Salesforce Issues Goals Sizing Allocation/Alignment Organization 1

Salesforce Issues Goals Sizing: How many? What type? (Syntex) Allocation: Over products (Syntex/Detailer) Customers/prospects (Syntex) Territory design (Geoline) Call planning (CALLPLAN) (Integrated models: ZS) Organization/Control: Compensation 2

Salesforce Management Decisions Goals and Objectives Organization Decisions Salesforce structuring Salesforce sizing Territory design Allocation Decisions Over products, customers, prospects, segments Timing/Call planning Control Decisions Compensation Evaluation Motivation 3

Salesforce Size % of sales method (back into number of people) Breakdown method (add up sales potential) Based on response model Syntex 4

How to Estimate the Response Function? Historical data Available? Sufficient variability for estimation? Experiments ABB (Remember?). Difficult to execute. Managerial Judgment Quick. Builds consensus. Encourages systematic thinking. 9

Sizing Example: Salesforce Sizing at Syntex Current salesforce size (1982) was 433 reps, expanding by 30–40 per year. Salesforce allocated to: 7 Drugs Naprosyn, Anaprox, Norinyl, etc. & 9 Physician Specialities Family practice, internal medicine OB/GYN, etc. by judgmental/historical norms. Questions: How large should the salesforce be? How should it be allocated to drugs and to physician specialities? Approach: Judgmental estimation of response functions. 5

Syntex Model Each management team member separately estimates a response function for each sales entry As a group, the management team members discuss and develop consensus estimates of response functions Run the model Test profit consequences of alternate scenarios Do results make sense? Can they be implemented? Implement resource allocation decisions Monitor and evaluate sales performance No Yes 6

Pooled Judgment Process Reference Conditions: Assumptions about what the market would do at best guess/planned conditions. Just a reference point--not as important as CHANGES from reference conditions--your task. What if?….Selling effort in this segment were 50% more…..what would happen to sales? Think about it this way: How many salespeople is that? How much additional sales per salesperson? Capture new accounts? More sales to existing customers? We pool your results. We report average and extremes. You discuss and redo your assessment. We cycle once more if needed. 28

Opportunity Costs Identified by Syntex Model Opportunity cost of maintaining current sales force size Change in Profit after Change in Salesforce Size and Reallocation of Effort +$5M –$5M Current level 30 Optimal increase in sales force size Change in Salesforce Size from Current Level 7

Allocation Allocation to existing customers and prospects (CALLPLAN) Allocation to products: Rules of thumb. Response models. 8

Allocation Example: CALLPLAN Model at United Airlines Step 1 Determine expected contribution of all possible call policies for each product account. Step 2 Allocate time to accounts. 10

Each Salesperson is Asked . . . What would sales of this account be if . . . . . . you don’t visit the account? X0 . . . you visit the account the same as last period? X1 . . . you visit the account 50% more than last period? X2 . . . you visit the account as frequently as possible? X3 11

This Yields— Expected Sales Number Of Calls X X X X Base 1.5 ´ Base 3 2 Expected Sales X 1 X Base 1.5 ´ Base Number Of Calls 12

Problem How much time to spend at each account to: Maximize Subject to sum of account revenues ´ account margin? Subject to salesperson time constraint? min./max. calling restriction? Output Recommended calling frequencies for each account 13

Optimization Procedure in CALLPLAN Number of calls 1 2 3 4 5 6 7 8 9 10 1 100 300 600 400 300 225 160 11 70 50 Account 2 1400 1100 850 650 490 360 250 165 85 15 Number 3 3600 1800 800 200 100 75 50 40 30 25 4 180 170 160 150 140 135 130 125 120 115 The numbers in each row of the matrix correspond to the response function for that account, showing incremental contribution per call at that call level. Indicates marginal contributions at current level of deployment Indicates marginal contributions at the optimal level of deployment 14

Current Allocation vs Model Recommended Allocation 8 8 7 7 6 6 5 5 Number of Calls Number of Calls 4 4 3 3 2 2 1 1 1 2 3 4 1 2 3 4 Account Number Current Allocation Account Number Model Recommended Allocation 15

Does CALLPLAN work? The United Airlines Experiment 20 sales people participated 10 West Coast 10 East Coast 10 pairs selected 5 East and 5 West matched by managerial judgment, personal characteristics, compatibility of territory size, and revenue account mix. 10 CALLPLAN participants selected 1 from each pair. Other 10 were control group. Control group Told they were in an experiment. Participated in judgmental call frequency/account response development. Received computer feedback of their input but no CALLPLAN recommendations. 16

Results after 6 Months Sales Change vs Previous Year Experimental Group – Control = Difference +11.9% +3.8% +8.1% (Probability that this result is due to chance < 0.025.) 17

Profit Impact Time Needed Change in Sales ~ 1/2 day per salesperson (~ 95% profit in airline business) > $1,000,000 (for the 10 sales people) in 6 months. 18

Territory Design Example: Geoline Objective—To design territories that are: 1. Of equal workload*. 2. Contiguous. 3. Compact. Model—Maximize compactness: S.T. G Workloads are equal. G Contiguous. G Sales people are assigned to one or more geographical units. (Uses legislative redistricting software.) * Workload is measured using variables such as customer count, number of calls, sales potential, or some weighted combination of these variables. 19

Sales Territory Design Output Optimal boundaries and resident locations for three sales territories. 10 8 6 Miles 4 2 2 4 6 8 10 12 14 16 18 20 Miles 20

Sales Force Alignment/Allocation Influences Environmental Changes Competitor activity Shifts in buyer behavior Demographic shifts Government regulations Organizational Changes New products Maturing product lines Restructuring Mergers and acquisitions New data sources 21

What Can Realignment Accomplish? G Better coverage of clients and prospects G Better market penetration Higher Sales and Profits Workload Balance Sales Potential Balance G Fairer evaluation of sales people G Improved morale Travel Efficiency G More face-to-face selling time G Reduced costs Minimized Disruption G Acceptance by sales people G Acceptance by customers G Lower “transition costs” 22

Territory Design Objectives and Criteria Sales Workload Potential Minimum Territory Balance Balance Disruption Compactness Customers Responsiveness ´ ´ Relationships ´ Reps Earnings opportunity ´ Reduced uncertainty ´ Control of overnights ´ Firm Sales results ´ ´ ? Effort control ´ Travel cost control ´ Conflicts? Tradeoffs? Priorities? (How to set?) 23

Compensation (Indirect Control): 1. Level 2. Form: Salary Commission (on sales? on profit? short/long term?) 3. Other: Contests Bonuses 24