Creating Sales Force Structure, Territories, and Goals
Creating the proper sales force structure, territoires, and goals leads to customer, sales force and firm satisfaction.
LEARNING OBJECTIVES
Explain the components of and rationale behind sales force, territory and sales goal creation
KEY TAKEAWAYS
Key Points
- The sales force structure will guide the sales force and impact the company’s bottom line.
- Sales territories are the customer groups or geographic districts for which individual sales people or sales teams hold responsibility.
- The purpose of a sales force coverage (or sales territory) metric is to create balanced sales territories.
- When setting sale quotas, sales managers should compare results to past performance, not forecasts.
Key Terms
- buying power: purchasing power
- quota: A prescribed number or percentage that may serve as, for example, a maximum, a minimum, or a goal.
Introduction
Sales operations are a set of business activities and processes that help a sales organization run effectively, efficiently, and in support of business strategies and objectives. Sales operations may also be referred to as sales operations, sales support, or business operations. The set of sales operations activities vary from company to company but often include these nine categories:
- Sales strategy: design, planning, execution;
- Measurement of results: reporting, analytics and sales data;
- Compensation, sales quota, policies;
- Technology and tools, including CRM;
- Training and sales communication;
- Sales territory design and optimization;
- Contests/spiffs;
- Lead generation/sales programs; and
- Customer segmentation.
Creating The Sales Force Structure
How will the sales process be structured? The answer to that question, an important one, depends on the company’s strategy. The resulting structure will guide the sales force and their actions and will, therefore, impact the company’s bottom line.
When developing the sales force structure, sales managers must:
- Figure out the right mix of generalists, product, market, or activity specialist with the objective of balancing sales force productivity. What is the right mix? That depends on the company and it’s offerings.
- Design a reporting structure that makes it easy to both coordinate and control the sales process and the activities of the salespeople.
- Help the sales people achieve their goals (and reduce stress) by providing training, coaching, incentives, information support, and performance management.
Designing Territories
Sales territories are the customer groups or geographic districts for which individual sales people or sales teams hold responsibility. Territories can be defined on the basis of geography, sales potential, history, or a combination of factors. Companies strive to balance their territories, because this can reduce costs and increase sales.
Purpose
The purpose of a sales force coverage (or sales territory) metric is to create balanced sales territories.
There are a number of ways to analyze territories. The most common approach is to assess them based on their potential or size.
If there is a large difference between territories, or they change over time, sales people may have either too much or not enough work. Too much work can cause the sales person to neglect some customers, while too little could lead to over-servicing the customers.
Both actions can cost the firm revenue.
In addition, if the sales person thinks that the territory distribution is unfair, they may leave and wind up working for a competitor.
So, balanced territory allocation is important to keep customers, sales people, and the firm, as a whole, satisfied.
“Sales potential forecast” can be used to determine sales targets and to help identify territories worthy of an allocation of limited resources.
A sales potential forecast is a forecast of the number of prospects and their buying power. It does not assess the likelihood of converting “potential” accounts.
Sales potential can be represented in a number of ways. Of these, the most basic is population (i.e., the number of potential accounts in a territory). In a survey of nearly 200 senior marketing managers, 62% responded that they found the “sales potential forecast” metric very useful.
Construction
Before they even begin to design new territories, a sales force manager should determine the workloads of all members of the sales team.
The workload for a territory can be calculated as follows:
Workload (#) = [Current accounts (#) * Average time to service an active account (#)] + [Prospects (#) * Time spent trying to convert a prospect into an active account (#)]
They should also determine the sales potential in a particular territory.
The sales potential in a territory can be determined as follows:
Sales potential ($) = Number of possible accounts (#) x Buying power ($)
A third metric that is just as important as the other two is to compare territories. Managers can look at the respective size of each territory or, more specifically, the travel time (the amount of time needed to reach customers and potential customers).
Creating Sales Quotas
Sales goals are commonly stated in terms of quotas. A sales quota is the minimum sales goal for a set time span. A sales quota may be minimum amount of dollars (monetary value) or product sold (volume). Sales quotas may also be for sales activity, such as number of calls per day. The time span could be set for the day, week, month, or fiscal quarter or year.
Management usually sets the sales quota and the sales territory, but it’s not easy. When setting quotas, successful sales managers tend to:
- Ask for less than they think the sales person can deliver;
- Compare results to past performance, not forecasts; and
- Ensure that the compensation scheme allows the sales force to make money when the company does.
