Vaguely Right Approach To Sales Force Allocations

Vaguely right approach to Sales force allocations

Introduction • Three important sales force allocation

decisions – Call frequency for each prospect – Boundaries of territories – decisions – Addition or deletion of men in sales force

• Dependency on Corporate information

systems – historical sales data – precisely wrong approach • Input – managerial judgment necessary for profitability - vaguely right approach

Precisely wrong approaches Allocating calls in proportion to sales or

potential Rigidness in call frequency

Concentrating on travel time  higher travel time may be fruitful

Precisely wrong approaches Defining territories by call frequencies

proportion to sales or potential Depends on call frequencies which may be

precisely wrong Adding salesmen when they can be

afforded Salesmen should be selected based on ROI –

capital investment

Vaguely right approach

Yes : A

No : B

Vaguely right approach Yes : A

Yes

No

No : B

Vaguely right approach • Interrelationship of three decisions

• Input – Soft and hard data • HARD – Geographic areas – Time and cost involved in reaching the account – Average time per call on each account – Planned number of calls to each account – Average profit contribution per sales – Average amount of time the salesman has for selling and travelling

Vaguely right approach Soft Amount of sale that could be anticipated from

certain accounts Different number of calls are made than planned Easily supplied by manager and sales man Odds for converting prospects are estimated vaguely right Discussion of explicit alternatives Improved communication

Vaguely right approach Computer system Terminal and conversational manner Allocate 600 hours of available time in a

territory Find the most productive account – allocate 5 to 10 hours Allocate next most productive account and so on Allocation in small incremental doses Application of marginal analysis principles

Vaguely right approach Part A : optimal number of calls to be made

on each account in each sales territory Part B : Add or delete time from each territory till marginal profit value of time is equal E.g. 10 to 15 times in some cases

Part C : check marginal profit value of

territories are equal – Realign

Vaguely right approach • Consider this example – marginal values – – – –

Able 65.96 $ Baker 144.44 $ Charlie 273.12 $ Donald 128.77 $

• Results : if 220 hrs are subtracted from able’s

territory and added to Charlie's territory marginal values will be more equal • Net profit increase is $ 16549 • Add or delete men – marginal profit per hour per man is less than cost per hour in keeping the man in the field then sales force has too many men • Marginal profit value is enough to make minimum ROI

Vaguely right approach Problems and opportunities Day or night Element of risk in evaluating response of

accounts to call efforts Bottom up approach Output of their own input Avoiding spending too much time with customers they like Uncomfortable in putting in objective estimates

Thank you