SALES FORCE SIZING &
PORTFOLIO OPTIMIZATION
David Wood, PhD, Senior Principal
Rajnish Kumar, Senior Manager
Today’s Webinar as part of a series
All PMSA Webinars available via
http://www.pmsa.net/conferences/webinar
• Promotion Response Modeling
9/16/2015
• SALES FORCE SIZING & PORTFOLIO OPTIMIZATION
Today
• Territory Alignments & People Placement
10/14/2015
• Targeting & Call Planning
10/28/2015
• Incentive Compensation
11/11/2015
All Webinars at 12:00 noon Eastern time
2
Copyright © 2015 Axtria, Inc. All Rights Reserved.
Natural annual rhythms in sales planning “seasons”
Sales Management / Sales Operations Workload
Today’s Webinar
focuses on this
dimension
Assumes annual size, alignment, goal processes
3
Copyright © 2015 Axtria, Inc. All Rights Reserved.
Slide 3
Today’s discussion has the following objectives:

Present classic approaches to sales force sizing
o
o
What are the advantages and limitations ?
When appropriate to use ?

Share illustrative case studies

Answer your questions
4
Copyright © 2015 Axtria, Inc. All Rights Reserved.
Slide 4
Sales force sizing – typical questions

How many sales people do we need ?

…by type of sales resource ?

What will sales and profits be, given various sales force options ?

How do we allocate reps ? … across product lines ? … geography ?

What is the incremental ROI of additional (or fewer) reps?
5
Copyright © 2015 Axtria, Inc. All Rights Reserved.
Slide 5
Go-to-market strategy – key questions
What Customers?
Customer
Universe
Customer
Segmentation
How Approach Market?
What Work?
Role Definitions
• Direct / indirect / hybrid
• Inside / outside
• Hunter / skinner / farmer
Activities by
Segment
Workload
Capacity
Workload by
Segment
Targeting /
Reach
Go-to-Market
Strategy
Sales Force
Sizing
Staff by Whom?
Resourcing
Options
Tactical Call
Plan
6
Copyright © 2015 Axtria, Inc. All Rights Reserved.
Resource
Deployment
Deploy Where?
Slide 6
Important Criteria

Time: how long does it take to conduct the analysis ?

Data: are the underlying data readily available ? … are the inputs / assumptions
easy to get ?

Complexity: how difficult is the ‘math’ ?

Defensible: can this go to the CFO / CEO ?

Forecast: does it generate estimates of sales and profits ?

Implementable: can outputs be used to deploy, align, guide, and incent the
sales force ?

Cost: how costly is the approach ?

Long term impact: does the organization learn / get better ?
7
Copyright © 2015 Axtria, Inc. All Rights Reserved.
Slide 7
Classic approaches to sales force sizing
Same as Last Year
Cost of Sales
Share of Voice
Workload Build-up
Affordable Coverage
Sales Response
8
Copyright © 2015 Axtria, Inc. All Rights Reserved.
Slide 8
Most common approaches – internally focused
Sales (in $mn)
Sales Rep (in nos.)
50
50
50
200
Same as
Last Year
150
100
Last Year
This Year
Sales
(in $mn)
Next Year
Sales Rep
(in nos.)
200
Cost of Sales
# Sales
(in $mn)
vs
# Sales Rep
150
100
75
50
Last Year
This Year
100
Next Year
9
Copyright © 2015 Axtria, Inc. All Rights Reserved.
Slide 9
Summary & Comparison
Criteria
 
Approach
Time
 Less is good       More is good   
Data
Complexity
Cost
Forecast
Defensible
Implement
able
L-T Impact
Same as
Last Year
Cost of
Sales
10
Copyright © 2015 Axtria, Inc. All Rights Reserved.
Slide 10
Summary & Comparison
Criteria
Approach
Time
Data
Complexity
Cost
Forecast
Defensible
Implement
able
L-T Impact
Same as
Last Year
Cost of
Sales
Good
So-So
Bad
11
Copyright © 2015 Axtria, Inc. All Rights Reserved.
Slide 11
Share of Voice – Example from Insurance (P&C
Commercial Lines)
Geo 9
Geo 8
Geo 7
Geo 6
Geo 5
Geo 4
Geo 3
Geo 2
Geo 1
Agency presence by
P&C carrier in
different markets
Source: P&C LOB, Axtria Agency Intelligence database
12
Copyright © 2015 Axtria, Inc. All Rights Reserved.
Slide 12
Workload Build-up Approach
Rep Capacity
1 # Days / Year
220
# Calls / Day
6
# Calls / Year
1,320
Assumptions
3 Reach
Customer Total #
2 Segment Prospects %
#
4 # Calls to Customer Quintile
5
4
3
2
1
A
1,000
80%
800
24
12
12
B
5,000
60%
3,000
12
8
4
C
12,000
60%
7,200
12
D
45,000
40% 18,000
4
Totals
63,000
46% 29,000 42,720 19,680
Quintile 5 = largest accounts; Quintile 1 = smallest
63%
8,320
6.3
14,400
10.9
4
23,040
17.5
2
21,600
16.4
67,360
51.0
29%
4
# Calls # FTEs
4,320
640
0
6%
1%
0%
5
13
Copyright © 2015 Axtria, Inc. All Rights Reserved.
Slide 13
Summary & Comparison
Criteria
 
Approach
Time
 Less is good       More is good   
Data
Complexity
Cost
Forecast
Defensible
Implement
able
L-T Impact
Same as
Last Year
Cost of
Sales
Share of
Voice
Workload
Build-up
14
Copyright © 2015 Axtria, Inc. All Rights Reserved.
Slide 14
Summary & Comparison
Criteria
Approach
Time
Data
Complexity
Cost
Forecast
Defensible
Implement
able
L-T Impact
Same as
Last Year
Cost of
Sales
Share of
Voice
Workload
Build-up
Good
15
So-So
Copyright © 2015 Axtria, Inc. All Rights Reserved.
Bad
Slide 15
Sales Force Sizing: Micro-economics 101
What happens when a territory goes vacant ?
Sales generated from effort this period have a lingering effect into future periods,
referred to as “carryover”
What happens when
a territory goes
vacant ?
Sales do not drop to $0,
due to “carryover”, brand
equity, advertising, etc.
T+1
T
16
Copyright © 2015 Axtria, Inc. All Rights Reserved.
Slide 16
Sales Force Sizing: Micro-economics 101
Are all sales ‘attributable’ to sales force effort in the same time period ?
No. Sales due to sales force effort vary by industry, market, product, marketing
spend, etc.
Sales
Due to
Effort
Sales
Due to
Effort (T)
Prior
Carryover
Prior
Carryover
Brand
Equity
Brand
Equity
(T+1)
Carryover
from T
T
T+1
T+2 …
17
Copyright © 2015 Axtria, Inc. All Rights Reserved.
Slide 17
Affordable Coverage Approach
Rep Capacity
# Days / Year
# Calls / Day
# Calls / Year
1 $ / Rep
Cost / Call
Customer
Segment
Assumptions
Financial Assumptions
2
220
6
3
1,320
$100,000
$76
4
Total #
Segment
Prospects % Sales
Sales Forecast
% Margin
50%
% Sales due to Effort
25%
% Carryover
75%
Discount Rate
10%
% Revenues in Quintile
4
3
2
5
50,000,000
1
A
1,000
20%
60%
20%
10%
7%
3%
100%
B
5,000
15%
60%
20%
10%
7%
3%
100%
C
12,000
20%
60%
20%
10%
7%
3%
100%
D
45,000
45%
60%
20%
10%
7%
3%
100%
Totals
63,000
Customer
Segment
A
B
C
D
Total #
Prospects
1,000
5,000
12,000
45,000
100%
5
5
Estimated $ Sales Per Customer
4
3
2
$ 6,000
$ 900
$ 500
$ 300
$ 2,000
$
300
$
167
$
100
$ 1,000
$
150
$
83
$
50
$
$
$
$
700
105
58
35
$
$
$
$
1
300
45
25
15
Quintile 5 = largest
accounts;
Quintile 1 = smallest
18
Copyright © 2015 Axtria, Inc. All Rights Reserved.
Slide 18
Affordable Coverage Approach
6
Customer
Segment
A
B
C
D
7
Customer
Segment
A
B
C
D
8
Customer
Segment
Estimated L-T Contribution per Customer
5
4
3
2
1
$ 1,610
$
242
$
134
$
81
$
$
$
$
537
81
45
27
$
$
$
$
268
40
22
13
$
$
$
$
188
28
16
9
$
$
$
$
81
12
7
4
Maximum Affordable Calls / Customer
5
4
3
2
1
21.3
3.2
1.8
1.1
3.5
0.5
0.3
0.2
2.5
0.4
0.2
0.1
Refined # Calls / Customer
4
3
2
5
A
B
C
D
7.1
1.1
0.6
0.4
12
4
4
2
Customer
Segment
5
A
B
C
D
2,400
4,000
9,600
18,000
8
2
2
4
4
1.1
0.2
0.1
0.1
1
4
Refined # Calls
3
2
1,600
800
800
2,000
4,800
- 19
- Reserved.
Copyright
© 2015 Axtria,
Inc. All Rights
Quintile 5 = largest accounts;
Quintile 1 = smallest
2
1
400
-
# Calls
6,000
6,000
14,400
18,000
# FTEs
4.5
4.5
10.9
13.6
Slide 19
9
Summary & Comparison
Criteria
 
Approach
Time
 Less is good       More is good   
Data
Complexity
Cost
Forecast
Same as Last Year
Cost of Sales
Share of Voice
Workload Build-up
Affordable
Coverage
20
Copyright © 2015 Axtria, Inc. All Rights Reserved.
Defensible
Implement
able
L-T Impact
Summary & Comparison
Criteria
Approach
Time
Data
Complexity
Cost
Forecast
Defensible
Implement
L-T Impact
Same as Last
Year
Cost of Sales
Share of
Voice
Workload
Build-up
Affordable
Coverage
Good
So-So
Bad
21
Copyright © 2015 Axtria, Inc. All Rights Reserved.
Slide 21
We’re going to take a little side trip into sales force “structure” considerations
What Customers?
Customer
Universe
Customer
Segmentation
How Approach Market?
What Work?
Role Definitions
• Direct / indirect / hybrid
• Inside / outside
• Hunter / skinner / farmer
Activities by
Segment
Workload
Capacity
Workload by
Segment
Targeting /
Reach
Go-to-Market
Strategy
Sales Force
Sizing
Staff by Whom?
Resourcing
Options
Tactical Call
Plan
22
Copyright © 2015 Axtria, Inc. All Rights Reserved.
Resource
Deployment
Deploy Where?
Slide 22
Approaches to sales force structure
1. Highly dependent on your specific situation, mandates, product portfolio, etc.
2. Very general considerations:
–
–
–
Consider targets you want to reach and roles required to sell to those targets
“Standard” office-based physician practices (retail prescribing) usually only
requires a “standard” rep
•
May be able to make secondary details in a single call (more on this later)
•
Probably only need to reach the prescribing physician, other office contacts
less important
Products with an “account selling model” (typically, any product that is dispensed
in the office (vaccines, infused products, etc.) will require a more complicated
selling process
•
Contacts and selling to other office staff (nurses, office manager, billing
coordinator) may be equally, or more, important than selling to the
physician(s)
•
Sale may depend on more than clinical efficacy (price, convenience,
company support) and may require a more complete skill set than a
“standard” office-rep
23
Copyright © 2015 Axtria, Inc. All Rights Reserved.
Approaches to sales force structure
2. Very general considerations (continued):
–
Hospital-based products typically require even more complex selling roles
•
Physicians, formulary committee, medical director, possibly CFO (depending
on product characteristics)
•
Higher skill, higher cost reps are commonly used
•
Note that the physician targets themselves frequently will have office-based
practices outside the hospital, and may be easier to reach in that setting.
You may want to plan on multiple reps (hospital, and office-based) both
reaching these targets in different settings.
–
IDNs / Major Health Systems almost always require a highly-skilled, highlyexperienced rep.
•
Significant interaction with non-medical personnel
•
Need ability to present a total picture of product advantages (clinical,
financial, company service etc.) to a wide variety of targets
24
Copyright © 2015 Axtria, Inc. All Rights Reserved.
Approaches to sales force structure
2. Very general considerations (continued)
–
Generally, giving reps fewer products to sell (as few as one) will increase product
focus and make it easier to incentivize reps.
•
Product effectiveness per call is likely to be high, and target selection is easy
–
However, it’s also highly inefficient
•
Most reps (in most situations) can deliver at least one additional “secondary”
detail in call
•
Giving the rep only one product to sell wastes that opportunity, and,
arguably, ignores up to 1/3 the total capacity of the sales force
–
Giving the reps multiple products to sell improves overall efficiency, but makes
target selection, call allocation, and incentive creation a bit more complex
25
Copyright © 2015 Axtria, Inc. All Rights Reserved.
Sales Force Sizing: Micro-economics 102
Additional investment yields diminishing returns
Ideally, we would like to add sales reps until the very last one covers their costs
… where marginal revenue equals marginal cost
$ Revenues
# Sales Reps
26
Copyright © 2015 Axtria, Inc. All Rights Reserved.
Slide 26
Assume you have response models showing how call
effort turns into sales for each product and customer
segment
 Assume single team with X number of reps
Response Curve – Brand A
 Calculate total available calls
 Calculate the “value” from each call at possible
product combinations. E.g.:
o Call A-B provides V1+V2 value
o Call A provides V2 value
o Call B provides V1 value
V2
Response Curve – Brand B

Assign the set of calls that provides maximum
value

Add up across all calls to arrive at scenario
values from X reps

Now do the same for varying numbers of reps
and compare the projected revenue and
profits.
V1
27
Copyright © 2015 Axtria, Inc. All Rights Reserved.
Assume you have response models showing how call
effort turns into sales for each product and customer
segment
Response Curve – Brand A
 Even a middle-sized problem (3 or 4 products, 2
sales forces, 100,000 possible targets) presents
literally millions of possible decisions to be
optimized.
V2
Response Curve – Brand B
V1
 Selecting the optimal set of all possible calls
across all possible targets and product
combinations can be . . . daunting
 Two major strategies:
 Linear programming solutions: a bit
complex to set up, and slightly limited in
how fully they can capture “reality” . . .
but very robust solutions that are always
optimal for the inputs.
 “Greedy” algorithms: select the “next best
thing to do” at ever step. These are
conceptually simpler, and more flexible in
what they can represent . . . but they have
known risks and can deliver up a
significantly sub-optimal solution under
28
certain conditions . . . so be careful
Copyright © 2015 Axtria, Inc. All Rights Reserved.
Sales response optimization
$$
ROI
Seeking
Revenue
Seeking
Sales Force Investment
29
Copyright © 2015 Axtria, Inc. All Rights Reserved.
Slide 29
Product & Target Overlap
One thing to consider as you develop a portfolio model: The sum of optimal calls
for any two products does not equal the total calls required for your sales force
to make
Brand A Targets = 78,000
Optimal PDEs: 1,000K
40,000
Brand B Targets = 61,000
Optimal PDEs: 400K
38,000
25,000
Target Overlap
30
Copyright © 2015 Axtria, Inc. All Rights Reserved.
Product & Target Overlap
The “ideal” situation is to have two (or even more) products that share a high
degree of target overlap (i.e., a target for one product is likely to be a target for
the others.
BUT . . . too much overlap is a problem, too . . . you may want to deliver
multiple primary details to the target to meet all products needs. If the count of
total desired primaries (across multiple products) exceeds the maximum number
of calls a rep can make, you have to either:
– Accept that you can’t make all the calls (product presentations) that you want
– Divide the products among multiple reps (multiple sales forces with varying
product portfolios) calling on the same doctor
• Multiple reps can almost always achieve a higher overall call rate to a specific
target (but two reps won’t necessarily double the total calls)
• Multiple reps may also distract / confuse the doctor and undermine other
aspects of the company’s strategy. This is not a decision to make lightly.
• Generally, it’s best if the multiple reps calling on the same doctor can be
differentiated in some way . . .by their lead product, by their role in serving
that office, etc.
31
Copyright © 2015 Axtria, Inc. All Rights Reserved.
Summary & Comparison
Criteria
 
Approach
Time
 Less is good       More is good   
Data
Complexity
Cost
Forecast
Same as Last Year
Cost of Sales
Share of Voice
Workload Build-up
Affordable
Coverage
Sales Response
32
Copyright © 2015 Axtria, Inc. All Rights Reserved.
Defensible
Implement
able
L-T Impact
Summary & Comparison
Criteria
Approach
Time
Data
Complexity
Cost
Forecast
Defensible
Implement
L-T Impact
Same as Last
Year
Cost of Sales
Share of
Voice
Workload
Build-up
Affordable
Coverage
Sales
Response
Good
So-So
Bad
33
Copyright © 2015 Axtria, Inc. All Rights Reserved.
Slide 33
When appropriate ?
Best Used When…
Approach
Same as Last Year
•
•
•
Recently conducted robust analysis
Markets are relatively stable
Costs must be ruthlessly controlled
Cost of Sales
•
Best use is as a heuristic to diagnose over/under investment
Share of Voice
•
•
Your competitors are brilliant & your products are identical
Heuristic to apply within specific segments
Workload
Build-up
•
•
Starting point to the ‘journey’
Historical sales + effort data unavailable (i.e., new market)
Affordable Coverage
•
•
•
Complex, organizational buying behavior
Unable to link sales to historical effort
Limited data, time, budget prevents Sales Response
Sales Response
•
•
Scenarios or sales forecasting is desired
CXO requires ROI
34
Copyright © 2015 Axtria, Inc. All Rights Reserved.
Slide 34
THANK YOU
Presenter: David Wood
Email: david.wood@axtria.com
Contact No.: +1 908 892 2194
Rajnish Kumar
Rajnish.Kumar@axtria.com
+1 908 240 9420
35
Copyright © 2015 Axtria, Inc. All Rights Reserved.