The organization of the sales network

Organizational Models of Commercial Networks

1. Traditional Hierarchical Structure

A clear chain of command, with centralized decisions.

• Multinationals: Coca-Cola manages its global network with a hierarchical structure that facilitates control over standardized products.

• SMEs: Small artisanal businesses, such as local fashion producers, can use this model to maintain direct supervision.

This approach is ideal for highly standardized markets and requires strong operational control.

2. Divisional Structure

An organization segmented by product, geography, or customer industry.

• Multinationals: Apple uses divisions for product lines like iPhone and Mac, ensuring focus and innovation.

• SMEs: A fitness equipment manufacturer may divide the team by market (gyms vs. specialty stores).

It allows for specialization and adaptation to complex markets, but requires greater investment in dedicated resources.

3. Partner-Based Model

External distributor and affiliate networks to reduce costs and expand coverage.

• Multinationals: Microsoft leverages a global network of partners to sell and implement technology solutions.

• SMEs: Organic food companies rely on specialty stores and local distributors to reach new markets.

Suitable for rapid growth with low investments, while maintaining operational flexibility.

4. Matrix Structure

Combining criteria such as product and geographic area for complex contexts.

• Multinationals: Procter & Gamble adopts a matrix to manage its product portfolio across multiple markets.

• SMBs: Software companies can organize sales by industry and geographic area, ensuring coordination.

Ideal for highly customizable sectors, but complex to implement.

5. Network Structure

External collaborations with distributors and logistics partners.

• Multinationals: Amazon uses a network of partners to ensure fast delivery and global coverage.

• SMBs: Small e-commerce businesses can leverage shared warehouses and couriers to expand rapidly.

Perfect for dynamic and fast-changing markets.

Incentive Systems for Commercial Networks: Models, Curves, and Bonuses

Incentivizing sales networks is a strategic pillar of corporate success. A good incentive system motivates salespeople, increases individual performance, and aligns operational and strategic objectives. The choice of incentive model and type depends on the company context, product complexity, and organizational culture.

Incentive Models

Incentive models for sales networks are based on the relationship between seller performance and rewards. Among the main ones are:

1. Direct Commission: A percentage of each sale. It's simple and straightforward, but it risks focusing solely on volume.

   • Example: Real estate.

   • Advantage: Clarity and transparency.

2. Cumulative Objectives: Incentives are activated only upon reaching certain periodic targets.

   • Application: Pharmaceutical industry, where rewards are tied to filled prescriptions (Kotler et al., 2018).

3. Progressive Scale: Increasing percentages as specific thresholds are exceeded.

   • Example: Car sales, where those who sell more than 20 cars earn a higher percentage (Brown and Peterson, 1994).

4. Quality Incentives: They reward parameters such as the level of customer satisfaction (Reichheld, 2003).

   • Example: Using Net Promoter Score in luxury sectors.

   
   

Incentive Curves

The design of incentive curves affects the behavior of sellers:

1. Linear: Each unit sold generates a proportional reward. It's simple but less motivating to exceed targets.

2. Exponential: Increasing incentives for exceeding thresholds. Extremely motivating for ambitious goals, but penalizing for underperforming salespeople.

3. Non-Linear: Combines fixed and variable bonuses, used by companies like IBM to drive loyalty and high performance.

4. Bell: Maximum rewards for optimal performance levels, reduced in case of excesses or deficits.

   
   

Types of Bonuses

Bonuses can be monetary, material or long-term:

1. Monetary: Direct cash prizes.

   • Example: Salesforce offers cash rewards to salespeople who exceed 120% of their goals (Harvard Business Review, 2020).

2. Non-Monetary: Gadgets, trips, or experiential rewards.

   • Example: American Express rewards top agents with exclusive trips (McCarthy, 2017).

3. Long-Term: Like stock options, used by companies like Google to motivate and retain talent over the long term.

Practical considerations

An effective incentive system combines quantitative and qualitative objectives, with diversified tools. For example, Unilever adopts progressive commissions to encourage the penetration of new products, while HSBC links bonuses to customer loyalty. Incentive curves should be designed to reward excellence without excessively penalizing those who fail to achieve the maximum targets (Holtrop et al., 2017).

The adoption of mixed models and continuous monitoring allow for the optimization of incentives, adapting them to market dynamics and the team's needs.

Conclusion: What is the Ideal Model?

There's no one-size-fits-all solution: the choice depends on the nature of the product, the target market, and the company's objectives. While multinationals can afford complex structures, SMEs benefit from scalable models such as partner networks or geographical divisions.