The machinery by which a company actually secures orders is its sales organization. In industrial marketing, the private sales organizations of companies range in type all the way from a sales force consisting of one man, who sometimes is also president or treasurer of the company, to a large crew of salesmen organized under district managers and governed by an elaborate set of instructions. In some companies, brokers, selling agents, or manufacturers’ agents are substituted for such private sales organizations.
These differences in sales organization re fleet in some instances differences in operating conditions; in other in- stances, however, they represent diversities in the degrees of alertness with which various companies are handling their marketing problems.
Brokers have their largest field of activity in marketing primary materials, such as wheat and cotton. They also are employed extensively in marketing cotton gray cloth and occasionally in marketing flour. Until after 1918 brokers played a large part in the marketing of chemicals, but within the last ten years brokers services have been dispensed with by those manufacturers, who in numerous instances have set up private sales organizations to enable them to develop their markets intensively.
A broker is a go-between, affiliated with neither buyer nor seller. When a manufacturer secures his orders through the medium of brokers, he does not have continuous relation- ships with particular customers nor can be benefit materially by attempting to individualize his service or his product. Selling through brokers is a cheap method of marketing, suited to standardized goods which are sold entirely on a price basis.
Selling agents are employed in lieu of private sales organizations by copper mining companies, textile manufacturers, occasionally by machinery manufacturers, and by at least one chemical manufacturing company. The selling agent in each instance regularly undertakes to sell the entire output of each company for which it is agent. Except in the case
of the agents selling copper, a selling agent employs a sales force. Inasmuch as a selling agent usually sells the products of several manufacturers, economy in sales management expense presumably is secured.
A firm of selling agents must seek to serve its clients well, for on the satisfactoriness of its service its success depends. Nevertheless, a manufacturer often finds it more difficult to coordinate sales activities with factory operations when a separate firm handles the selling. Under conditions which offer opportunities for market development, a firm of selling agents, furthermore, is likely to be tempted to suggest price concessions instead of an intensification of sales efforts as a means of increasing the volume of sales; for the burden of increased sales effort is borne by the selling agent — that of price concessions by the manufacturer.
The third substitute for a manufacturer’s private sales organization is provided in the form of manufacturers’ agents. A company which employs manufacturers’ agents exercises a greater degree of control over its sales activities than is exercised by a company which entrusts the sale of its products to a sole selling agent, when manufacturers’ agents are employed, each is assigned a particular territory in which to operate and sells only in that territory.
In selecting the agents and in observing their activities, the manufacturer must per- form a sales management task, but that task is lighter than it would be if salesmen instead of agents were employed.
The chief advantage accruing from the employment of manufacturers’
Agents is the saving in selling expense. An agent usually solicits orders for several non-competing manufacturers and therefore spreads the selling expense. A manufacturers’ agent, furthermore, like a broker or a selling agent, is paid only a commission on sales; hence field sales expense is incurred by the company only for orders actually obtained. In several industries acquaintance with purchasing agents, superintendents, and plant engineers is an asset of manufacturers” agents which warrants their employment by a company just entering the market.
Numerous manufacturers who employ their own salesmen in dense markets, moreover, utilize the services of manufacturers’ agents in sparse markets. One company manufacturing power transmission equipment, for ex- ample, has 22 sales branches but supplements the branches with the services of 5 manufacturers’ agents. Another company, manufacturing factory trucks and allied equipment, employs 14 salesmen; 10 manufacturers’ agents each of whom sells the products of one other manufacturer; and 20 manufacturers’ agents who sell the products of two or more other manufacturers.
The company’s own sales- men operate in the large industrial districts and the manufacturers’ agents operate in markets deemed to be not capable of supporting salesmen selling only the one line.
While many companies properly are using the services of manufacturers’ agents in marketing their products, other companies continue to employ agents through inertia or because of lack of alertness in comprehending their marketing problems. An ex- ample of a well-advised change from use of manufacturers’ agents is furnished by a company which manufactures expensive machines for installation in machine shops and other metal working plants.
Despite the fact that the sale of the machines requires an intimate technical knowledge of their construction and operation, the company sold its products for many year. through manufacturers’ agents. A few years ago, however, the company began to pay more attention to its marketing methods than it had previously, and it decided to employ sales- men instead of agents in all but the sparse markets. After the change was made, sales increased and customers were better satisfied.
UNDER the new arrangement, the company taught its salesmen to exercise especial care in inspecting the operation of the machines after installation in order to make sure that purloiners secured the maximum results.
I another company, which is faced with conditions analogous to those in the example just cited, has not yet changed its methods. This second company manufactures highly technical equipment for installation in the boiler rooms of power plants. This equipment must be drawn in when the power plant is designed, and a high degree of engineering skill is required for designing and selling.
The company has been attempting to sell its product through manufacturers’ agents located in large industrial centers The agents have succeeded in locating a goodly number of potential customers but in no instance have they been able to close a sale without the direct assistance of an officer of the manufacturing company. Better results could be obtained and less selling expense incurred, in ratio to sales, if the company employed a small force of salesmen, thoroughly trained in power plant engineering and qualified to discuss highly technical problems with superintendents of operations and consulting engineers.
IN industrial marketing, as in the marketing of consumers goods, when a company decides to maintain i private sales force the first essential is to ascertain the sales tasks to be per- formed. When the tasks to be per- formed are known, the organization for performing them can be planned intelligently.
A salesman’s tasks usually involve one or several of the following duties: locating prospective customers; booking orders: maintaining continuous relationships with customers from whom repeat orders may be forthcoming; aiding dealers in promoting sales, when distribution is through dealers: furnishing requisite information to operating officials and plant engineers regarding the product, when direct marketing methods are employed: stimulating latent demand among both new and old customers by arousing effective buying motives; and adjusting complaints from customers or users.
The sales management task comprises the selection and instruction of the salesmen: the assignment of territories or of prospective customers the determination of the frequency of call; the continuous supervision and direction of the work of the salesmen and the determination of the basis for paying them for their services.
The fact, obvious when mentioned, that there are not enough 100 per cent salesmen available to enable every manufacturing company and every distributing firm to employ none but top-notch salesmen is of especial significance in industrial marketing.
As has been pointed out, a large part of the purchases of many sorts of industrial goods are made by companies with departmental organizations. For dealing with operating executives and plant engineers a salesman needs to understand thoroughly and to be able to demonstrate the technical characteristics and qualities of the article which he is selling; he also should be able to size-up the possible application of the article to a particular user’s needs: and he must have skill in handling sales negotiations. Since a company’s sales force usually is made up largely of men with no more than average ability, two provisions must be made in order to attain satisfactory sales results.
In the first place, the salesmen must be given thorough training on the technical points en- countered in selling the product and definite guidance in locating prospective customers and in handling negotiations. In the second place, advertising of the right sort usually is needed for supplementing the efforts of the salesmen, particularly by furnishing stimulating information to operating officials and plant engineers.
ONE of the sales organization problems which arise when a company is producing a diverse line of products is that of segregating the sales organization so that different products are sold, or different classes of customers are served, by separate sales forces.
As has been pointed out in earlier articles in this series, a company which manufactures both consumers’ goods and industrial goods is likely to find it worth while to divide its sales force into two crews — one selling to wholesalers or retailers, the other selling to industrial distributors or users. Similarly a company manufacturing several products, each of which is sold to a distinct group of industrial customers, is likely to find a segregation of its
Sales force to be very worth while. Provided that purchases of each of several groups of customers are large enough in the aggregate to war- rant specialized selling, the ground on which the question of segregating the sales force is to be determined is the degree of dissimilarity in the buying habits and practices of the various groups of customers, and the extent to which specialized technical knowledge on the part of the salesmen is required for carrying on negotiations with operating and staff executives in the customers’ organizations.
The fact that salesmen usually are of only average ability is also a factor inducing segregation of the sales force under such circumstances as have just been cited.
The following examples illustrate specifically conditions warranting segregated sales organizations. A metal manufacturing company developed a chemical by-product which for a time was disposed of by a selling agent.
When the company took over the sale of the by-product itself, it decided to employ salesmen especially for selling the by-product rather than to have it sold by the metal sales- men. Another example is furnished by a large company which manufactures half-a-dozen groups of products. One group of products is sold largely to mining companies, public utilities, and railroads: a second group to auto- mobile manufacturers and toilet goods manufacturers; a third to automobile and furniture manufacturers: a fourth to wholesalers: a fifth to cotton mills and other textile plants: and a sixth chiefly to paint manufacturers.
After having tried other experiments in sales organization, the company under- took to have specialized salesmen for each line to secure orders from large users, but to have sales to customers whose purchases were of small or average volume handled by general salesmen each of whom sold all the lines. This use of general salesmen to sell all the lines to a large part of the company’s customers produced some small economies, but it did not yield a satisfactory volume of sales.
Al- though the ill-success of the plan was caused in part by administrative defects, its chief weakness lay in the fact that the customers for one group of products required technical information different from that required by the customers for other groups of products; furthermore, a different
Frequency of call was required for the different groups of customers if the, company was to have its sales plan conform to the buying habits of its customers. It was not possible to educate each salesman to deal effectively C with the problems of selling to all classes of customers, nor could the salesmen be routed to exploit fully the sales opportunities.
The company consequently decided to use a separate sales force for each group of products.
IN conclusion, a word regarding methods of paying industrial salesmen. Although some companies pay their salesmen by means of commissions on sales, the most common method of compensating industrial sales- men is by straight salaries, and it is logical that the straight salary plan usually should yield the best results. As examples cited in these articles have shown, industrial salesmen often have to carry on prolonged negotiations before an order is secured.
Ser- vice work of various sorts also is required of them. Inasmuch as the commission method of payment usually discourages lengthy negotiations and hampers service work by placing a heavy premium on immediate results, the salary system is rightly preferred by companies which expect their salesmen to do more than merely solicit orders.
Since the sales of many industrial goods, furthermore, are subject to severe fluctuations in volume with changes in business conditions, the salary method gives greater stability to the incomes of the salesmen than can be attained with commissions. Whatever method of compensation is adopted, however, the management should assume responsibility for in- strutting and guiding the salesmen and for controlling their activities so as to secure satisfactory results.