Optimizing Sales Territories: Planning Approaches to Unlock Productivity in 2010

12,085 views
11,765 views

Published on

Any company with a direct sales force has lots at stake in efficiently deploying its sales resources. Yet few sales organizations structure sales territories with a rigor approaching even the most routine analysis used by other “deployment” functions in the firm, such as that used by supply chain departments in optimizing delivery routes, or service organizations in managing manage mobile service technicians.

Firms who use an analytical approach to optimizing sales territories stand to unlock a significant productivity gain. In this Sales Management Association webcast, TerrAlign’s Ken Kramer reviews the fundamentals of effective territory organization, builds a case for optimization, and reviews case examples of firms who’ve realized sales and profit gains of up to 12% and travel expense reduction of up to 15% - without adding headcount.

Specific topics addressed in this webcast include: territory design best practices; factors impacting territory success; when to expand or reduce a territory; territory design’s impact on sales incentive compensation costs; and optimized territories’ impact on sales organization performance.

Published in: Business, Technology

Optimizing Sales Territories: Planning Approaches to Unlock Productivity in 2010

  1. 1. Optimizing Sales TerritoriesPlanning Approaches to Unlock Productivity in 2010<br />Presented by <br />Ken Kramer<br />Director of Product Marketing<br />TerrAlign<br />January 22, 2010<br />© 2010 The Sales Management Association <br />
  2. 2. The Sales Management Association<br />Visit Us Online at www.salesmanagement.org<br />A global, cross-industry professional association for sales operations and sales management.<br />Focused in providing research, case studies, training, peer networking, and professional development to our membership. <br />2<br />Copyright © 2008 - 2010 The Sales Management Association. All rights reserved.<br />
  3. 3. Today’s Objectives<br /><ul><li>Why territory alignment is important
  4. 4. What factors impact territory success
  5. 5. How territory design directly relates to both revenue and the cost of incentive compensation
  6. 6. Territory design best practices </li></ul>3<br />© 2010 The TerrAlign Group . Distributed with Permission by The Sales Management Association <br />
  7. 7. About TerrAlign<br />Founded in 1987, TerrAlign has a wealth of experience providing Sales Resource Optimization (SRO) solutions, with a core focus on Field Territory Alignment & Management<br />“This kind of solution gives field managers and sales operations analysts the ability to optimally allocate sales resources and provides equitable and manageable territories for sales reps.”<br />“One key aspect of improving the performance of a sales organization is to align sales territories with the abilities of the sales force and the revenue potential of customers… Organizations that need a simple but sophisticated approach for optimizing sales potential through territory alignment should examine how TerrAlign could help their efforts.”<br />4<br />© 2010 The TerrAlign Group . Distributed with Permission by The Sales Management Association <br />
  8. 8. Incentive Compensation Management<br />Commissions<br />Compensation Plan<br />Sales<br />Performance Management<br />Quota<br />Quota Management<br />Sales Hierarchy<br />Territory <br />Management<br />Account Assignments<br />Customer <br />Management<br />Accounts<br />Sales<br />Force<br />Automation<br />Contacts<br />Opportunities<br />Opportunity <br />Management<br />Pipelines and Forecast<br />Reporting/Analytics<br />Visibility<br />How Territories Impact Sales Process<br /> “Territory management is the critical link between SFA and Sales Performance Management” - Sirius Decisions 2009<br />5<br />© 2010 The TerrAlign Group . Distributed with Permission by The Sales Management Association <br />
  9. 9. Sales Performance Management Process<br />Through 2010, on average, enterprises will miss the equivalent of at least 10 percent of total annual sales in "lost opportunity" revenue that could have been captured with improved processes for defining, assigning and managing territories, quotas, and incentives and compensation plans (0.8 probability) -Gartner<br />Design Comp Plan<br />Optimize Sales Territories<br />Set and Allocate Quotas<br />Calculate Incentive Comp<br />Analyze/<br />Set Corporate Strategy<br />6<br />© 2010 The TerrAlign Group . Distributed with Permission by The Sales Management Association <br />
  10. 10. Why Re-Align?<br /><ul><li>To balance territories based on a combination of opportunity, workload, account/prospect information and geography
  11. 11. Expansion or reduction of sales force caused by new competition, new products, mergers/acquisitions
  12. 12. To manage on-going Territory management or modifications due to new customer acquisition, personnel changes</li></ul>7<br />© 2010 The TerrAlign Group . Distributed with Permission by The Sales Management Association <br />
  13. 13. You Know Things Could Be Better When…<br /><ul><li>You hear “I just know” more than “the data shows…”
  14. 14. You’re part of the 70/30 statistic
  15. 15. Reps from same territory keeps turning over and you think that location just doesn’t breed good reps
  16. 16. Managers are afraid of top reps
  17. 17. More exceptions than rules
  18. 18. Revenue rules, market-share drools
  19. 19. Sales Training is an issue, but not a big one so long as the good reps stay
  20. 20. You don’t know how long it takes to service an account or how many accounts are needed to produce desired revenue for a territory</li></ul>8<br />© 2010 The TerrAlign Group . Distributed with Permission by The Sales Management Association <br />
  21. 21. Sample Deployment Map<br />9<br />
  22. 22. Realignment Evolution<br />10<br />© 2010 The TerrAlign Group . Distributed with Permission by The Sales Management Association <br />
  23. 23. Case Study Snippets<br />All examples are from actual customers<br /><ul><li>Data modified to protect innocent
  24. 24. Most cases show effect of optimization on only a portion of a sales force, can be extrapolated out</li></ul>The examples will show:<br />Cost of Being Over/Under Capacity<br />Impact on Incentive Compensation Costs<br />Upside Revenue<br />11<br />© 2010 The TerrAlign Group . Distributed with Permission by The Sales Management Association <br />
  25. 25. Business Case Parameters<br />Customer provided:<br /><ul><li>Account and rep data for the 2 districts
  26. 26. Call frequency and call duration values
  27. 27. Current territories assignment
  28. 28. Target work for each territory = 1,696 hours per year</li></ul>TerrAlign<br /><ul><li>Geocoded each store and rep record
  29. 29. Calculated travel time estimate and work for each store using TerrAlign 4 software and Drive Time Network
  30. 30. Work = call frequency x (travel time estimate + call duration)
  31. 31. Optimized territories within district boundaries balancing on work
  32. 32. Manually reviewed and fine tuned territories
  33. 33. Compared current and optimized alignments</li></ul>12<br />© 2010 The TerrAlign Group . Distributed with Permission by The Sales Management Association <br />
  34. 34. Travel Time Reduction<br />Optimizing territories reduced travel time creating the following benefits:<br />Travel time reduction<br /><ul><li>NE decreased by 5.2%
  35. 35. SE decreased by 4.7%
  36. 36. Total savings on mileage = 11,960 miles x $.50 = $5,980</li></ul>Increased available call hours<br /><ul><li>NE increased by 1.6%
  37. 37. SE increased by .6%
  38. 38. Total value of increased call hours = $100,000 x 2.2% = $2,200</li></ul>13<br />© 2010 The TerrAlign Group . Distributed with Permission by The Sales Management Association <br />
  39. 39. Ways to Improve Capacity<br />Over-capacity<br /><ul><li>Add reps
  40. 40. Move reps from under-capacity areas to over-capacity areas
  41. 41. Reduce call frequencies
  42. 42. Reduce call durations
  43. 43. Remove stores from coverage</li></ul>Under-capacity<br /><ul><li>Reduce reps
  44. 44. Move reps from under-capacity areas to over-capacity areas
  45. 45. Increase call frequencies
  46. 46. Increase call durations
  47. 47. Add additional stores to coverage</li></ul>14<br />© 2010 The TerrAlign Group . Distributed with Permission by The Sales Management Association <br />
  48. 48. Average Opportunity<br />Rep capacity<br />Lost Opportunity<br />Costly Resources<br />15<br />© 2010 The TerrAlign Group . Distributed with Permission by The Sales Management Association <br />
  49. 49. Improved Balance and Workload<br />16<br />© 2010 The TerrAlign Group . Distributed with Permission by The Sales Management Association <br />
  50. 50. 50 60 70 80 90 100 110 120 130 140 150<br />The Desired Outcome<br />Balanced Territories Lead to Expected Incentive Compensation Costs, Aligned with Revenue<br />17<br />© 2010 The TerrAlign Group . Distributed with Permission by The Sales Management Association <br />
  51. 51. Sample Deployment Map<br />18<br />
  52. 52. Benefits of Optimizing Sales Resources<br /><ul><li>Increase sales and profits by 4% to 12% by full resource utilization
  53. 53. Reduce travel costs on average by 10%-15%
  54. 54. Ability to identify over and under-achievers and reduce turn-over
  55. 55. Equitable territories lead to the ‘right’ quota and incentive plan, and therefore motivated, focused sales reps</li></ul>19<br />© 2010 The TerrAlign Group . Distributed with Permission by The Sales Management Association <br />
  56. 56. Learn More<br />The Sales Management Association<br />This abridged presentation is provided as a preview. <br />Sales Management Association members may access the presentation in its entirety, and download copies in Powerpoint format, at the Sales Management Association website: www.salesmanagement.org.<br />Consider joining The Sales Management Association, the premier professional association for sales leaders, sales support professionals, and sales force effectiveness thought leaders.<br />20<br />Copyright © 2008 - 2010 The Sales Management Association. All rights reserved.<br />
  57. 57. About The Sales Management Association<br />www.salesmanagement.org<br />The Sales Management Association is a global professional association for sales management and sales operations. The SMA fosters a community of interest among sales force effectiveness thought leaders, consultants, academics, and sales management practitioners across many industries.<br />Through training workshops, online resources, and research materials, The SMA addresses the management issues of greatest concern to members. The SMA’s focus areas include management leadership, sales force performance coaching, sales planning, sales process management, enabling technologies, incentive compensation, and sales force support.<br />Copyright © 2008 - 2010 The Sales Management Association. All rights reserved.<br />

×