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SALES FORCEEFFECTIVENESS MANAGEMENTAccelerate Sales Force Productivity and Improve Your Sales Results by Aligning Sales Activities with Company Objectives

Origin Source by David CichelliSenior Vice President The Alexander Group, Inc.Author of ‘Compensating the Sales Force’

2

VisiVisi PramudiaPramudia““FUNFUNtastictastic Enthusiasms to you!Enthusiasms to you!””

http://http://visipramudia.wordpress.comvisipramudia.wordpress.com

Comprehensive Framework for Sales GrowthComprehensive Framework for Sales Growth

Sales Management System

1Sales Segments

& Objectives 2Coverage

Model 3SalesProcess 4Job Design

&Organization

Structure 5ResourceDeployment 6Sales Talent

&Supervision 7Performance

Metrics 8Quotas&

SalesCompensation

Strategy Structure Management

S A L E S O P E R T I O N S A N D T E C H N O L O G I E S

3



Predictable Pattern of Business GrowthPredictable Pattern of Business Growth

Base

Low

High

Phase IStart-Up

Phase IIVolumeGrowth

Phase IIIRe-

Evaluation

Phase IVOptimization

Grow

GrowReally Fast

Grow; KeepCustomers

Launch NewProducts

ControlPricing Reduce

Cost

Re-ThinkProduct & Market

Strategy

Reposition

GrowSelect

Markets

Top Line Growth

• Territory Sizing• Quotas

Revenue Mgt

• Get New Customers

• Keep Customers• New Products

Price Mgt

• Protect Base• Price Mgt• Reduce Costs

Segment Gowth

• New Value Proposition

• New Markets• Specialization

Objectives

IssuesSales

Growth

4



Success Can Lead to ObsolescenceSuccess Can Lead to Obsolescence

Business Strategy

Start-Up

Any Business

Marketing Strategy One Product

SalesStrategy Survive

Obsolescence

Obsolescence

Volume Growth

More Business

Big Market

Lower Costs

Obsolescence

Obsolescence

Re-Evaluation

What Business?

Many Products/Markets

Hold Share

Obsolescence

Obsolescence

Optimization

CertainBusiness

SegmentManagement

Optimize forReturns

Obsolescence

Obsolescence

SBUs

InsufficientCustomerCoverage

InsufficientCustomerCoverage

Failure toSupport Multi-

Product Strategy

Failure toSupport Multi-

Product Strategy

Price ErosionPrice ErosionToo ManyDissimilar

Products andCustomers

Too ManyDissimilar

Products andCustomers

Phase IStart-Up

Phase IIVolumeGrowth

Phase IIIRe-

Evaluation

Phase IVOptimization

5



Dimensions of Excellence by PhaseDimensions of Excellence by Phase

Business Strategy

Start-Up

Any Business

Marketing Strategy One Product

SalesStrategy Survive

Transformation

Transformation

Volume Growth

More Business

Big Market

Lower CostsTransform

ationTransform

ation

Re-Evaluation

What Business?

Many Products/Markets

Hold Share

Transformation

Transformation

Optimization

CertainBusiness

SegmentManagement

Optimize forReturns

RecruitingOn-boardingMessagingExecutingTesting

RecruitingOn-boardingMessagingExecutingTesting

Acct StratificationMultiple Messages

Acct Mgt SkillsHunters

New ProductsMarket Share

Acct StratificationMultiple Messages

Acct Mgt SkillsHunters

New ProductsMarket Share

Customer SegmentsMultiple Channels

Sales SpecializationRules of EngagementMargin Maintenance

Customer De-selectionProductivity

Customer SegmentsMultiple Channels

Sales SpecializationRules of EngagementMargin Maintenance

Customer De-selectionProductivity

Fewer SegmentsSimpler Channels

Intense Customer FocusHigh Productivity

Low ChurnGood Margin/ Cash Flow

Fewer SegmentsSimpler Channels

Intense Customer FocusHigh Productivity

Low ChurnGood Margin/ Cash Flow

Phase I Phase II Phase III Phase IV

6



Destination: Sales Excellence - ThemesDestination: Sales Excellence - Themes

Start-Up Volume Growth Re-Evaluation OptimizationPhase I Phase II Phase III Phase IV

New MarketAccess SellingNew MarketNew Market

Access SellingAccess Selling

Successful GrowthScaling

Successful GrowthSuccessful GrowthScalingScaling

Core-Market SellingProficiency

CoreCore--Market SellingMarket SellingProficiencyProficiency

Multi Segment/ Solution SellingMulti Segment/ Multi Segment/ Solution SellingSolution Selling


Sales Segment & Objectives


1Sales Segments



&Organization



Metrics 8Quotas&

SalesCompensation



8



Sales SegmentsSales Segments

Sales must do marketing…

Sales Segments

Product

Customer Channel

… to organize selling resources.

9



Principles of Effective Segmentation and TargetingPrinciples of Effective Segmentation and Targeting

• Actionable: determines sales strategy, coverage and account targeting

• Simple: easy to communicate and understand• Customer focused: based on buying process and

buyer needs• Sales potential focused: customers and prospects

grouped on potential and current revenue• Ranked by attractiveness: segments are evaluated

and ranked in term of buying processes revenue potential, profitability and past success

10



Segmentation and Targeting ComponentsSegmentation and Targeting Components

How should the market be divided into meaningful, actionable groups and which should be targeted?

Buyer ProfileBuyer Profile Identification of significant differences in how buyers make their purchase decisions

Buyer GroupAttractivenessBuyer Group

AttractivenessDetermination of attractiveness of buyer groups based on current and potential revenue, profitability, strategic fit, operational fit, loyalty, etc.

Targeted andActionable Segments

Targeted andActionable Segments

• Matching segment buying criteria (based on how buyers want to buy) with the attractiveness of segment to the company

• Segments must be identifiable and actionable

Value propositionValue proposition• Alignment of value proposition with buying preferences• Delivery of a unique value proposition


Coverage Model


1Sales Segments



&Organization



Metrics 8Quotas&

SalesCompensation



12



Channel Strategy EvolvesChannel Strategy EvolvesBusiness Growth Phase

Start-Up Volume Growth Re-Evaluation OptimizationI II III IV

SBUsV

Deployment Model

Geographic-based coverage

Customer Size/ Value

Specialization

Vertical Market and Product

Specialization

•Channel•Specialization•Channel Bus Unit

•Field Bus Unit•Market Bus Unit

•Channel•Specialization•Channel Bus Unit

•Field Bus Unit•Market Bus Unit

Strategic Business Unit

Action Plan Account Stratification

• Size• Value

Account Segmentation

• Product• Industry• Channel

Buyer Segmentation

• New Access• New Buyer

Access

Market Segmentation

• New Market Access

13



Illustrative Sales Coverage ModelIllustrative Sales Coverage Model

Coverage Resource Coverage Comments

Worldwide AccountsTop 500 Accounts: Over S10M in Potential Annual Revenue

Team Selling Model

Corporate Accounts Local Sales Through Central AM

Major Accounts Channel Management

Field Sales Accounts Geographic Sales Coverage Channel Support

Inside Sales Accounts Assigned AccountsField TeamingOutbound/ Inbound

Inbound only Customer Service

E Commerce E-Channel


Sales Process


1Sales Segments



&Organization



Metrics 8Quotas&

SalesCompensation



15



Types of SellingTypes of Selling

• Select accounts• Narrowly defined• Large account list• Geographic• GeographicDeployment

• Engages in joint planning with customer; lead their thinking

• Establishes exclusive partnership with customer

• Value added through application expertise

• Justifies higher prices through superior product and/or ability to meet “needs”

• Price/ performance comparison

Selling Technique

• Articulates vision regarding where industry and customer are going and can go in the future

• Guides customer toward solutions with long term implications

• Focuses on economics of customer’s operation

• Proactively identifies ways to improve business results

• Sell solutions that improve market share, profitability, customer retention, etc.

• Focuses on use of product in customer’s environment

• Engineers product to fit customer’s requirements

• Typically repetitive solutions to standard, recurring issues

• Differentiates on basis of product characteristics

• Mathes products to customer’s “needs”

• Overcomes objections

• Adds value through product knowledge

• Responds to RFPs• Submits bids• Differentiates

products based on delivery, price

Salesperson’s Activities

• Leads customer toward solutions that result in attainment of volume and profit goals

• Establishes and grows long-term relationships

• Meets growth goals in volume and profitability

• Maximizes gross margins

• Obtains/ retains target accounts

• Maximizes volume and price

• Achieves desired product mix

• Obtains “approved supplier” status

• Maximizes volume

Primary Objectives

“Visionary Selling”“Consultative selling”“Design-in selling”“Need satisfaction selling”

“Vending”Also Known As

Product FocusSelling

Feature/ BenefitSelling

ApplicationsSelling

SolutionSelling

ThoughtLeadership

Selling

16



Close/Fulfill

Identify Sales ProcessIdentify Sales Process

GenerateLead

QualifyLead

ConductNeeds

Analysis

DesignSolution

Propose/Negotiate

Steps of the Sales Process

Attrition (hit rates) 10 8 6 4 3 1

Effort (hours) 1.5 4 3 6 6 8

Total Effort (hours) 15 32 18 24 18 8 = 115

Duration 3,5 months

Avg. Sales Value $ 90K

Return on sales effort = $90,000/115 = $780/hour

How can we minimize attrition late in the sales process?How can we increase speed to close?How can we improve the close rate and pipeline yield?How can we increase transaction size?

17



Cross Industry BenchmarkCross Industry Benchmark

TotalTotalTimeTime

SellingSellingTimeTime

5050--60%60%

NonNon--SellingSellingTimeTime

4040--50%50%

OnOn--SiteSiteContact Contact

33%33%

OtherOtherSelling Selling

22%22%

ServiceService1010--20%20%

AdministrationAdministration1010--20%20%

TravelTravel1515--20%20%

World ClassWorld Class

18



Sales Personnel Survey - BenchmarkSales Personnel Survey - Benchmark

8%

12%18%

15%

9%

9%

10%

9%

7%

3%

Market Development/ Prospecting

Account/ Opprtunity Planning

Account Development

Opportunity Pursuit/ Close

Order Entry and Delivery

Implementation Problems

Customer Service

Admin. / Reporting

People Development

Travel and Other downtime

Sale

s Ti

me

Sale

s Ti

me

NonNon

-- Sal

es T

ime

Sale

s Ti

me


Job Design & Organization Structure


1Sales Segments



&Organization



Metrics 8Quotas&

SalesCompensation



20



Existing ADC North America Sales Force StructureExisting ADC North America Sales Force Structure

LargeAccounts

NationalAccounts

Conn

ectiv

ity

IP C

able

Wire

less

OtherAccounts

• Verizon• AT & T• Qwest• SBC• Bellsouth

• Sprint• Level 3• Cisco• Nortel• Others

VPVPVP

WirelineDedicated Resource

WirelineDedicated Resource Connectivity

Dedicated Resource

ConnectivityDedicated Resource Services

Dedicated Resource

ServicesDedicated Resource

Field SalesDirector

Field SalesDirector

Sr. AMSr. AM

AMAM

AMAMFor Each Large Account

VPVPVP

HQHQ OEMOEM EntertainmentEntertainment GOVGOV

Sr. AMSr. AM

AMAM

AMAM

Sr. AMSr. AM

AMAM

AMAM

Sr. AMSr. AM

AMAM

AMAM

Sr. AMSr. AM

AMAM

AMAM

VP ConnectivityVP Connectivity VP IP CableVP IP Cable VP WirelessVP Wireless

Sr. AMSr. AM

AMAM

AMAM

Sr. AMSr. AM

AMAM

AMAM

Sr. AMSr. AM

AMAM

AMAM


Resource Deployment


1Sales Segments



&Organization



Metrics 8Quotas&

SalesCompensation



22



Resource Development – 7 StepsResource Development – 7 Steps

Assign accounts to account managers:Industry/ account knowledge, skills experience

Step VII

Build territories/ segment of equitable size:Run the sales capacity model for all territories/ segments

Step VI

Refine sales capacity model:Based on market test

Step V

Develop resource deployment recommendations:Review for “reality check” with test market.

Step IV

Develop sales capacity model:Build model based on productivity benchmarks

Step III

Determine territory/ segment definition criteria:Consistent relationships, geographical deployment, match skills with opprtunity, coverage of accounts in multiple location, segment issues.

Step II

Determine the optimal territory/ segment size:Define the average anticipated capacity for each sales role

Step I


Sales Talent & Supervision


1Sales Segments



&Organization



Metrics 8Quotas&

SalesCompensation



24



Sales Talent & SupervisionSales Talent & Supervision

Competency ModelCompetency Model

Assessment ToolsAssessment Tools

Skill AssessmentsSkill Assessments(Implementation)(Implementation)

Training CurriculumTraining Curriculum

Ongoing DevelopmentOngoing DevelopmentPlanPlan


Performance Metric


1Sales Segments



&Organization



Metrics 8Quotas&

SalesCompensation



26



Return on Sales EffortReturn on Sales Effort

Close/Fulfill

GenerateLead

QualifyLead

ConductNeeds

Analysis

DesignSolution

Propose/Negotiate

Steps of the Sales Process

Attrition (hit rates) 10 8 6 4 3 1

Effort (hours) 1.5 4 3 6 6 8

Total Effort (hours) 15 32 18 24 18 8 = 115

Duration 3,5 months

Avg. Sales Value $ 90K

Return on sales effort = $90,000/115 = $780/hour


Sales Compensation


1Sales Segments



&Organization



Metrics 8Quotas&

SalesCompensation



28



Why Sales Compensation is Different…Why Sales Compensation is Different…

• Powerful and effective but noisy and difficult to manage• Derivative design process – matches unique job content• Multi-parties must be involved – sales, marketing, finance, HR

and IT• Best solution is a consensus• It produces positive results and sometimes unexpected negative

outcomes• Most litigated compensation program• Requires constant attention – communication, administration,

interpretation• Not an HR compensation program

29



Management: What Drives Sales?Management: What Drives Sales?

• Base Pay• Benefits Stock• Incentive Compensation

• Cash• Security Programs• Incentives

IV. Remuneration

• Career Progression• Recognition Programs• Training

• Individual Goals and Needs

• Personal Achievement Programs

• Affiliation/ Team

III. Self-Accomplishment

• Appraisal Process• Program Execution• Reporting

• Measurement• Engagement Management

II. Accountability

• Speeches• Learning• Orientation• Leadership Conferences

• Corporate Vision• Communication

I. Leadership

MethodsDescriptionFactor

30



Types of Variable Compensation PlansTypes of Variable Compensation Plans

TargetTargetTotalTotal

CompensationCompensation

Types of Variable Compensation PlansTypes of Variable Compensation Plans

GainsharingGainsharing AddAdd--OnOn 2x Capped2x Capped 3x Uncapped3x UncappedStraightStraight

CommissionCommission

31



Two Categories of Sales JobsTwo Categories of Sales Jobs

IncomeProducers

SalesRepresentatives

Value Created by

Account Owner

Basis of Pay

Examples

Seller(Relationship)

Sales Person

Percent of Revenue(Unlimited)

Real EstateTraders

Independent AgentsMulti Tier Marketing

Company(Product/Services)

Company

Manage to Target Pay

Territory RepAccount ManagerChanel Manager

Product Specialist

32



Market Pay – Volume Versus EarningsMarket Pay – Volume Versus Earnings

HighHigh

LowLow

WW--2 Earnings2 Earnings

LowLow HighHigh

Sales RepresentativesSales Representatives

Income ProducersIncome Producers

Sales Territory VolumeSales Territory Volume

33



Managing Pay – Sales RepresentativesManaging Pay – Sales Representatives

HighHigh

LowLow

WW--2 Earnings2 Earnings

LowLow HighHigh

Sales RepresentativesSales Representatives

Sales Territory VolumeSales Territory Volume

Territory RepresentativeTerritory Representative

Senior Sales RepresentativeSenior Sales Representative

AccountAccount ExecutivesExecutivesSenior Account ManagerSenior Account Manager

Global Account ManagerGlobal Account Manager

34



Job Categories – and Pay PlansJob Categories – and Pay Plans

Income ProducersIncome Producers • Own the accounts – Portable• Relationship Selling

• Straight Commission• Target Rate - Unlimited

Sales RepresentativesSales Representatives • Company Accounts• Promote Solution/ Value

• Bonus Plus Incentive• Target Pay – Managed• Significant Risk

Sales SupportSales Support • Support Company’s Sellers• Extend Solution/ Value

• Base Plus Incentive• Target Pay – Managed• Moderate Risk

35



Target Pay – Target Cash CompensationTarget Pay – Target Cash Compensation

Consistent with your company’s:• Labor Market Rates• Job Scope• Budget Dollars• Internal Equity

Target Total Cash Compensation is the preferred annual pay for achieving goal: lower pay for less than goal; higher pay for exceeding goal.

Target Total Cash Compensation is the preferred annual pay for achieving goal: lower pay for less than goal; higher pay for exceeding goal.

36



Manage All CompensationManage All Compensation

SalesExpenses

Benefits

Salary

TargetIncentive

Pay

OvertargetIncentive

Pay

Contests

Recognition

Reimbursement

Security Needs

Retention/ Non-Sales Pay

At Risk Pay

Outstanding Pay

Focused Efforts

Intrinsic RewardsSpecial Compensation

Sales Compensation

Fixed Compensation

Performance- BasedCompensation

37



Upside EarningsUpside Earnings

9070

50

1030

50

Extent of Upside PotentialExtent of Upside PotentialLowLow HighHigh

120

0%0%

100%100%

TargetTarget

Targ

et C

ompe

nsat

ion

Targ

et C

ompe

nsat

ion

Influence of Influence of SalespersonSalesperson

160200

38



Performance MeasuresPerformance Measures

AccountableAssigned to a Salesperson

ObservableMeasurableAccurateReportable

AccountableAccountableAssigned to a Salesperson

ObservableObservableMeasurableAccurateReportable

Bad MeasuresCorporate Galactic MeasuresCompliance MeasuresInput MeasuresCant Measure Measures

Bad MeasuresBad MeasuresCorporate Galactic MeasuresCompliance MeasuresInput MeasuresCant Measure Measures

RequiredRequired

AvoidAvoid

39



Types of Performance MeasuresTypes of Performance Measures

Sales Revenue: purchase, continuing, estimatedProfit: gross margin, contribution marginItems: units, contracts, design wins

Sales Revenue: Sales Revenue: purchase, continuing, estimatedProfit: Profit: gross margin, contribution marginItems:Items: units, contracts, design wins

Volume ProductionVolume Production

Products: balance, mix, launch, cross-sell, packagesAccounts: new, retention, penetration, growthOrders: close rate, size, length, receivablePrice Management: discount, rebates, realization, percent

Products: Products: balance, mix, launch, cross-sell, packagesAccounts: Accounts: new, retention, penetration, growthOrders:Orders: close rate, size, length, receivablePrice Management: Price Management: discount, rebates, realization, percent

Sales EffectivenessSales Effectiveness

Sales Satisfaction: surveys, complaintsLoyalty: persistency, share

Sales Satisfaction: Sales Satisfaction: surveys, complaintsLoyalty: Loyalty: persistency, shareCustomer ImpactCustomer Impact

Productivity: cost per order dollar, sales loadingChannels: partner success, outlet performancePersonnel: balance performance, turnover, ramp rate

Productivity: Productivity: cost per order dollar, sales loadingChannels: Channels: partner success, outlet performancePersonnelPersonnel: balance performance, turnover, ramp rate

Resource UseResource Use

40



Quota DifficultyQuota Difficulty

30% to 40%of Sellers

60% to 70%of Sellers

Bottom 10%of Sellers

Top 10%of Sellers

Minimum Target100%

Excellence

Quota Performance

# of

Sal

espe

rson

41



Formula Types for Sales RepsFormula Types for Sales Reps

Target Incentive Target Incentive ––Commission FormulaCommission Formula

Target Incentive Target Incentive ––Bonus FormulaBonus Formula

TI - CFTI - CF

TI - BFTI - BF

Target Earning are Pre-EstablishedExpected Volume is Known – Same for All TerritoriesCommission Formula Rate – Pay Percent of Production

to Achieve and Exceed Target Earnings

Target Earning are Pre-EstablishedExpected Volume is Known – Same for All TerritoriesCommission Formula Rate – Pay Percent of Production

to Achieve and Exceed Target Earnings

Target Earning are Pre-EstablishedExpected Volume is Known – Differs by TerritoriesBonus Formula Rate – Pay Percent of Target Pay for

Percent of Goal Achievement to Achieve and Exceed Target Earnings

Target Earning are Pre-EstablishedExpected Volume is Known – Differs by TerritoriesBonus Formula Rate – Pay Percent of Target Pay for

Percent of Goal Achievement to Achieve and Exceed Target Earnings

42



Flat CommissionFlat Commission

Features

Illustration

Comments

Pay Mix: 0/100Payment for each sale: sales dollars, gross margin, units

Flat CommissionRate on Revenue

3%

Commission Graph

Commission Dollars

Sales Volume

Simple, easy to understandSeller owns customersEarnings will vary substantially

3%

43



Ramped CommissionRamped Commission

Features

Illustration

Comments

Pay Mix: 0/100Payment for each sale: sales dollars, gross margin, units

CommissionVolume RateTo $3M 2%$3M & Over 4%

Commission Graph

Commission Dollars

Sales Volume

Simple, easy to understandSeller owns customersPremium paid for high sellers

2%

4%

44



Bonus - StepsBonus - Steps

Features

Illustration

Comments

Pay Mix: 80/20Territories: dissimilar sizeEarnings: equalized

I. Base Salary

II. Bonus Schedule

% to % ofQuota Base<85% 0%85% 5%90% 15%100% 25%105% 40%110% 55%

>115% 75%

(% of Base Salary)Bonus Schedule

Basis Choices: base salary, midpoint, target incentiveWeakness: steps

45



Bonus – Dollar ScheduleBonus – Dollar Schedule

Features

Illustration

Comments

Pay Mix: 75/25Territories: dissimilar sizeEarnings: equalized

I. Base Salary

II. Dollar Schedule

% to DollarQuota Amt<96% $1,50098% $3,000

100% $5,000102% $7,500104% $10,000106% $12,500

>108% $15,000

Dollar Payouts

Basis Choices: base salary, midpoint, target incentiveWeakness: steps

46



Bonus – Supervisor MatrixBonus – Supervisor Matrix

Features

Illustration

Comments

Pay Mix: 75/25; base plus bonus matrixMeasures: volume and number of reps achieving goalLinked: both measures must be excellent payout

I. Base Salary

II. Bonus Matrix

Effective: strong visual impact of results and pay-outApplication: channel manager, product overlay specialistWeakness: double threshold and cap

Excellence 75 100 125 150 200 250 30058 83 108 133 172 211 25042 67 92 117 144 172 200

Volume Target 25 50 75 100 117 133 15017 36 56 75 92 108 1258 22 36 50 67 83 100

Treshold 0 8 17 25 42 58 75Treshold Target Excellence

Bonus Matrix (% of Target Incentive)

# of Reps Reaching Goal


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