territory management key to productivity account analysis and time allocation single factor model:...

Territory ManagementKey to Productivity

Account Analysis and Time Allocation

• Single Factor Model: ABC Account Classification• Portfolio Models

• Account Opportunity• Competitive Position

• Decision Models• Sales Funnel - complex selling; not straight rebuy

• Unqualified Opportunity• Qualified Opportunity• Best Few Opportunities

What are weaknesses of each???


Customer Break-even AnalysisFigure 5-2

What are appropriate strategies for each account?

A

B

C

• Greater account penetration• Sell expanded product mix• Consolidate orders

• Service by phone• Concede to competition

• Protect from competition


Breakeven Sales Volume

(Cost per Call) x (Number of Calls to Close)

Sales Calls as a % of Sales


Salesperson Cost per Call

Direct Selling ExpenseCost per Call =

Total Calls per Year

Total Calls per Year = (Net Selling Days) x ( Avg Calls per day)

A Portfolio Model

Core Accounts

Accounts are veryattractive.

Invest heavily in sellingresources.

Core Accounts

Accounts are veryattractive.

Invest heavily in sellingresources.

Drag AccountsAccounts are

moderately attractive.Invest to maintaincurrent position.

Drag AccountsAccounts are

moderately attractive.Invest to maintaincurrent position.

GrowthAccounts

Accounts are potentiallyattractive.

May want to investin heavily

GrowthAccounts

Accounts are potentiallyattractive.

May want to investin heavily

Competitive Position

Strong Weak

Acc

ount

Opp

ortu

nity

High

Low

ProblemAccounts

Accounts are veryunattractive.

Minimal investmentof selling resources.

ProblemAccounts

Accounts are veryunattractive.

Minimal investmentof selling resources.

Unqualified

Qualified

Best few

50% closure probability



2113 15 2322 18

24 2019 17

16 14

9 12

1011

8

7 5

6

3

1 2

4

The Sales Funnel

Personal Time Management

EmergenciesEmergencies

Personal Growth

Personal Growth

TimeWasters

TimeWasters

RecreationRecreation

Importance High Low

High

Low

Urg

ency


Industry BreakevenBusiness Services 1,096.37

Chemicals 15,474.67

Construction 9,730.00

Electronics 433.25

Food Products 6,580.00

Instruments 11,629.13

Machinery 1,580.77

Office Equipment 616.67

Printing/Publshing 3,811.61

Rubber/Plastics 41,662.14

Personal SellingDeveloping a list of Prospects

1. Direct Inquiry• Advertising• Direct Mail• Trade publications• Trade shows

2. Directories -- Thomas Register

3. Referrals

4. Cold canvassing


Minimum Account Size Exercise: Problem 1

$34.50 x 4 .10

= $1.38

Smallest Customer Orders1 call per month $345.002 calls per month $690.003 calls per month $1,035.00

Opportunity Cost: Low Volume vs. High Volume Customer


Time Allocation: Problem 2

Why not allocate calls strictly based on % of sales?

What additional information should you considerin allocating time?


Portfolio Analysis: Problem 3

Where do allocation problems seem to occur?Why might this happen?

• Salesperson allocating on basis of current competitive position, not on basis of account opportunity

• Too much time on low opportunity accounts

• Best Target: high opportunity, weak competitive cell

• High opportunity, strong comp may be vulnerable

to comp.


Portfolio Analysis: Problem 3

Possible more productive effort allocation strategy:

Assuming number of Accounts in each cell roughly equal:

High/Strong 36 Calls per year

High/Weak 24 Calls per year

Low/Strong 10 Calls per year

Low/Weak 4 Calls per year

Is the assumption realistic?

Personal SellingDeveloping a list of Prospects

1. Direct Inquiry• Advertising• Direct Mail• Trade publications• Trade shows

2. Directories -- Thomas Register

3. Referrals

4. Cold canvassing

Personal SellingSample Prospect Profile - Characteristics

• Multiple-practice physician office• Internal medicine, family practice• Surburban location• New practice -- less than 5 years• Good credit history• Currently purchases from a full-service distributor

Personal SellingQualifying Prospects

1. Needs for your products/services

2. Authority to make purchase

3. Credit rating & ability to pay

4. Rating scale applied to characteristicsby each salesperson

OverallAverage $879,321 $1,499,870 5.5% -0.9%

Selected Industries:

Drugs/Medicine $ 445,900 $2,460,000 18.6% 11.4%

Paper 1,392,500 6,250,000 16.2 9.1

Services 158,100 532,118 12.9 6.0

Chemicals 490,000 1,357,462 10.7 4.0

Electronics 665,400 1,880,769 10.9 4.2

Building Materials 1,650,400 1,681,667 0.2 -5.9

Glass Products 1,390,000 512,500 -9.5 -15.0

Tools/Hardware 908,300 1,312,500 3.7 2.6

Sales Per Salesperson1977 1987

NominalAnnualGrowth

RealAnnualGrowth

Productivity Crisis

MINIMUM ACCOUNTS SIZE EXERCISE

You are a rookie salesperson with Associated Medical Supplies, Inc., a

wholesaler of disposable medical supplies. As new salesperson you are finding it

difficult to convince accounts to change from their current suppliers. The doctors

with whom you are having the most success tend to be small, single practices

located in the rural areas. Competition for these accounts is not as intense,

perhaps because their purchases are fairly small. They usually place about $900

of business with you a month. Nevertheless, they seem to be most appreciative

of your coming each week to take inventory of their supplies and write an order.

Furthermore, it is better than no sales at all.

Lately your boss has been getting on you because productivity has not

increased as much as he had hoped for when placing you in the territory. In

particular, direct selling costs including compensation, are currently 15% of sales;

whereas the total company’s target is for direct sales costs to be 10% of net sales.

In light of this, you are wondering if spending time on small rural physicians is the

best way for you to manage your territory. You have calculated that your cost per

call is currently $34.50.

Should you be calling on these small physician practices?

What is the smallest size customer you should pursue in order to meet your

company’s selling cost objectives?

What might you wish to consider in better managing your territory?

ABC Account Classification

If equal calls per customer:

% of % of

ACCOUNT No. of Total Sales Total Total calls Sales ($)

CLASSI- Accts. Accts. (000) Sales Per Classif. Per Call

FICATION (1) (2) (3) (4) (5) (6)

A 21 15% $910 65% 105 $8,667

B 28 20 280 20 140 2,000

C 91 65 210 15 455 462

Totals 140 100% $1,400 100% 700 $2,000 (Avg)

TIME ALLOCATION

As a salesperson for Strength Footwear, Inc., you have been very successful. Your commissions are well over $70,000 a year. Demand for your product line is verystrong, but so is the demand on your time. You work your territory 220 days a year andcan make 4 calls a day. The maximum number of times you need to see any account isevery other week, but you need to call on each account at least once a quarter. To helpyou allocate your time according to sales results, you have gathered the followinginformation on customer sales:

Accounts Sales Last Year

Top 10 Accounts $150,000Next 10 best accounts 56,250Next 10 best accounts 55,500Next 20 best accounts 37,500Next 20 best accounts 37,000Next 20 best accounts 18,750Last 20 accounts 15,000

$370,000

Develop and justify a call schedule for allocating time across the 110 customers in yourterritory.

What additional information should you consider in allocating your time?

TIME ALLOCATION ANALYSIS

Number Total Percent Percent Sales of Sales of of per

Accounts Volume Sales Accounts Account

10 $150,000 40.5% 9% $15,000 10 56,250 15.2 9 5,625 10 55,500 15.0 9 5,550 20 37,500 10.1 18 1,875 20 37,000 10.0 18 1,850 20 18,750 5.1 18 938 20 15,000 4.1 18 750110 $370,000 100.0 99 $ 3,364

Total No. Percent SalesAccounts Call Pattern of Calls of Calls Per Call

Top 10 Every other week 260 29.6 $576.92Next 10 Once a month 120 13.6 468.75Next 10 Once a month 120 13.6 462.50Next 20 About every 2 mos. 110 12.5 340.91Next 20 About every 2 mos. 110 12.5 336.36Next 20 Once a quarter 80 9.1 234.38Last 20 Once a quarter 80 9.1 187.50

880 100.0 $420.45

Competitive PositionCompetitive Position

Segment 1

Attractiveness:

Accounts are very attractive because they offer high opportunity and sales organization has strong competitive position.

Selling Effort Strategy:

Accounts should receive a heavy investment of sales resources to take advantage of opportunity and maintain/improve competitive position.

Segment 2

Attractiveness:

Accounts are potentially attractive due to high opportunity, buy sales organization currently has weak competitive position.


Additional analysis should be performed to identify account where sales organization’s competitive position can be strengthened. These accounts should receive heavy investment of sales resources, while other accounts receive minimal investment.

Segment 3

Attractiveness:

Accounts are moderately attractive due to sales organization’s strong competitive position. However, future opportunity is limited.


Accounts should receive a sales resource investment sufficient to maintain current competitive position.

Segment 4

Attractiveness:

Accounts are very unattractive: they offer low opportunity and sales organization has weak competitive position.


Accounts should receive minimal investments of sales resources. Less costly forms of marketing (for example, telephone sales calls, direct mail) should replace personal selling efforts on a selective basis, or the account coverage should be eliminated entirely.

Strong Weak

High

Low

Competitive PosititionCompetitive Positition

Segment 1

Attractiveness:

Accounts are very attractive because they offer high opportunity and sales organization has strong competitive position.


Accounts should receive a heavy investment of sales resources to take advantage of opportunity and maintain/improve competitive position.

Strong

High


Segment 2

Attractiveness:

Accounts are potentially attractive due to high opportunity, buy sales organization currently has weak competitive position.


Additional analysis should be performed to identify account where sales organization’s competitive position can be strengthened. These accounts should receive heavy investment of sales resources, while other accounts receive minimal investment.

Weak

High


Segment 3

Attractiveness:

Accounts are moderately attractive due to sales organization’s strong competitive position. However, future opportunity is limited.


Accounts should receive a sales resource investment sufficient to maintain current competitive position.

Strong

Low


Segment 4

Attractiveness:

Accounts are very unattractive: they offer low opportunity and sales organization has weak competitive position.


Accounts should receive minimal investments of sales resources. Less costly forms of marketing (for example, telephone sales calls, direct mail) should replace personal selling efforts on a selective basis, or the account coverage should be eliminated entirely.

Weak

Low

PORTFOLIO ANALYSISYou are concerned about your productivity and have decided to analyze your

account allocation strategy. You sell outdoor sportswear to women’s retail clothing stores. The sportswear segment of women’s clothing has been growing rapidly thoughsome retailers have been quicker than others to recognize and take advantage of theopportunity. You have ocmpiled the following account information from this past year:

Account Competition SalesAccount Opportunity Position Calls SalesDesigner Depot High Strong 24 $60,000Fashion Conspiracy High Strong 22 $57,000Clothes Time High Weak 15 $29,500Moda Fashion Low Weak 15 $20,000Peachtree Low Weak 17 $21,000Tomorrow Fashion High Weak 18 $36,000Reprise Low Strong 24 $34,250Plus Fashions Low Strong 22 $35,000Casual Girls High Weak 10 $14,000Another Season Low Strong 21 $37,000Bandiera’s Low Weak 15 $20,000Sports Locker High Strong 20 $53,000

Assume that these accounts are representative of all your accounts. Contruct a portfoliomodel and assess your effort allocation.

Where do time allocation problems seem to occur? Why might this happen?

Develop a more productive effort allocation strategy, given the information available.

PORTFOLIO ANALYSIS

Calls SalesDD 24 $ 60,000FC 22 $ 57,000SL 20 $ 53,000Total 66 $170,000Avg.: 22 $ 56,667

Calls SalesCT 2415 $ 29,500TF 18 $ 36,000CG 10 $ 14,000Total 43 $ 79,500Avg.: 14 $ 26,500

Calls SalesR 24 $ 34,250PF 22 $ 35,000AS 21 $ 37,000Total 67 $106,250Avg.: 22 $ 35,417

Calls SalesMF 15 $ 20,000P 17 $ 21,000B 15 $ 20,500Total 47 $ 61,500Avg.: 16 $ 20,500

Competitive Position

AccountOpportunity

Strong Weak

High

Low

Number of Sales Calls Response Function

DollarSales perQuarter

Number ofSales CallsPer Quarter

$20,000

$10,000

1 2 3 4 5


Prospecting Model -- Selling Priorities

FIRST Close your “Best Few” sales objectives

SECOND Prospect for “Unqualified” objectives

THIRD Work the “Qualified” objectives

Sales Funnel


Territory Coverage

Judgmental Routing -- Basic Rules

° Route should be circular° Route should never cross itself° Same route should not be used to go to and from a customer° Customers in neighboring areas

should be visited in sequence


Paths for Productivity Improvement% Rating

Rank Important*

1 New Technology 69%

2 Incentives for Strategic Accounts 69%

3 Incentives for Strategic Products 68%

4 Improve Motivation Programs 57%

5 Increase Incentives on Volume 56%

6 Use Alternative:Telemarketing 45%

Source: Sales & Marketing Management, Jan. 90, p. 41

*Based on 10000 salespeople from 192 companies

Selecting a Partial Route using the Largest-Angle Method

y

x

Start

1

2

3

4

5

6

Step 1


1

23

4

5

6

Step 2-3

Biggest angle 1-3-4, choose 4


1

2

3

4

5

6

Step 4

Biggest angle 3-4-6, choose 6


1

2

3

4

5

6

Step 5

Choose 1


1

2

3

4

5

6

Step 6

Outer ring 3-4-6 1-3

You are a salesperson for a large consumer goods manufacturer. You call on a set of retailers on a regular basis to ensure proper distribution of your products and to sell merchandising ideas for moving more of your product lines. You are expected to make 8 calls a day on the purchasing managers of your accounts. Normal operating hours for these stores is from 10:00 a.m. to 6:00 p.m., though most purchasing managers will arrive earlier and generally leave between 4:30 and 5:00 p.m. . Like most salespeople you work out of your own home. Below is the geographic lay-out of the accounts you plan on seeing tomorrow. Design a sales route for seeing these 8 accounts using the largest angle method.

A

C

E

B

G

D

H

GHome

Route Exercise A

Largest Angle Method

Preliminary Route

AB

C

E

GF

H

D

Home

Largest Angle Method

Final Solution

A

B

C

ED

G

F

H

Home

Alternative Solution

Travel Time Minimized

A

B

C

ED

H

F

G

Home


Salespeople’s Time Wasters

1. Telephone interruptions2. Drop-in visitors3. Lack of self-discipline4. Crises5. Meetings6. Lack of objectives, priorities & deadlines7. Indecision and Procrastination8. Attempting too much at once9. Leaving tasks unfinished10. Unclear communication


Sales Management Guidelines for Involvement in Territory Management

1. Be aware of your management style whichwith you and your salespeople are most comfortable and productive.

2. Consider experience & maturity of your sales force in deciding management style

3. Cold calling & prospecting are special cases --- give extra attention when these are part of sales job.


Sales Concentration% Total Sales

0

20

40

60

80

100

Source: SMM, Jan. 90, p. 40

Top Top 10%

Top20%

Top50%

Personal SellingSample Prospect Profile - Characteristics

• Multiple-practice physician office• Internal medicine, family practice• Surburban location• New practice -- less than 5 years• Good credit history• Currently purchases from a full-service distributor

Table 5-1 Computing the Cost per Call for an Industrial Products Salesperson

Compensation Salary, commisions, and bonus $60,000 Fringe benefits (hospital, life insurance, social security) 9000 $69,000Direct Selling Expenses Automobile 7000 Lodging and meals 5250 Entertainment 2250 Communications 3500 Samples, promotional material 1750 Miscellaneous 1500 21,250 Total Direct Expenses $90,250Calls Per Year Total available days 260 days Less: Vacation 10 days Holidays 10 days Sickness 5 days Meetings 18 days Training 12 days 55 days Net Selling Days 205 days Average calls per day 3 calls Total Calls per Year (205 X 3) 615 callsAverage Cost per Call ($90,250/615) $146.75

Table 5-2 Selected Statistics on Cost per Call and Number of Calls Needed to Close a Sale

IndustryCost

per Call

Number of CallsNeeded to Close

a Sale

Sales Costs as aPercentage of

Total Sales

Business services $ 46.00 4.6 19.3%

Chemicals 165.80 2.8 3.0

Construction 111.20 2.8 3.2

Electronics 133.30 3.9 12.0

Food products 131.60 4.8 9.6

Instruments 226.00 5.3 10.3

Machinery 68.50 3.0 13.0

Office Equipment 25.00 3.7 15.0

Printing/publishing 70.10 4.5 8.3

Rubber/plastic 248.20 4.7 2.8

Source: Dartnell Corporation, 25th Survey of Sales Force Compensation.

Customer Break-even Analysis

A

C

B

1 2 3 4 5 6

$1,630

$3,261

$4,891

$6,522

$8,153

$9,784

Average Sales VolumePer Month

Number of SalesCalls Per Month

territory management key to productivity account analysis and time allocation single factor model:...

Documents

growth accounts accounts

sales slide

territory management

competition slide

sales funnel slide

day slide

productivity account

personal selling