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decision makers, decision, management, magazine, books, articles, research, business

Issue No:06/03/2

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The sales force is the major driver of revenue in most organizations. Yet, historically, it has been among the most neglected areas when it comes to using objective analysis and modeling solutions for improving its effectiveness. But all this is changing. Over the last few years, progressive companies have accrued tremendous benefits through the use of sales force planning solutions.

Some of the areas where modeling solutions are being used to increase sales force effectiveness are:

  1. Sales force sizing: Determine the optimal size of the sales force based on the market/product segments, current/potential demand, carryover and multiyear contribution effects, territory size, etc.
  2. Sales force effort/resource allocation: Allocate sales force effort to market segments and products.
  3. Sales force routing: Determine the lowest cost route/travel plan for sales personnel based on their travel plan and travel cost/allowance structures.
  4. Sales territory design/redesign: Assign accounts/geographic units (territories) to sales people.
  5. Compensation structure of sales personnel: Design the best compensation structure with fixed and variable pay components.

Sales force models can provide deep insights into the impact of various decisions on revenue and profitability

  • How much is sales of a product/category likely to increase by increasing the sales force effort by x%?
  • How strong are the carryover effects for this a category? How much will last years' sales effort contribute to current sales in a territory?
  • What are the risks associated with increasing or decreasing the size of the sales force? What are the likely short term/long term effects?
  • How should sales territories be realigned to ensure maximum coverage and sales?
  • How many products/categories should a sales person handle? What is the optimal territory size a sales person should cover?
  • How should a sales person design his travel or tour plan to minimize costs and maximize coverage?
  • How much time should he spend at each location? How often should he visit a particular location?
  • How should the compensation of a sales person be structured? For a new product? For a mature product? For fast and slow moving products?

Most sales force modeling exercises include both descriptive and normative models. Descriptive models characterize how markets react to various sales force decisions while normative models are optimizers that search the solution space to find the best sales force decision.

A typical sales force modeling project consists of the following steps:

  1. Finalize scope and objectives
  2. Build initial model based on content insights, domain expertise and interaction with sales personnel
  3. Identify, collect and refine required data
  4. Execute model on historical data and validate results with users
  5. Fine-tune model
  6. Implement model and train users

End-users need to be involved along each step of the model-building and implementation process. Models can provide the insights, but it is people who make the decisions.

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