302 CHAPTER16 MANAGING THESALESFORCE
Sales Force Size and Compensation
Once the company clarifies its sales force strategy and structure, it is ready to consider
sales force size, based on the number of customers it wants to reach. One widely-used
method for determining sales force size is the five-stepworkload approach:(1) group
customers into size classes by annual sales volume; (2) establish call frequencies, the
number of calls to be made per year on each account in a size class; (3) multiply the
number of accounts in each size class by the call frequency to arrive at the total yearly
sales call workload; (4) determine the average number of calls a sales rep can make
per year; and (5) divide the total annual calls (calculated in step 3) required by the
average annual calls made by a rep (calculated in step 4) to see how many reps are
needed.
Suppose the company has 1,000 A accounts and 2,000 B accounts; A accounts
require 36 calls a year (36,000 calls yearly), and B accounts require 12 calls a year
(totaling 24,000 calls). The company therefore needs a sales force that can make
60,000 sales calls a year. If the average rep can make 1,000 calls a year, the company
would need 60,000/1,000, or 60 sales representatives.
Many companies are shrinking their sales forces because the sales department is
costly to maintain. Consider the situation of Coca-Cola Amatil, the Australian Coke
franchisee. Amatil used to maintain an army of reps to call on small milk bar (corner
store) accounts. These reps would often make up to 30 sales calls per day, staying just
long enough to take an order and perhaps show one new product. When Amatil looked
at the costs of sending these reps out to milk bars, it saw a good deal of wasted time andTerritorial:Each sales representative is assigned an exclusive territory.This structure results in a
clear definition of responsibilities and increases the rep’s incentive to cultivate local business and
personal ties.Travel expenses remain relatively low, because each rep travels within a small area.
Product:The importance of sales reps’ knowing their products, together with the
development of product divisions and product management, has led many companies to
structure their sales forces along product lines. Product specialization is particularly useful for
product lines that are technically complex, highly unrelated, or very numerous. Kodak uses one
sales force for its film products that are intensively distributed, and another sales force to sell
complex products that require technical support.
Market:Companies often specialize their sales forces along industry or customer lines. IBM
set up a sales office for finance and brokerage customers in New York, another for GM in
Detroit, and still another for Ford in Dearborn. Market specialization helps the sales force
become knowledgeable about specific customer needs, but the major disadvantage is that
customers are scattered throughout the country, requiring extensive travel.
Complex:When a company sells a diverse product line to many types of customers over a
broad geographical area, it often combines several structures, with sales forces specialized by
territory-product, territory-market, product-market, and so on.A sales representative might then
report to one or more line and staff managers. Motorola has four types of sales forces: (1) a
strategic market sales forcecomposed of technical, applications, and quality engineers and service
personnel assigned to major accounts; (2) a geographic sales forcecalling on customers in different
territories; (3) a distributor sales forcecalling on and coaching Motorola distributors; and (4) an
inside sales forcehandling orders via phone and fax.Table 5.13 Sales Force Structures