SIZE & DESIGN OF THE SALESFORCE

Size of the Sales force

After the company decides its sales organization structure, it is ready to determine the size of the sales force. It is a key decision to meet companys sales volume and profit objectives. Optimum size of salespeople required to meet the objective.

Methods

Methods available to determine optimum sales force size are: Work load Method Sales potential (or breakdown) method Incremental

1. 2. 3.

Workload Method

All sales people will have equal workload. The total workload in covering the market includes customer size, customers sales volume potential and travel time.

Workload Method

Group present and potential customers according to their sales potential. Decide time per sales call and desired call frequencies for each customer class. Calculate the total (market) workload necessary to cover the entire market Decide the total work time available per salesperson Divide the total work time available by different activities per salesperson Calculate the total number of salespeople needed.

Step-1

Suppose a company estimates 500 numbers A class and 1000 numbers B class customers to be covered in the entire nation. Customer with small potential will be looked after by telemarketing salespeople/ companys dealer.

Step-2
Assume both present & prospective customer require same time per call and the same call frequencies per year. Class A- 60 min. per call & 36 calls a year means 36hrs/yr, Class B 30 min. per call & 12 calls a year means 6 hrs/yr.

Step-3

Total workload necessary

For Class A 500 customers*36hr/yr=18000hrs For Class B 1000 customers*6hr/yr=6000hrs Total=24,000 hrs

Step-4
Decide the total time available. Suppose the company decides salespeople should work 40 hrs per week, 45 weeks per year. Then each salesperson has 1800hrs/year for selling and non selling and traveling time.

Step-5

Divide total work time available Selling activities 40%= 720hrs Non selling activities 30%= 540 hrs Traveling activities 30%= 540 hrs Total 100% 1800hrs

Step-6
Total market work load by total selling time available per sales person 24000/720=33.3 33 sales people needed.

Advantage & Disadvantage

Relatively simple to apply with managerial Judgement. Conceptually sound as the size of the sales force is based on selling effort needed. It can be adopted for all type of selling situation. This method require accurate information on prospective customers & sales potential of existing and prospective customers. It neglects sales productivity in terms of sales per sales person & also sales force turnover.

Sales Potential/ Breakdown Method

Sales manager assumes the productivity of the average salesperson and the company sales forecast is accurate. Also considers the anticipated sales force turnover. Basic formula: N= S/P (1+T), where N=No. of sales people needed/ size S= Annual sales forecast for the company P= Estimated productivity of the average salesperson T=Estimated percentage of annual sales force turnover

Example

Companys sales forecast is Rs. 50 million for next year, the annual sales volume productivity for average sales person is Rs 2 million and anticipated annual sales force turnover is 20% So N= 50,000,000/2,000,000(1+.20)=25*1.2= 30 sales people needed.

Advantage & Disadvantage

It is simpler & straight forward This method conceptually weak. Lead time is needed for recruitment & training the salespeople to the desired level of sales productivity. In spite limitation, it is often used for deciding sales force size.

Incremental Method

Profit will increase when additional salespeople are added, if the incremental sales revenue exceed the incremental costs. Example: A company whose total sales volume varies directly with the no of sales people working in the market. Cost of good sold remain constant at 60% of sale. Sales people receive a salary of Rs 1,20,000 each year plus commission of 6% on their sales volume. In addition each one gets travel and food allowances of Rs 6000 per month, i.e. Rs 72,000 per year. At present company has 30 salespeople.

Contd..

This method is conceptually accurate. It is also difficult to apply in practice, since it needed historical data. Not useful for new sales people.