Putting the Force Back in Sales Force

By Prophet

When your company is expanding rapidly and experiencing double-digit growth, evaluating your sales force performance, in most cases, becomes a low priority. But growth will inevitably slow down due to change. Internal changes (mergers, new product launches, entries into new markets), competitive changes (loss of market leadership, price competition, lower barriers to entry, lower share of voice), or environmental changes (deregulation, new infrastructures, economic cycles) should all prompt you to reassess your sales force. Ask yourself: Do I have the right team structure in place? Do I have the optimal sales force size? What is my best allocation of selling effort?

Ask: How do I put the FORCE back in sales force?

Groupon, for instance, a pioneering deal-of-the-day website that launched in November 2008 during the height of the economic meltdown and now the fastest growing company in history, reached $500MM in revenues in just 2 years. Its rapid expansion was sustained by an insatiable consumer appetite, and more importantly, by a tireless sales force. According to the WSJ, Groupon’s sales force grew from 128 reps in Q1 of 2010 to more than 5,000 in Q2 of 2012, spanning 500 markets in 48 countries. However, as the market became saturated with offers (competitive changes), business challenges became apparent. Growth slowed to a halt and questions about the sustainability of its sales force, which is a key revenue driver and constitutes a large portion of its costs, arose. Its strategy of rapid expansion left it with little chance to properly adapt its sales force design, compensation structure, and rep-merchant relationship management.

Sales forces work. They are a potent vehicle for driving sales. But they are expensive resources that need to be optimized. Using analytics and predictive modeling to analyze sales force performance can help you put the FORCE back in sales force. For companies facing sales force mismanagement questions, a quick fix reallocation or head count reduction is not the answer. A company needs to ensure that its sales force is built from the ground up, is rooted in robust analytics, is scalable, and can sustain long-term growth.

Understand the Issues

A variety of symptoms can signal the need for a sales force re-think and redesign, categorized as:

  • Knowledge issues
  • Customer base issues
  • Resource allocation issues

Knowledge issues arise when salespeople don’t have sufficient product or technical knowledge to address customers’ complaints and/or questions, don’t have access to technical decision makers, lack the industry knowledge required to sell effectively, or lack of knowledge on what makes quality leads. This is common in B2B markets with a fast pace of technical developments, and in intermediated markets with a jigsaw of re-sellers, vendors, and partners.

Customer base issues are signaled by poor customer retention rates, insufficient business coming from existing customer base, persistent switching to competitors, under-servicing large accounts or equivalently over-valuing small accounts, or inability to “win back” lost accounts. Often, our clients have incorrect sales force structure, e.g., the optimal structure of traditional reps-on-the-road, call center agents, specialist technical reps, re-sellers and agents, win-back reps, online product details and online order taking as intrinsic elements of the sales strategy, etc.Most of our clients don’t have a simple single team of reps, but have to make sense of this jigsaw of different types of reps and different customer contact channels working together.

Resource allocation issues can include time mismanagement in terms of allocation to the wrong products, incorrect targeting by channel (e.g., dermatologists vs. beauticians), not spending sufficient time with the right audience within a channel (e.g., practice manager vs. doctor). Also, we typically see territory misalignment and suboptimal compensation incentives related to the above. Often we see that sales people spend too much time on administrative tasks, waste time providing easy-to-access information, acquire low-opportunity accounts and service existing customers—all of which leave little time to generate new business. Or, they can incur excessive travel costs as a result of misaligned territories.

Identify Issues Early

These issues are manageable if identified early. For example, when facing certain knowledge-based issues, a company can hire or train product, technical, or market specialists to address knowledge deficiencies. Sales assistants can be hired to take on administrative tasks for several sales managers. A win-back specialist can be hired to focus exclusively on bringing back churned customers. A special strike force can be trained for handling new product launches. Sales force analytics is very important in early identification of issues, especially concerning sales force sizing, allocation, structure, and territory design.

In the mid 2000s Adidas, an athletic footwear, apparel and sports accessories manufacturer, wanted to improve its knowledge management capabilities. Specifically, Adidas wanted to reduce the number of calls from in-field sales reps to check on product availability and capture more “in-the-moment” business. At the time, reps either needed to check inventory before they left for a sales opportunity or call from their personal cell phones to check inventory. To avoid disrupting the momentum of the pitch or misplacing an order, Adidas realized that real-time wireless information accessed on handheld devices was the best solution. An application was developed that allowed the sales reps to access up-to-date inventory information anywhere, anytime. By equipping reps with better, more accurate knowledge, “at-once” sales increased, orders were submitted more accurately, and back office resources experienced fewer interruptions due to inquiries.

Prior to 2006, Yakult, the original probiotic with over 25 million drinkers and sold across 31 countries, maintained a sales force of 20 executives, each of whom were responsible for making routine scheduled store visits for a fixed territory. The purpose of their visit was to address any prior issues, as well as to retrieve paper-based reports and data on past sales transactions, which they would then upload to a central database for analysis. The results often revealed problems such as poor availability of stock, slow stock turnaround, and shelf-life wastage. Yakult’s resource allocation inefficiencies limited its ability to address these problems in real time, leading to missed sales opportunities. Consequently, Yakult replaced its traditional fixed territory design in favor of virtual territories, streamlined all sales data collection and provided sales executives the technology to access vital sales information remotely. Rather than having to wait months for a routine visit, Yakult can now identify stores that require attention and divide the workload appropriately to address those issues.

Invest Time Upfront

A company can avoid these issues altogether by thoroughly evaluating various sales force strategies upfront through an analytics lens. The way to tackle a typical sales force design problem is to take a two-pronged approach. The first step is to decide on the two key structural components of sales force design (rep effort and sales force ownership) that best align with the corporate strategy. These two high-level decisions will largely influence the second step, resource optimization.

First, decide whether to design rep efforts around efficiency or effectiveness. Efficient sales roles include generalist sales people, sales assistants, customer service reps, telesales reps, part-timers and independent salespeople. These roles minimize use of costly resources, allowing the work to be completed at lower cost. Telesales, for example, is a more efficient way to reach customers, because it generates a higher level of call activity for a lower level of investment. Effective sales roles, on the other hand, include product specialists, technical specialists, market specialists, account managers, lead hunters, and win-back specialists. These roles are highly effective in converting and retaining customers since they are highly trained in their roles. Selecting the most effective sales force comes at a higher cost since they are higher touch roles, and requires significant time and training investments.

Then outline the relationship between the sales force and the company. The three types of relationships are:

  1. Company owned (e.g., direct sales force, company websites, owned retail stores)
  2. Company connected (e.g., agents/brokers, exclusive distributors, franchises, dealerships, joint-ventures, manufacturers reps)
  3. Independent stand-alone (e.g., wholesalers, distributors/dealers, value-added partners, independent retailers)

Each relationship type brings a unique set of advantages and disadvantages. For example, an independent relationship can allow a company to gain entry into a new market quickly, but gives the company little control over the customer relationship management or salesperson quality.

We are increasingly seeing sales as a jigsaw – not a neatly owned sales force of reps-on-the-road working for the sales director, but rather a blend of reps, call center agents, specialist technical reps to spec proposals and product details, re-sellers, win-back reps, etc.

Optimize Your Sales Force

Once we know the rep effort type and the ideal sales force relationship, we can focus the optimization effort on specific design attributes, including size (How many managers or specialists do I need?), time allocation (How much time should I spend traveling vs. meeting with prospective customers?), product mix (Which products should I sell to which customer?), allocation (Where should I locate my sales force?) and activities (How many calls should I make?). Optimization effectiveness depends largely on the richness of the underlying dataset.

Ideally, the optimization effort should take place in increments, beginning with a business unit and geography that has the highest potential upside as a result of a situation assessment. Applying our Prophet RepMix Modeler tool, we can link the sales force effort, varying by customer segment, product type, geography, or sales channel to incremental profit. We can then combine models to build an optimal scenario that maximizes profits across various dimensions. Finally, we can compare the optimal scenario and the base case to quantify the value of the recommended strategy. Even if the optimal scenario is out of reach due to budget constraints or structural difficulties, we can still leverage the sales response curves from the model to generate next-best alternatives given our known constraints. Iteratively, we arrive at the optimal, sustainable solution. This helps us put the FORCE back in sales force.

The Benefits of Taking an Analytic Approach

There are clear benefits to taking a bottoms-up analytical approach to sales force design. We can move beyond using rudimentary guides and rules of thumbs of financial ratios, last year’s spending, industry benchmarks, or sales force affordability, etc. Although these rules are easy to administer and grasp, they almost always lead to poor resource alignments. With analytics, we take an objective approach to resource allocation and sales force design that is directly tied to business performance. We create stronger organizational buy-in by assuring senior leadership that sales resources are being managed in a way that maximizes firm-wide performance.

The sales force sits at the heart of any organization. It is your revenue driver. Because of carry-over effects such as new sales becoming sticky and persisting into later years, sales forces are powerful at driving growth for your business. That’s why building the right sales force is a necessary investment that you cannot overlook. Sales force optimization, when implemented correctly, can ensure long-term growth, regardless of how your product mix evolves, customers’ needs change, or market conditions shift.

Let us help you put the FORCE back in Sales force. 

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