Territory Management Key to Productivity Account Analysis and

Territory Management Key to Productivity Account Analysis and Time Allocation • Single Factor Model: ABC Account Classification • Portfolio Models • Account Opportunity • Competitive Position • Decision Models • Sales Funnel - complex selling; not straight rebuy • Unqualified Opportunity • Qualified Opportunity • Best Few Opportunities What are weaknesses of each? ? ?

Territory Management Key to Productivity Customer Break-even Analysis Figure 5 -2 What are appropriate strategies for each account? A • Greater account penetration • Sell expanded product mix • Consolidate orders B • Service by phone • Concede to competition C • Protect from competition

Territory Management Key to Productivity Breakeven Sales Volume (Cost per Call) x (Number of Calls to Close) Sales Calls as a % of Sales

Territory Management Key to Productivity Salesperson Cost per Call = Direct Selling Expense Total Calls per Year = (Net Selling Days) x ( Avg Calls per day)

A Portfolio Model Competitive Position Account Opportunity Strong High Low Core Accounts Weak Growth Accounts are very Accounts are potentially attractive. Invest heavily in selling May want to invest resources. in heavily Drag Accounts Problem Accounts are moderately attractive. Invest to maintain current position. Accounts are very unattractive. Minimal investment of selling resources.

The Sales Funnel Unqualified 13 24 19 20 21 15 17 23 16 22 12 9 11 10 14 18 50% closure probability Qualified 7 5 6 8 Best few 3 1 4 2 75% closure probability 90% closure probability

Personal Time Management Importance High Low Emergencies Time Wasters Low Personal Growth Recreation Urgency High

Territory Management Key to Productivity Industry Business Services Chemicals Construction Electronics Food Products Instruments Machinery Office Equipment Printing/Publshing Rubber/Plastics Breakeven 1, 096. 37 15, 474. 67 9, 730. 00 433. 25 6, 580. 00 11, 629. 13 1, 580. 77 616. 67 3, 811. 61 41, 662. 14

Personal Selling Developing a list of Prospects 1. Direct Inquiry • Advertising • Direct Mail • Trade publications • Trade shows 2. Directories -- Thomas Register 3. Referrals 4. Cold canvassing

Territory Management Key to Productivity Minimum Account Size Exercise: Problem 1 $34. 50 x 4. 10 = $1. 38 Smallest Customer Orders 1 call per month 2 calls per month 3 calls per month $345. 00 $690. 00 $1, 035. 00 Opportunity Cost: Low Volume vs. High Volume Customer

Territory Management Key to Productivity Time Allocation: Problem 2 Why not allocate calls strictly based on % of sales? What additional information should you consider in allocating time?

Territory Management Key to Productivity Portfolio Analysis: Problem 3 Where do allocation problems seem to occur? Why might this happen? • Salesperson allocating on basis of current competitive position, not on basis of account opportunity • Too much time on low opportunity accounts • Best Target: high opportunity, weak competitive cell • High opportunity, strong comp may be vulnerable to comp.

Territory Management Key to Productivity Portfolio Analysis: Problem 3 Possible more productive effort allocation strategy: Assuming number of Accounts in each cell roughly equal: High/Strong 36 Calls per year High/Weak 24 Calls per year Low/Strong 10 Calls per year Low/Weak 4 Calls per year Is the assumption realistic?

Personal Selling Developing a list of Prospects 1. Direct Inquiry • Advertising • Direct Mail • Trade publications • Trade shows 2. Directories -- Thomas Register 3. Referrals 4. Cold canvassing

Personal Selling Sample Prospect Profile - Characteristics • • • Multiple-practice physician office Internal medicine, family practice Surburban location New practice -- less than 5 years Good credit history Currently purchases from a full-service distributor

Personal Selling Qualifying Prospects 1. Needs for your products/services 2. Authority to make purchase 3. Credit rating & ability to pay 4. Rating scale applied to characteristics by each salesperson

Productivity Crisis Overall Average Sales Per Salesperson 1977 1987 $879, 321 -0. 9% Real Nominal Annual Growth $1, 499, 870 5. 5% $ 445, 900 $2, 460, 000 11. 4% 1, 392, 500 6, 250, 000 158, 100 532, 11812. 9 490, 000 1, 357, 462 665, 400 1, 880, 769 1, 650, 400 1, 681, 667 1, 390, 000 512, 500 -9. 5 908, 300 1, 312, 500 18. 6% Selected Industries: Drugs/Medicine Paper Services Chemicals Electronics Building Materials Glass Products Tools/Hardware 16. 29. 1 6. 0 10. 74. 0 10. 94. 2 0. 2 -5. 9 -15. 0 3. 72. 6

MINIMUM ACCOUNTS SIZE EXERCISE You are a rookie salesperson with Associated Medical Supplies, Inc. , a wholesaler of disposable medical supplies. As new salesperson you are finding it difficult to convince accounts to change from their current suppliers. The doctors with whom you are having the most success tend to be small, single practices located in the rural areas. Competition for these accounts is not as intense, perhaps because their purchases are fairly small. They usually place about $900 of business with you a month. Nevertheless, they seem to be most appreciative of your coming each week to take inventory of their supplies and write an order. Furthermore, it is better than no sales at all. Lately your boss has been getting on you because productivity has not increased as much as he had hoped for when placing you in the territory. In particular, direct selling costs including compensation, are currently 15% of sales; whereas the total company’s target is for direct sales costs to be 10% of net sales. In light of this, you are wondering if spending time on small rural physicians is the best way for you to manage your territory. You have calculated that your cost per call is currently $34. 50. Should you be calling on these small physician practices? What is the smallest size customer you should pursue in order to meet your company’s selling cost objectives? What might you wish to consider in better managing your territory?

ABC Account Classification ACCOUNT CLASSIFICATION A B C Totals If equal calls per customer: % of Total calls Sales ($) Sales Per Classif. Per Call (4) (5) (6) No. of Accts. (1) % of Total Accts. (2) Sales (000) (3) 21 28 91 140 15% 20 65 100% $910 65% 280 20 210 15 $1, 400 100% 105 140 455 700 $8, 667 2, 000 462 $2, 000 (Avg)

TIME ALLOCATION As a salesperson for Strength Footwear, Inc. , you have been very successful. Your commissions are well over $70, 000 a year. Demand for your product line is very strong, but so is the demand on your time. You work your territory 220 days a year and can make 4 calls a day. The maximum number of times you need to see any account is every other week, but you need to call on each account at least once a quarter. To help you allocate your time according to sales results, you have gathered the following information on customer sales: Accounts Top 10 Accounts Next 10 best accounts Next 20 best accounts Last 20 accounts Sales Last Year $150, 000 56, 250 55, 500 37, 000 18, 750 15, 000 $370, 000 Develop and justify a call schedule for allocating time across the 110 customers in your territory. What additional information should you consider in allocating your time?

TIME ALLOCATION ANALYSIS Number of Accounts 10 10 10 20 20 110 Accounts Top 10 Next 20 Next 20 Last 20 Total Sales Volume Percent of Sales Percent of Accounts Sales per Account $150, 000 56, 250 55, 500 37, 000 18, 750 15, 000 $370, 000 40. 5% 15. 2 15. 0 10. 1 10. 0 5. 1 4. 1 100. 0 9% 9 9 18 18 99 $15, 000 5, 625 5, 550 1, 875 1, 850 938 750 $ 3, 364 Total No. Percent of Calls Sales Per Call Pattern Every other week Once a month About every 2 mos. Once a quarter 260 120 110 80 80 880 29. 6 13. 6 12. 5 9. 1 100. 0 $576. 92 468. 75 462. 50 340. 91 336. 36 234. 38 187. 50 $420. 45

Competitive Position High Strong Weak Segment 1 Segment 2 Attractiveness: Accounts are very attractive because they offer high opportunity and sales organization has strong competitive position. Accounts are potentially attractive due to high opportunity, buy sales organization currently has weak competitive position. Selling Effort Strategy: Accounts should receive a heavy investment of sales resources to take advantage of opportunity and maintain/improve competitive position. Additional analysis should be performed to identify account where sales organization’s competitive position can be strengthened. These accounts should receive heavy investment of sales resources, while other accounts receive minimal investment. Segment 3 Low Segment 4 Attractiveness: Accounts are moderately attractive due to sales organization’s strong competitive position. However, future opportunity is limited. Accounts are very unattractive: they offer low opportunity and sales organization has weak competitive position. Selling Effort Strategy: Accounts should receive a sales resource investment sufficient to maintain current competitive position. Accounts should receive minimal investments of sales resources. Less costly forms of marketing (for example, telephone sales calls, direct mail) should replace personal selling efforts on a selective basis, or the account coverage should be eliminated entirely.

Competitive Positition Strong Segment 1 Attractiveness: Accounts are very attractive because they offer high opportunity and sales organization has strong competitive position. High Selling Effort Strategy: Accounts should receive a heavy investment of sales resources to take advantage of opportunity and maintain/improve competitive position.

Competitive Positition Weak Segment 2 Attractiveness: High Accounts are potentially attractive due to high opportunity, buy sales organization currently has weak competitive position. Selling Effort Strategy: Additional analysis should be performed to identify account where sales organization’s competitive position can be strengthened. These accounts should receive heavy investment of sales resources, while other accounts receive minimal investment.

Competitive Positition Strong Segment 3 Attractiveness: Low Accounts are moderately attractive due to sales organization’s strong competitive position. However, future opportunity is limited. Selling Effort Strategy: Accounts should receive a sales resource investment sufficient to maintain current competitive position.

Competitive Positition Weak Segment 4 Attractiveness: Low Accounts are very unattractive: they offer low opportunity and sales organization has weak competitive position. Selling Effort Strategy: Accounts should receive minimal investments of sales resources. Less costly forms of marketing (for example, telephone sales calls, direct mail) should replace personal selling efforts on a selective basis, or the account coverage should be eliminated entirely.

PORTFOLIO ANALYSIS You are concerned about your productivity and have decided to analyze your account allocation strategy. You sell outdoor sportswear to women’s retail clothing stores. The sportswear segment of women’s clothing has been growing rapidly though some retailers have been quicker than others to recognize and take advantage of the opportunity. You have ocmpiled the following account information from this past year: Account Opportunity Designer Depot High Fashion Conspiracy High Clothes Time High Moda Fashion Low Peachtree Low Tomorrow Fashion High Reprise Low Plus Fashions Low Casual Girls High Another Season Low Bandiera’s Low Sports Locker High Competition Position Strong Weak Strong Weak Strong Sales Calls 24 22 15 15 17 18 24 22 10 21 15 20 Sales $60, 000 $57, 000 $29, 500 $20, 000 $21, 000 $36, 000 $34, 250 $35, 000 $14, 000 $37, 000 $20, 000 $53, 000 Assume that these accounts are representative of all your accounts. Contruct a portfolio model and assess your effort allocation. Where do time allocation problems seem to occur? Why might this happen? Develop a more productive effort allocation strategy, given the information available.

PORTFOLIO ANALYSIS Competitive Position Strong High Account Opportunity Low Weak DD FC SL Total Avg. : Calls 24 22 20 66 22 Sales $ 60, 000 $ 57, 000 $ 53, 000 $170, 000 $ 56, 667 R PF AS Total Avg. : Calls 24 22 21 67 22 Sales $ 34, 250 $ 35, 000 $ 37, 000 $106, 250 $ 35, 417 CT TF CG Total Avg. : Calls 2415 18 10 43 14 Sales $ 29, 500 $ 36, 000 $ 14, 000 $ 79, 500 $ 26, 500 MF P B Total Avg. : Calls 15 17 15 47 16 Sales $ 20, 000 $ 21, 000 $ 20, 500 $ 61, 500 $ 20, 500

Number of Sales Calls Response Function Dollar Sales per Quarter $20, 000 $10, 000 1 2 3 4 5 Number of Sales Calls Per Quarter

Territory Management Key to Productivity Prospecting Model -- Selling Priorities Sales Funnel FIRST Close your “Best Few” sales objectives SECOND Prospect for “Unqualified” objectives THIRD Work the “Qualified” objectives

Territory Management Key to Productivity Territory Coverage Judgmental Routing -- Basic Rules ° Route should be circular ° Route should never cross itself ° Same route should not be used to go to and from a customer ° Customers in neighboring areas should be visited in sequence

Territory Management Key to Productivity Paths for Productivity Improvement % Rating Important* Rank 1 2 3 4 5 6 New Technology Incentives for Strategic Accounts Incentives for Strategic Products Improve Motivation Programs Increase Incentives on Volume Use Alternative: Telemarketing 69% 68% 57% 56% 45% *Based on 10000 salespeople from 192 companies Source: Sales & Marketing Management, Jan. 90, p. 41

Selecting a Partial Route using the Largest-Angle Method y 1 2 6 3 5 Start x 4 Step 1

Selecting a Partial Route using the Largest-Angle Method 1 2 6 3 5 4 Step 2 -3 Biggest angle 1 -3 -4, choose 4

Selecting a Partial Route using the Largest-Angle Method 1 2 6 3 5 4 Step 4 Biggest angle 3 -4 -6, choose 6

Selecting a Partial Route using the Largest-Angle Method 1 6 2 3 5 4 Step 5 Choose 1

Selecting a Partial Route using the Largest-Angle Method 1 6 2 3 5 4 Step 6 Outer ring 3 -4 -6 1 -3

Route Exercise A You are a salesperson for a large consumer goods manufacturer. You call on a set of retailers on a regular basis to ensure proper distribution of your products and to sell merchandising ideas for moving more of your product lines. You are expected to make 8 calls a day on the purchasing managers of your accounts. Normal operating hours for these stores is from 10: 00 a. m. to 6: 00 p. m. , though most purchasing managers will arrive earlier and generally leave between 4: 30 and 5: 00 p. m. . Like most salespeople you work out of your own home. Below is the geographic lay-out of the accounts you plan on seeing tomorrow. Design a sales route for seeing these 8 accounts using the largest angle method. A B C D E H Home G G

Largest Angle Method Preliminary Route A B C D E H F Home G

Largest Angle Method Final Solution A B C D E H G Home F

Alternative Solution Travel Time Minimized A B C D E H G F Home

Territory Management Key to Productivity Salespeople’s Time Wasters 1. Telephone interruptions 2. Drop-in visitors 3. Lack of self-discipline 4. Crises 5. Meetings 6. Lack of objectives, priorities & deadlines 7. Indecision and Procrastination 8. Attempting too much at once 9. Leaving tasks unfinished 10. Unclear communication

Territory Management Key to Productivity Sales Management Guidelines for Involvement in Territory Management 1. Be aware of your management style which with you and your salespeople are most comfortable and productive. 2. Consider experience & maturity of your sales force in deciding management style 3. Cold calling & prospecting are special cases --give extra attention when these are part of sales job

Territory Management Key to Productivity Sales Concentration % Total Sales 100 80 60 40 20 0 Top Source: SMM, Jan. 90, p. 40 Top 10% Top 20% Top 50%

Personal Selling Sample Prospect Profile - Characteristics • • • Multiple-practice physician office Internal medicine, family practice Surburban location New practice -- less than 5 years Good credit history Currently purchases from a full-service distributor

Table 5 -1 Computing the Cost per Call for an Industrial Products Salesperson Compensation Salary, commisions, and bonus Fringe benefits (hospital, life insurance, social security) Direct Selling Expenses Automobile Lodging and meals Entertainment Communications Samples, promotional material Miscellaneous Total Direct Expenses Calls Per Year Total available days Less: Vacation Holidays Sickness Meetings Training Net Selling Days Average calls per day Total Calls per Year (205 X 3) Average Cost per Call ($90, 250/615) $60, 000 9000 7000 5250 2250 3500 1750 1500 $69, 000 21, 250 $90, 250 260 days 10 days 5 days 18 days 12 days 55 days 205 days 3 calls 615 calls $146. 75

Table 5 -2 Selected Statistics on Cost per Call and Number of Calls Needed to Close a Sale Source: Dartnell Corporation, 25 th Survey of Sales Force Compensation.

Customer Break-even Analysis Average Sales Volume Per Month $9, 784 $8, 153 C $6, 522 $4, 891 $3, 261 A $1, 630 B 1 2 3 4 5 6 Number of Sales Calls Per Month