districts, some knowledge of competitive activity, and data on sales, sales costs and sales activities that is readily available in most companies. • Considerations for implementation The scientific approaches ensure that the decision of sales force size and allocation is based on facts, that assumptions are made explicit and can be tested, and that the decision will have the highest quality possible. However as no approach is perfect it is advisable to use a combination of approaches to balance their respective strengths and weaknesses. For example a scientific approach combined with a simpler approach as a reality check. Balance number of sales representatives with number of people in sales supporting roles A sales person needs support to be effective. This is especially true in complex industrial sales where many companies have specialized roles for example for technical sales and pre-sales engineering. When managers change the number of sales representatives they also need to scale the number of people in supporting roles accordingly. Take caution as the optimal ratio of sales to sales support people can vary across segments depending on how customers buy.
“The scientific approaches ensure that the decision of sales force size and allocation is based on facts” 46 |
Where in the business cycle are you? Market potential is a key piece of information in several of the sizing approaches. The problem is that potential can vary greatly over the business cycle. To determine the optimal size of a sales force size based on potential at the top of the business cycle can greatly overestimate the optimal size and profit potential. Sales resources are expensive to attract and train and having to let go of them due to an error in estimated potential can be a costly mistake. This can vary depending on the economics of the business but as a conservative rule of thumb we recommend companies to size their sales forces using a potential at approximately 25 percent from the bottom level towards the top level of the business cycle. What is your time perspective? The optimal size of the sales force depends on which time perspective you adopt. This is simply because spending on sales resources is an investment that takes time to bear fruit – new or reallocated sales people will need time to develop business with their new customers and they will need time to learn. During that time they will not be as effective as the current sales people are, but the company will have the full cost (except bonuses) from day one. Manage risk A company we recently worked with discovered they were targeting too many new segments, running the risk of not gaining critical mass in any of them, and facing a great risk if their sales