TTG, Incorporated: Professional Territory Design Software Since 1988

Effective Sales Force Deployment

Use or Misuse of Your Most Critical Resource

By David Pinals, TTG, Inc.

INTRODUCTION 

For large field sales organizations, the most critical resource is the aggregate face-to-face selling time the sales force has available to call on customers and prospects.  With the rising cost of an industrial field sales call going from $30 in 1965 to $60 in 1975 to over $200 in 2000, we are seeing a doubling and then a tripling in the cost of a sales call.  Might the cost of a sales call in 2005 be $300 or more? The cumulative effect of poor sales force deployment (i.e. calls not made on accounts that increase sales or profits the most) drives up the cost of sales and increases lost revenue.  On the positive side, by using the management principle of leverage, a very small improvement in sales force deployment can produce enormous improvements in sales and profits. 

Recently there have been significant improvements in the methods available to sales management for creating effective sales force deployment plans.  This paper describes the critical issues to be addressed in a sales force deployment plan and suggests an approach for developing, implementing and monitoring such a plan.  Within the sales force deployment planning process, this paper highlights an approach to sales territory alignment.  The approach is supported by a highly interactive, solution oriented, sales territory design software package that simplifies and accelerates the planning, implementation, and monitoring process.  Most important, the approach provides the basis for a structured, intelligent, well thought-out sales territory plan that achieves management objectives through a process that encourages implementation and field force acceptance. 

BACKGROUND 

Effective sales force deployment is composed of three key components:

• Optimal sizing of a sales force, 
• Optimal allocation of sales call effort to increase sales or profit response from customers and prospects (often referred to as workload allocation), and 
• Optimal alignment of sales territories to balance workload and minimize travel. 

Additional important issues that are beyond the scope of this paper include adjustments to the sales force deployment plan in response to multiple product lines, product life cycles, and dynamic changes over time.

Sales Force Size

 A technique often used to determine the optimal size of a sales force is called workload buildup.  The first step is to determine the total number of sales calls to be made by the entire selling organization in a year.

This is done by multiplying the total number of accounts to call on by the number of times each account should be called on in a year.  In the second step, sales force size is determined by dividing the total number of calls needed in a year by the average number of calls a rep can make in a year.  For the work load buildup technique to be effective it should be based upon historical sales performance and work load allocation data, with adjustments for future products and market conditions coming from senior sales and marketing management.

Work Load Allocation 

We have found three different approaches for developing a workload measure.  The first approach uses the amount of selling time available as a singular measure.  The second approach uses the amount of market potential as a singular measure.  The third approach integrates selling time with potential market demand, and we believe it is the superior approach.

By using both selling time and potential market demand in a work load measure, a market response matrix can be constructed that estimates the amount of revenue that can be generated from an account for a given amount of sales call effort.  Call effort is defined as the total calling time based on frequency (or number of calls) and average duration of calls that a salesperson makes on an account.  A workload model defines the amount of selling time that should be optimally allocated to an account (no more, no less) to achieve a targeted sales goal.  Historical call data, sales data, and field sales management judgment is normally used to support the quantification of the work load model.

Territory Alignment

Once total workload has been determined, the process of creating sales territories involves the assignment of both accounts and prospects to salespeople.  The process in many cases can be viewed as a geographic problem of defining territory boundaries by grouping small geographic units together into larger areas called sales territories.  We call the geographic grouping process territory alignment.  This process is usually guided by alignment criteria and objectives developed in conjunction with sales management.  Alignment criteria can include multiple objectives and constraints. For example, sales territories should have balanced work load, be compact and contiguous, and minimize travel time.

Territories that are not balanced may have either too many customers and prospects, and therefore too high a workload, or not enough.  A sales territory with too many customers and prospects means sales opportunities may be overlooked or missed because there is too much work to do.  Not having enough work means that a salesperson’s time is being wasted and potential is not being tapped.  The combination of wasted selling time and missed selling opportunities stifles sales and increases sales costs.

Even though automated methods for territory alignment have been available for over 15 years, the predominate manual method is still in use. This method can be described as the traditional “calculator and crayon” approach.  For small organizations in industries where there is a small selling organization, few new product introductions, where competition is weak, and where market shifts seldom occur, the calculator and crayon approach can be sufficient, but time-consuming. 

Manual Approach 

The time-consuming and cumbersome nature of traditional manual alignment methods tends to force sales management to rely on “short-cuts” in the alignment process.  In doing so, management may ultimately be faced with problems worse than those originally to be solved.  A few example of these “short-cuts” are outlined in the following table:

 Manual "Short-Cuts"

Objective	Method	Result
Increase Sales/Add Reps	Split high growth territories.   Leave low growth territories alone.	Create territories with unbalanced workload.  Maintain inefficient territory design.
Maintain Sales/Reduce Reps	Merge poorly performing territories.	Create large,  poorly designed territories made worse by merging.
Complete realignment quickly	Approximate "Broad Pen" geographic realignment.	Create territory inequalities and inefficiencies, increase opportunities for sales "poaching", poor morale and unrealistic quotas.

 

Automated Approach

Automated alignment approaches fall into two categories: mathematical optimization and management heuristic. 

Mathematical optimization – is an approach that uses a mathematical programming model.  Several different models are available and can be powerful tools when national or regional territory alignments are required.  Creating a mathematical formulation of a large sales force to optimize alignment is a complex task requiring extensive computational resources and skilled personnel.  Since mathematical models can simultaneously consider multiple territory alignment criteria and are computer-based, initial territory alignments can be created quickly that satisfy multiple design objectives.

The major drawbacks of the mathematical optimization approach are:  1) not taking into account certain local knowledge and geographic factors that are obvious to district and regional managers, and 2) sales management often not understanding the optimization or “black box” approach and therefore not believing in, nor acting upon, the results.  For these reasons, mathematical optimization approaches alone are never sufficient.

Management heuristic – is an approach that incorporates management alignment criteria (including local geographic and customer/salesperson relationships) into an iterative procedure that incrementally realigns territories until management is satisfied with the results.

To be effective and cost-efficient, the management heuristic approach requires the support of a highly interactive system to manipulate alignment criteria and keep track of results for each iteration.   With the support of such a system, alternative “what-if” scenarios can be quickly analyzed, and the seasoned judgment of sales management can be incorporated into a final solution that can be easily “tweaked” at any time to improve overall sales performance.

The major drawbacks of the management heuristic approach are that it does not produce a mathematically "optimal" solution and can be time-consuming.  In addition, the solution to any alignment problem is strongly influenced by the skill and knowledge of the individual(s) creating the territory design. 

A combined approach – uses a mathematical optimization approach to generate initial territory alignments and the management heuristic approach to “fine-tune” alignments.  To determine which approach, or combination of approaches, is best suited to a particular sales organization’s needs, we have developed a sales force deployment procedure that reviews size, workload, and alignment issues.

Our sales force deployment procedure consists of four stages that will produce dramatic increases in sales force productivity.  

SALES FORCE DEPLOYMENT PROCEDURE 

The four-stage sales force deployment procedure is as follows:

1. Audit
2. Assessment
3. Prescription (Alignment)
4. Monitoring (Fine Tuning)

 Stage 1 – Audit is a comprehensive review of the sale organization’s: 

• Goals and objectives
• Current and future strategy
• Constraints
• Resources
• Data availability

The audit stage clarifies management’s objectives and current strategy.  It also defines constraints and available resources and identifies internal and external data sources, which can be tapped for the assessment and prescription stages that follow.

Stage 2 – Assessment evaluates the market potential and workload requirements and reviews current deployment of field sales resources.  The process highlights inequities in current workload, deployment and geographic factors that could be adjusted to produce significant improvements in sales force productivity.

 If a workload model has not been developed, this is the stage where market potential, sales performance and, if available, historical work allocation data is acquired and organized into a database for workload modeling.

 A particularly unique component of the assessment stage, not generally available using traditional methods, is the use of highly detailed maps to display pertinent data on market potential and workload, as well as geographic factors involving territory definitions, such as road access and sales rep locations.  By carefully designing these assessment maps, it is possible to quickly highlight territories that are not compact and contiguous, and therefore are inefficient to cover.  It is also possible to see where major versus minor territory realignments are required to correct these inefficiencies.

Stage 3 – Prescription (Territory Alignment) is where an integrated plan is created that builds upon the strengths and corrects weaknesses in sales force deployment identified in the assessment stage by adjusting territory alignments.  The prescription is designed to achieve management objectives, subject to specific constraints, defined in the audit stage.

Depending on a company’s objectives, the criteria for aligning sales territories may differ.  When adequate account coverage is the critical success factor, sales management may want to balance the workload of all sales representatives.  In other cases, particularly when equitable compensation opportunities are necessary for attracting and motivating sales representatives, sales management may want to design territories based on market potential.

While it can be argued that mathematical programming techniques produce alignments that can be “proven” to be optimal, we have found sales management more likely to accept, and therefore implement, alignments based upon their own local market knowledge.  In addition, we have found that alignments may over time require only minor “fine-tuning”, or periodic “tweaking”, rather than a complete and major realignment.

To date, however, management has not had an effective procedure for iteratively testing the many “what-if” scenarios that may need to be evaluated in the course of an alignment design.  Juggling key multiple variables, for example, workload, market potential, and the geographic factors we have discussed, across multiple territories simultaneously is cumbersome.  The process is further complicated by the need to have immediate feedback on each alignment adjustment for each key variable, which should be tracked using a spreadsheet.

There is also the need to keep territories compact and contiguous, to accommodate travel networks and geographical barriers and to refer to base maps showing boundaries and geographical references.  Finally, map overlays showing alternative territory alignments for each scenario must be repeatedly updated and changes catalogued in sequence with changes made in the spreadsheet.

Recent advances in PC hardware technology and efficient new algorithms to address territory optimization have made mathematical optimizations readily available to businesses of all sizes. In addition, market competition has made these new, powerful applications available at very affordable price points. This new software tightly integrates client workload data with computer-based maps and drive-time tables to make recommendations on territory alignments as well as optimal placement of sales personnel. Some of these systems also provide feedback on existing territory alignments to help understand where problems exist and how they can be corrected. Using such a system, the time required to complete a realignment of a large national sales force can be measured in days or weeks instead of months.

Stage 4 – Monitoring (Fine Tuning) recognizes that any good sales force deployment plan requires input from field management who must be able to adjust alignments based upon local knowledge of special rep/account relationships and representatives’ particular strengths and weaknesses.  In addition, the marketplace is not static:  new products are introduced, old products are eliminated, market potential shifts, and competition reallocates its efforts against yours.  As a result, an effective alignment plan cannot remain fixed.  In industries such as electronics, packaged goods, and pharmaceuticals, alignments may need to be adjusted two or three times a year just to keep pace with the dynamic marketplace.

A computerized sales territory design system supports management’s need for territory fine-tuning and performance monitoring.  Performance monitoring is effectively supported by these systems through the use of pre-defined map and report templates that simplify the monitoring effort.  Performance maps produced on a quarterly basis provide a powerful management reporting mechanism for highlighting areas of over and under performance among and within sales territories.

CONCLUSIONS 

With major costs of a sales organization reflected in the time and energy of its sales people, effective allocation of the sales forces becomes a critical factor in controlling cost of sales and increasing revenue.  Traditional manual approaches to sales force sizing, allocation and territory alignment are inadequate. Traditional approaches are costly to perform, difficult to conduct in an acceptable time frame, cannot incorporate necessary data into the planning and design process, and produce inferior plans that are difficult to implement and gain acceptance.  Competitive pressures are too great to under utilize or poorly direct field sales resources.

Mathematical optimization and management heuristic models have been specifically created to support sales force deployment planning efforts.  Powerful PC-based systems are available to planners and managers to align and map sales territories so as to satisfy multiple management design criteria and to support ongoing realignment and sales performance monitoring functions.  These models and support systems save months of planning time.  The real payoff, though, is more effective sales resource deployment that maximizes the amount of face-to-face selling time the sales force is able to spend with prospects and customers who have the highest potential of producing the greatest sales and profits.  Effective sales force deployment means increased sales and profits.

Most important, effective sales force deployment is achieved through an ongoing process consisting of audit, assessment, prescription, and monitoring stages rather than a one-time single event.  Using a structured well defined process, supported by a uniquely designed sales territory planning system, effective sales force deployment is easier to achieve than ever before.  

David Pinals is the President and CEO of TTG, Inc. in Burlington, MA. He is one of the founders of TTG and  the creator several territory design software applications including Territory Planner, STARmanager, ASTRO, Territory Mapper and most recently, AlignStar. Mr. Pinals holds a graduate degrees in Applied Geography and has assisted businesses in solving sales force deployment problems since 1982. TTG provides solutions for their clients that include both software and consulting services. David Pinals may be reached at TTG, Inc. by calling (781) 272-8900 or via the contact form.

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