Improve Financial Results by Optimizing Sales Territories



                      Ken Kramer
               Director, Pro...
The Financial Impact of Territory Optimization


  • In this session, you'll learn how your organization can
    increase ...
“One key aspect of improving the performance of a
sales organization is to align sales territories with the
 abilities of ...
About The TerrAlign Group


 • Founded in 1987, TerrAlign has a wealth of experience
   providing Sales Resource Optimizat...
Objectives of Optimizing Territories


  Creation of territories….
  • that are balanced with regards to a strategic metri...
Why Territory Coverage Models Should Change


 • To follow the same strategy used in designing comp
   plans
 • To balance...
© 2007 Callidus Software Inc. – Proprietary & Confidential
© 2007 Callidus Software Inc. – Proprietary & Confidential
© 2007 Callidus Software Inc. – Proprietary & Confidential
Integrating Territory Optimization into the
Compensation Process


 “Through 2010, on average, enterprises will miss the e...
Realignment Evolution
                   300.00%




                   250.00%




                   200.00%
  Relative ...
Territory Opportunity vs. Rep Capacity

                                          Opportunity by Territory                ...
Territory Opportunity vs. Rep Capacity

                                                                                  ...
Based on Sample 1000 Rep Field Force



                                                      Equivalent to 100
          ...
Imbalanced Territories Create Over and
Underperformers, Regardless of Talent


                                           ...
Improved Balance and Workload



                                           Opportunity by territory

                2000...
Balanced Territories Lead to Expected Incentive
Compensation Costs, Aligned with Revenue


                               ...
Let’s Do the Math

                                                        500 reps x $75k var = $37.5M
1000 reps x $2M qu...
More Numbers

                                              Total Revenue
          Re-Allocate work amongst top
         ...
In Summary


  • Balanced territories improve sales and profits by 4% to
    12%
  • Territories that are more
    efficie...
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Improve Financial Results By Optimizing Sales Territories

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jointly presented by TerrAlign and Callidus Software at the TrueConnection: Sales Performance Management Conference 2007

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Improve Financial Results By Optimizing Sales Territories

  1. 1. Improve Financial Results by Optimizing Sales Territories Ken Kramer Director, Product Marketing TerrAlign
  2. 2. The Financial Impact of Territory Optimization • In this session, you'll learn how your organization can increase financial performance through more intelligent sales resource alignment • Increase revenues and market share thru full utilization of your sales resources Decrease cost of incentives • Ability to identify the real stars (and the bottom 10%) • Decreased hiring, training, lost revenue during ramp up • Reduction of travel costs • The creation of a sense of fairness with equitable • territories Right number of reps, with right quota, in the right place • © 2007 Callidus Software Inc. – Proprietary & Confidential
  3. 3. “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.” - Mark Smith, VP Research © 2007 Callidus Software Inc. – Proprietary & Confidential
  4. 4. About The TerrAlign Group • Founded in 1987, TerrAlign has a wealth of experience providing Sales Resource Optimization (SRO) solutions, with a core focus on Field Territory Alignment & Management • Leverage domain expertise to deliver market leading software and invaluable strategic consulting services with a focus of making every customer successful • Partner with other leading best in class vendors to deliver best possible solution © 2007 Callidus Software Inc. – Proprietary & Confidential
  5. 5. Objectives of Optimizing Territories Creation of territories…. • that are balanced with regards to a strategic metric • where workload/opportunity requirements are equivalent to rep capacity • that are geographically configured to enable reps to work efficiently • that help reps maintain relationships with accounts • that are equitable and critical to setting equitable quotas © 2007 Callidus Software Inc. – Proprietary & Confidential
  6. 6. Why Territory Coverage Models Should Change • To follow the same strategy used in designing comp plans • To balance territories based on a combination of opportunity, workload, account/prospect information and geography • When your situations change • Expansion or reduction of sales force caused by new competition, new products, mergers/acquisitions • Modifications due to new customer acquisition, personnel changes © 2007 Callidus Software Inc. – Proprietary & Confidential
  7. 7. © 2007 Callidus Software Inc. – Proprietary & Confidential
  8. 8. © 2007 Callidus Software Inc. – Proprietary & Confidential
  9. 9. © 2007 Callidus Software Inc. – Proprietary & Confidential
  10. 10. Integrating Territory Optimization into the Compensation Process “Through 2010, on average, enterprises will miss the equivalent of at least 10 percent of total annual sales in quot;lost opportunityquot; 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, Inc. Analyze/ Optimize Set and Calculate Design Set Sales Incentive Allocate Comp Plan Corporate Territories Quotas Comp Strategy © 2007 Callidus Software Inc. – Proprietary & Confidential
  11. 11. Realignment Evolution 300.00% 250.00% 200.00% Relative Value Current Optimized 150.00% Final High Low 100.00% 50.00% 0.00% Territories © 2007 Callidus Software Inc. – Proprietary & Confidential
  12. 12. Territory Opportunity vs. Rep Capacity Opportunity by Territory Average Opportunity Rep capacity 4,000 3,500 3,000 2,500 Opportunity 2,000 1,500 1,000 500 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Territories © 2007 Callidus Software Inc. – Proprietary & Confidential
  13. 13. Territory Opportunity vs. Rep Capacity Average Opportunity Opportunity by Territory Rep capacity Lost Opportunity 4,000 3,500 3,000 2,500 Opportunity 2,000 1,500 1,000 500 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Territories © 2007 Callidus Software Inc. – Proprietary & Confidential
  14. 14. Based on Sample 1000 Rep Field Force Equivalent to 100 160 empty territories 140 % of Average Equivalent to 100 120 unassigned reps 100 80 60 40 Under-utilized resources Opportunity Available Productive Work Lost Opportunity © 2007 Callidus Software Inc. – Proprietary & Confidential
  15. 15. Imbalanced Territories Create Over and Underperformers, Regardless of Talent Distribution of Attainment 25 % of Sales Force 20 15 10 5 0 50 60 70 80 90 100 110 120 130 140 % of Quota © 2007 Callidus Software Inc. – Proprietary & Confidential
  16. 16. Improved Balance and Workload Opportunity by territory 2000 1800 1600 1400 Opportunity 1200 1000 800 600 400 200 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 Territories © 2007 Callidus Software Inc. – Proprietary & Confidential
  17. 17. Balanced Territories Lead to Expected Incentive Compensation Costs, Aligned with Revenue Distribution of Attainment 25 % of Sales Force 20 15 10 5 0 50 60 70 80 90 100 110 120 130 140 150 % of Quota © 2007 Callidus Software Inc. – Proprietary & Confidential
  18. 18. Let’s Do the Math 500 reps x $75k var = $37.5M 1000 reps x $2M quota = $2B in expected revenue 500 reps x $150k - $75M 1000 reps @ $200k OTE = Or $112.5M IC Spent $200M Same Revenue - $12.5 Over-spent 50/50 Base vs. Variable = $100M IC planned Distribution of Attainment % of Sales Force 25 20 15 10 5 0 50 60 70 80 90 100 110 120 130 140 % of Quota © 2007 Callidus Software Inc. – Proprietary & Confidential
  19. 19. More Numbers Total Revenue Re-Allocate work amongst top expectation of $2B and bottom 100 reps Increase revenue by Increase revenue by up to 10% up to 10% with no with no increase in resources increase in resources Equivalent to Equivalent 100 empty $200M incremental to 100 territories Revenue unassigned Average reps % of © 2007 Callidus Software Inc. – Proprietary & Confidential
  20. 20. In Summary • Balanced territories improve sales and profits by 4% to 12% • Territories that are more efficient travel-wise reduce costs on average by 10%- 15% • Equitable territories reduce turn-over • Territories built on objective business metrics provide better management of quotas and more predictable incentives © 2007 Callidus Software Inc. – Proprietary & Confidential

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