Territory Management Key to Productivity

1. Territory ManagementKey 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???

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

3. Territory ManagementKey to Productivity Breakeven Sales Volume (Cost per Call) x (Number of Calls to Close) Sales Calls as a % of Sales

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

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

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

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

8. Territory ManagementKey to Productivity IndustryBreakeven Business Services 1,096.37 Chemicals 15,474.67 Construction 9,730.00 Electronics 433.25 Food Products 6,580.00 Instruments 11,629.13 Machinery 1,580.77 Office Equipment 616.67 Printing/Publshing 3,811.61 Rubber/Plastics 41,662.14

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

10. Territory ManagementKey to Productivity Minimum Account Size Exercise: Problem 1 $34.50 x 4 .10 = $1.38 Smallest Customer Orders 1 call per month $345.00 2 calls per month $690.00 3 calls per month $1,035.00 Opportunity Cost: Low Volume vs. High Volume Customer

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

12. Territory ManagementKey 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.

13. Territory ManagementKey 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?

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

15. PersonalSelling 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

16. PersonalSelling 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

17. Productivity Crisis Real Annual Growth Nominal Annual Growth Sales Per Salesperson 1977 1987 Overall Average $879,321 $1,499,8705.5% -0.9% Selected Industries: Drugs/Medicine $ 445,900 $2,460,000 18.6% 11.4% Paper 1,392,500 6,250,000 16.2 9.1 Services 158,100 532,118 12.9 6.0 Chemicals 490,000 1,357,462 10.7 4.0 Electronics 665,400 1,880,769 10.9 4.2 Building Materials 1,650,400 1,681,667 0.2 -5.9 Glass Products 1,390,000 512,500 -9.5 -15.0 Tools/Hardware 908,300 1,312,500 3.7 2.6

18. 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?

19. ABC Account Classification If equal calls per customer: % of % of ACCOUNT No. of Total Sales Total Total calls Sales ($) CLASSI- Accts. Accts. (000) Sales Per Classif. Per Call FICATION (1) (2) (3) (4) (5) (6) A 21 15% $910 65% 105 $8,667 B 28 20 280 20 140 2,000 C 91 65 210 15 455462 Totals 140 100% $1,400 100% 700 $2,000 (Avg)

20. 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 Sales Last Year Top 10 Accounts $150,000 Next 10 best accounts 56,250 Next 10 best accounts 55,500 Next 20 best accounts 37,500 Next 20 best accounts 37,000 Next 20 best accounts 18,750 Last 20 accounts 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?

21. TIME ALLOCATION ANALYSIS Number Total Percent Percent Sales of Sales of of per Accounts Volume Sales Accounts Account 10 $150,000 40.5% 9% $15,000 10 56,250 15.2 9 5,625 10 55,500 15.0 9 5,550 20 37,500 10.1 18 1,875 20 37,000 10.0 18 1,850 20 18,750 5.1 18 938 20 15,000 4.1 18 750 110 $370,000 100.0 99 $ 3,364 Total No. Percent Sales Accounts Call Pattern of Calls of Calls Per Call Top 10 Every other week 260 29.6 $576.92 Next 10 Once a month 120 13.6 468.75 Next 10 Once a month 120 13.6 462.50 Next 20 About every 2 mos. 110 12.5 340.91 Next 20 About every 2 mos. 110 12.5 336.36 Next 20 Once a quarter 80 9.1 234.38 Last 20 Once a quarter 80 9.1 187.50 880 100.0 $420.45

22. Competitive Position Strong Weak Segment 1 Attractiveness: Accounts are very attractive because they offer high opportunity and sales organization has strong competitive position. Selling Effort Strategy: Accounts should receive a heavy investment of sales resources to take advantage of opportunity and maintain/improve competitive position. Segment 2 Attractiveness: 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. High Segment 3 Attractiveness: 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. Segment 4 Attractiveness: 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. Low

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

24. Competitive Positition Weak Segment 2 Attractiveness: 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. High

25. Competitive Positition Strong Segment 3 Attractiveness: 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. Low

26. Competitive Positition Weak Segment 4 Attractiveness: 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. Low

27. 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 Competition Sales Account Opportunity Position Calls Sales Designer Depot High Strong 24 $60,000 Fashion Conspiracy High Strong 22 $57,000 Clothes Time High Weak 15 $29,500 Moda Fashion Low Weak 15 $20,000 Peachtree Low Weak 17 $21,000 Tomorrow Fashion High Weak 18 $36,000 Reprise Low Strong 24 $34,250 Plus Fashions Low Strong 22 $35,000 Casual Girls High Weak 10 $14,000 Another Season Low Strong 21 $37,000 Bandiera’s Low Weak 15 $20,000 Sports Locker High Strong 20 $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.

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

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

30. Territory ManagementKey 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

31. Territory ManagementKey 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

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

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

34. 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

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

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

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

38. 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

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

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

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

42. Territory ManagementKey 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

43. Territory ManagementKey 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.

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

45. PersonalSelling 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

46. Table 5-1 Computing the Cost per Call for an Industrial Products Salesperson Compensation Salary, commisions, and bonus $60,000 Fringe benefits (hospital, life insurance, social security) 9000 $69,000 Direct Selling Expenses Automobile 7000 Lodging and meals 5250 Entertainment 2250 Communications 3500 Samples, promotional material 1750 Miscellaneous 1500 21,250 Total Direct Expenses $90,250 Calls Per Year Total available days 260 days Less: Vacation 10 days Holidays 10 days Sickness 5 days Meetings 18 days Training 12 days 55 days Net Selling Days 205 days Average calls per day 3 calls Total Calls per Year (205 X 3) 615 calls Average Cost per Call ($90,250/615) $146.75

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

48. 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