusion to customers.
By Selling Function:
• (+) Different salespeople specialize in performing different selling functions. E.g.,
developmental salespeople responsible for development and early sales of new products.
• (-) Difficult to implement.
Chapter 4 – Organizing the Sales Effort
Although prior to the merger Fondren and Bronson each successfully used a sales force organized
2. Fondren’s key account is definitely AcademCo, and Fondren should focus on the long-term
relationship with this significant customer. Because AcademCo appears to be the only key account, it may
3. A team selling approach is the ideal way to coordinate Fondren’s selling endeavors with its
customer service and fulfillment operations. Rather than have a sales representative make a sale and then