Types of Sales Force Structure

The sales force comprises all the human and material resources that an organisation uses for its selling activities. The sales force’s structure determines how effective it is. For instance, if a company sells products that need specific technical knowledge, it would not be logical to sell all products by area.

Various factors such as budget, customers, and organisational culture decide the structure of the sales team that is right for a firm. Supporting functions such as sales enablement and sales operations also influence the sales organisation structure.

Factors When Deciding Sales Force Structure

Managers need to consider the following factors when deciding the structure of the sales force:

Nature of the Product

The nature of the product is important in deciding the sales force structure. For instance, products with shorter lifecycles will need different selling efforts than those with longer lifecycles.

Demand for product

The demand for a particular product plays a critical role in allocating salespersons to a territory. For instance, a product with constant demand and high turnover requires lesser selling effort than one with low or fluctuating demand and low turnover.

Transport

The transport facilities available for a particular product also need to be considered when dividing the sales force into a specific structure. For marketing and sales to be effective, a region with poor transport facilities should be divided into smaller territories.

Competition

Highly competitive sales territories mean that the size of the sales territory is reduced. In these territories, salespersons need to meet dealers and customers more often to maintain product demand. Hence, in such territories, the sales force should be allocated to smaller territories.

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Types of Sales Force Structure

• Product Based
• Geography Based
• Customer Based
• Combination Based

Product Based

In this type of division, the responsibilities of the sales force are defined based only on the product or product lines. If the reps gain expertise for a particular product or service, they can better convey its value and use to the prospects.

Product type is suitable in case the organisation has many products (or services) and it can divide the departments according to the products. It also makes sense to align salespeople to products when a company sells highly-priced products or technically-complex products.

Product-based sales force structures have the following advantages:

• Division according to product ensures that each product gets required attention.
  
  
• It enables sales reps to specialise in specific products.
  
  
• It allows managers to guide selling efforts.
  
  
• It allows managers to assign responsibilities to salespersons more effectively.

Product-based sales force structures have the following disadvantages:

• Efforts may be duplicated within geographies and customer accounts, resulting in higher costs
  
  
• Coordination may become difficult between two product departments
  
  
• Selling costs may be higher when dividing the sales force according to the products.
  
  
• Operational costs may be higher because each product is handled differently.

Geography Based

In this type of structure, departments are divided according to territories or geography. This type of alignment allows salespersons to familiarise themselves with a specific geographic location.

This involves building relationships with local businesses, becoming familiar with local competitors, and tracking target accounts. This structure makes it easier for managers to appraise their reps’ sales performances relative to the potential of a particular territory or region.

Geographic-based sales force structures have the following advantages:

• Transport costs are reduced since responsibilities have been defined based on areas.
  
  
• Customer services may be improved in geographic-based sales force structures.
  
  
• It is easier to evaluate sales performances according to zones.

Geographic-based sales force structures have the following disadvantages:

• Managers may find it difficult to coordinate the sales force for different markets.
  
  
• The chance of conflicts related to resource allocation between zones is higher.
  
  
• The possibility of sales reps working in silos is higher, preventing them from developing cross-functional expertise.

Customer Based

In this type, the sales force structure is organised based on the customers to whom the products are offered. Most firms have customer accounts of varying sizes and needs; by defining responsibilities accordingly, sales reps can become familiar with each type and meet their needs better.

A customer-based structure is suitable when the number of customers seeking specific services is huge. It is also suitable when the target market comprises premium customers who do not mind paying for the services offered.

Customer-based sales force structures have the following advantages:

• Since the departments are divided according to customers, each customer gets proper attention.
  
  
• Customer satisfaction is increased as customer services are maximised.
  
  
• Sales planning and policies can be improved by focusing on different customer categories.

Sales planning and policies can be improved by focusing on different customer categories.

• Planning and developing the market according to the customer can be quite expensive for the firm.
  
  
• Managing resources may prove difficult.
  
  
• Coordination of sales activities is more difficult.
  
  
• Constant communication with team members is needed to ensure all customers are provided with the same quality of service.

Combination Based

The combination-based approach of organising the sales force combines the other three approaches to structure the sales force. This structure is suitable in organisations that offer a variety of products to different customer categories spread over a big geographical area. This structure is also suitable when a company seeks to concentrate on different customers or products within a specific location.

For example, a firm may decide to structure the sales force based on a particular product it wants to highlight and at the same time, organise the sales groups of other products based on geography.

This type of alignment allows an organisation to reap the benefits of each approach whilst avoiding the disadvantages associated with each. However, since it can only work with a big sales force, it is unsuitable for smaller businesses.