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Do we need a direct sales force

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What should she have done instead-Sales Force Size? Breakdown method ... size of accounts, dispersion of accounts. 3/2/99. 18. Relationship to Control Systems ... – PowerPoint PPT presentation

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Title: Do we need a direct sales force


1
Do we need a direct sales force?
  • Jamestown
  • Case assumptions and analysis
  • The direct sales force vs. manufacturers reps

2
OBriens Cost Assumptions
  • Structure assumptions
  • Sales force size
  • Sales force growth of 20 and sales force size
  • Span of control, number of managers
  • Compensation assumptions
  • Compensation level level of experience industry
  • Turnover rate15

3
OBriens Assumptions
  • Miscellaneous assumptions
  • Rep commission rate 12, not 10
  • No growth in compensation or overhead as the
    sales force grows
  • No expenses for the sales manager
  • Doesnt subtract start-up costs from savings
  • Does not include sales information system

4
OBriens Assumptions
  • Sales assumptions
  • Analysis

5
What should she have done instead-Sales Force
Size?
  • Breakdown method
  • Nforecasted sales volume/SP productivity
  • Causal direction problems
  • Workload method
  • Ntotal work required/expected work from SP
  • Total work required f( of accounts of each
    size, time required for calls, nonselling and
    travel time)

6
What should she have done instead-Sales Force
Size?
  • Incremental method
  • A salesperson should be added as long as the
    incremental profit produced by the additions
    exceeds the incremental costs

7
Advantages of Reps
  • reps can afford to call on small accounts because
    they have multiple lines
  • high travel time between accounts is absorbed
    across multiple lines
  • there may be synergies across multiple lines
  • reps in the business for awhile tend to have both
    effort and ability

8
Advantages of Reps
  • reps have established contacts, relationships
  • savings at lower level of sales ( of sales)
    relative to direct
  • sales expenses a direct function of sales volume

9
Drawbacks of Reps
  • share of mind (many masters)
  • must bid for attention, sometimes too diversified
  • good reps are often taken (and there are lots of
    bad ones)
  • little control- lots of carrots, few sticks
  • Sum often highly efficient, but not always
    effective

10
Use Reps When
  • products are not overly complex
  • little company specific knowledge or training is
    required (low specific assets/investment)
  • products have a short selling cycle
  • selling requires no teamwork
  • output/outcome measures are easily available

11
Use Reps When
  • some territories are sparse, with high travel
    costs (that would be born by the rep)
  • many customers are small and may not warrant
    visits from a high-cost direct force
  • products are seasonal or volatile- environmental
    uncertainty

12
Advantages of a Direct Sales Force
  • all their attention is devoted to your products
  • eventual savings as a percentage of sales (as
    sales grow)
  • greater control is possible
  • attention can be directed to particular accounts
    and/or activities and/or products
  • direct force may provide better feedback

13
Drawbacks of Direct
  • heavy fixed costs- salesperson, managers,
    information systems
  • difficult to set up, slow to get up to speed
  • not easy to manage- benefits of control may not
    materialize
  • Sum can be very effective, if managed well- but
    good management is expensive

14
Use Direct When
  • after-sale service (e.g., training of customers)
    is important
  • the company desires a balance of effort among
    lines and wants to encourage selling high-margin
    and new products- behavior control more likely
    with direct sales force than with reps
  • team-selling is required or there is a long
    selling cycle

15
Use Direct When
  • sales and margins are high enough to support a
    direct force and cover fixed costs
  • the product line is broad, giving a direct force
    some of the synergy advantages a rep would have
    with multiple lines

16
Sum, Rep vs. Direct What to consider
  • How much behavioral control is needed
  • support/service
  • need for team selling
  • selling focus by product
  • length of the selling cycle
  • Product characteristics
  • complexity
  • size of the line

17
Sum, Rep vs. Direct What to consider
  • Salesperson characteristics
  • knowledge/expertise
  • risk averse/risk-seeking
  • Environmental Factors
  • quantity and predictability of sales
  • size of accounts, dispersion of accounts

18
Relationship to Control Systems
Low Control
High Control
Mfr. Reps
Direct with commission, low supervision
Direct with salary, high supervision
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