ZS Associates Research

SMA Annual Sales Force
Productivity Conference
1517 September, Atlanta, Georgia
Optimizing Market Coverage

to Drive Organic Growth
Marshall Solem
Principal
ZS Associates
Scott Sims
Principal
ZS Associates
2014 ZS Associates
-1-
SMA 2014 - ZS Solem-Sims - Market Coverage
Marshall Solem
Principal
ZS Associates
marshall.solem@zsassociates.com
Scott Sims
Principal
ZS Associates
scott.sims@zsassociates.com
2014 ZS Associates
-2-
Todays Objectives
In this session, you will:

Learn more about your peers
and hear their viewpoints
Share best practices on customer

segmentation, as well as sales force
sizing, structure and deployment (in an
effort to maximize market coverage)
Make ideas more relevant through

exercises and cases
2014 ZS Associates
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Agenda
Introduction
Customer Segmentation
Sales Force Structure
Sales Force Sizing

Sales Force Deployment
Wrap Up
2014 ZS Associates
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Agenda
Introduction
Sales Force Sizing

Wrap Up
2014 ZS Associates
-5-
Introduction
ZS Associates is a global leader in sales and marketing

>30 year legacy
3,000 professionals providing global service
from 21 offices
Largest Sales & Marketing consulting firm in the world
Worked with 1,000 companies in 70 countries

and 30 industries
Tight links to leading academics
BARCELONA BOSTON CHICAGO EVANSTON FRANKFURT LONDON LOS ANGELES MILAN NEW DELHI NEW YORK PARIS
PHILADELPHIA PRINCETON PUNE SAN DIEGO SAN FRANCISCO SAO PAULO SHANGHAI TOKYO TORONTO ZURICH
2014 ZS Associates
-6-
Introduction
ZSs focus on sales and marketing issues, combined with a

complete and integrated range of services, is unique to the market
Strategy & Planning
Sales
Marketing
Operations & Technology
2014 ZS Associates
-7-
Introduction
Highly effective sales organizations are achieved through a clear

growth strategy and aligned capabilities
Market Insight
Go-To-Market Strategy
Operational Excellence
Customer
Insight
Sales
Force Structure
Sales
Resources
Sizing
Territories
Account Targeting
Territory & Pipeline Mgt
Knowledge,
Skills &
Behaviors
Culture
Competency Model
Hiring
Training & Coaching
Motivation
Competitor
Insight
Segmentation &
Growth Strategy
Tools
Value
Proposition
Strategy
2014 ZS Associates
-8-
Sales Process & Decision Support Tools
Marketing
Programs
Marketing Mix
Demand Generation
Lead Nurturing
Sales Force & Partner Enablement
Community Building
Operations
(Sales,
Marketing,
Channels)
Data & List Management

Sales Admin
In-line Forecasting
Reporting
Analytics
Agency Management
Platforms & Systems Management
Customer
Engagement
Process
Market
Environment
Performance Measures
Incentives & Rewards
Performance Reviews
Agenda
Introduction
Sales Force Sizing

Wrap Up
2014 ZS Associates
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Segmentation
How much money are you leaving on the table?
Perfect Targeting
100%
(100% targeting effectiveness)
% Potential
80%
Opportunity
60%
40%
Random Targeting
(0% targeting effectiveness)
20%
0%
0%
20%
40%
60%
80%
100%
% Accounts (Reach)
Percent productivity improvement possible
(using typical potential concentration)
Current
Effectiveness
% of Accounts Reached
2014 ZS Associates
20%
40%
60%
80%
100%
20%
100%
55%
32%
14%
0%
40%
60%
37%
22%
10%
0%
60%
33%
22%
14%
7%
0%
80%
14%
10%
6%
3%
0%
100%
0%
0%
0%
0%
0%
- 10 -
Even when good

targeting data does not
exist, applying rigorous
heuristics or using
surrogates can have
a significant impact
on effectiveness
Segmentation
Two common dimensions for segmentation are overall sales

potential and current penetration (i.e. share of wallet)
Tier 3
Tier 1
Tier 4
Tier 2
Low
Sales Potential
High
Account Segmentation Strategy
Low
How big is the account? How

much could this customer add to
our top/bottom line over time?
2014 ZS Associates
Current Penetration
High
How much share of wallet do we possess?

Where are we focusing our efforts? What
customers are most important to us?
- 11 -
Segmentation
An effective segmentation should provide strong strategic

guidance on both where to play, and how to win
Where to Play
How to Win
Understand whom to target in the

marketplace based on customer
potential, behavior, and motivations
Identify key tactics that should be

implemented in each segment based
on their specific drivers & barriers
Strategic
Strategic Importance
Market Potential
Transactional
Industry
2014 ZS Associates
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Segment
Objective
Execution
Convince
Tactics
Make Aware
Tactics
Protect
Tactics
Segmentation
How do you currently segment your customers?
2014 ZS Associates
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Segmentation
Segmentation provides benefits to the organization across each

major stage in the sales and marketing process
The Benefits of Segmentation
Strategy Formulation
Segmentation serves as
the foundation for strategy
development to effectively
identify and win key customers
Execution
Segmentation drives tactical
planning and execution based
on a rich understanding
of customer needs and
decision drivers
Monitoring
Segmentation focuses
performance measurement on
the most relevant customer
factors, leading to more rapid
and focused market response
Enhanced profitability through focus

2014 ZS Associates
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Agenda
Introduction
Sales Force Sizing

Wrap Up
2014 ZS Associates
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Structure
There are three key aspects of sales force structure
Positions
Reporting Relationships
Roles & Responsibilities
Multiple dimensions to decide

2014 ZS Associates
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Structure
There are many ways to design sales roles/positions
Account
Type
Primary
Interaction
Venue
Product/
Service
Geography
Activity
Many ways to organize

2014 ZS Associates
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Structure
A schematic can help clarify sales rep roles

Key Account Managers
Segment 1
Segment 2
Segment 3
Segment 4
Product A
Field Rep
Products B&C Field Reps
Associate Field Reps
Inside Sales
Customers
Product A
Product B
Product C
Products
2014 ZS Associates
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Structure
Case example: Fortune 200 capital equipment & financing company
Strategic
Large
Medium
Small
Direct
Small
Indirect
Tele
PSS
VAR
Functional
Area Planning
Opportunity
Identification
AM
PSS
Account Executive
Local Facility
Planning
Account Executive
Overall Account
Planning
AM
PSS
AM
PSS
Solution
Development
Quotation,
Neg, Closing
Solution
Implementation
2014 ZS Associates
Product Sales Specialists

(6 types, territory aligned)
- 19 -
Structure
High
The range and diversity of structure options currently in use

is quite broad as many sales forces employ multiple roles
GAM
Cost
KAM /
SAM
Field
Sales
Low
Inside
Sales
Low
Complex Solution Selling Ability
High
GAM: Global Account Management | SAM: Strategic Account Management | KAM: Key Account Management
2014 ZS Associates
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Structure
High
The range and diversity of structure options currently in use

is quite broad as many sales forces employ multiple roles
GAM
Cost
KAM /
SAM
Field
Sales
Low
Inside
Sales
Low
Complex Solution Selling Ability
High
GAM: Global Account Management | SAM: Strategic Account Management | KAM: Key Account Management
2014 ZS Associates
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Structure
Historically, inside sales has been successful in situations of lower

buyer risk, and low buying process and solution complexity
High
Drivers
Technology
comfortable buyers
Buyer Risk
Low cost-per-contact
Scalability
Specialization with
Increasing
inside sales
sophistication
low efficiency loss
24/7, rapid response
Blurring lines with field
Inside sales
sweet-spot
sales (e.g., intimacy of live
Low
video)
Low
2014 ZS Associates
Buying Process & Solution Complexity

- 22 -
High
Structure
Inside sales is a growing investment area for many organizations
2009 2011 Job Growth
2011 Change in Inside

Sales Force Size
Decrease
4%
Increase
>20%
No
Change
25%
25%
Up
124%
19%
27%
Increase
11% to 20%
Up
59%
Increase
1% to 10%
Lead Generation
Jobs
Source: 2011 Change in Sales Force Size CSO Insights
2014 ZS Associates
Inside Sales
Jobs
Source: 2009-2011 Job Growth Simply Hired
- 23 -
Structure

Sales Department Breakdown
Outside Sales Reps
Inside Sales Reps
54%
53%
52%
51%
50%
49%
52.70%
48%
47%
51.80%
50.70%
49.30%
48.20%
46%
47.30%
45%
44%
2011
2012
2013
Source: Insidesales.com 2013 research 321 responses with companies from 30 industries
2014 ZS Associates
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Structure

Projected Growth of the Inside Sales Industry
Non-Retail Inside Sales Reps (thousands)
3,000
2,500
2,000
1,500
1,000
1,974
1,968
2010
2011
2,202
2,424
2,466
2,509
2,551
2,636
2,381
2,594
2,339
2013
2014
2015
2016
2017
2018
2019
2020
500
0
2012
Expected growth of non-retail inside sales jobs will grow

to 42,400 new jobs each year
Source: Insidesales.com 2013 research 321 responses with companies from 30 industries
2014 ZS Associates
- 25 -
Structure
Key account and team-based selling models can significantly

increase sales effectiveness
Independent
Typical Objectives
Single point of customer
contact
Customer
Coordinated team
interactions with the
customer
Broader leverage of the full

Sales Person
A
Sales Person
B
Sales Person
C
Sales Person
D
portfolio leading to higher

value solutions
Better cross-selling across

lines-of-business
Account Leader
Best talent on most

important accounts
Customer
Better flexibility to put best

talent on most important
opportunities
Account Manager
Increased customer
Sales Person
A
2014 ZS Associates
Sales Person
B
Sales Person
C
Sales Person
D
- 26 -
attraction, penetration
and loyalty
Structure
There is a continuum of KAM, SAM & GAM models in use
KAM
Best talent on most
important accounts
Typically country-specific
SAM
SAM as QB for
multi-regional team
Strategy for delivering

integrated, customized,
cross-regionally consistent
solutions to high value
multi-regional customers
Often includes executive
GAM
GAM as QB for global team
Strategy for delivering
integrated, customized,
globally consistent
solutions to high value
multi-regional customers
Typically includes executive

sponsorship programs
sponsorship programs
2014 ZS Associates
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Structure
A KAM strategy hinges on a number of linked business decisions

and processes, which will ultimately maximize the programs impact
Right Customers
Target key segments and accounts within the
market that best fit the KAM model (for the
account and for the firm)
Right Enablers
Establish sales process
Manage the change
Establish KPIs and motivate
the team
Right Value and Messages

Customize value propositions
for each segment
KAM as integral part of value
proposition
Right People
Define the KAM role/KAM sellers
Get the right people on the bus
Establish an executive sponsorship program
2014 ZS Associates
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Structure
Unfortunately, many companies experience varying degrees

of the opposite when transitioning to these models
Inflated cost-of-sales
Greater complexity and
coordination costs
Gatekeeper &/or redundant role

Resource gloming onto
largest accounts and deals
(e.g., free riders)
Reduced account universe reach
2014 ZS Associates
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Structure

Reduced individual
accountability and
finger-pointing
Destructive conflict between
account owners and product leads
Conflict between business

unit executives
2014 ZS Associates
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Structure

High transition costs

Excessive customer relationship
disruption
High performer turnover

Loss of focus on business today
2014 ZS Associates
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Structure

Failure to cost-effectively
deliver on customer
promise of greater value
Customer attrition
Lower margins
2014 ZS Associates
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Structure
Once sales positions are designed, sales management structure

and reporting relationships can be assessed
Generalist Management
Specialized Management
VP
FLM
Sales
Reps
Account Manager
2014 ZS Associates
Specialist A
Specialist B
- 33 -
Specialist C
Specialist D
Structure
There are many criteria by which to evaluate different structures
Many implications to consider

(some of which might be in conflict)
2014 ZS Associates
- 34 -
Case
Pacific Packaging Supplies, Inc. Case - Introduction
PPS is a $500MM manufacturing company that sells packaging products to national and
regional CPG firms, as well as to retail outlets
The majority of the companys revenues come from their cup and plate stock, cartons,
and skin-packaging (skin-packaging constitutes 2/5 of total PPS sales)
Pacific has a high-potential product, Retail Ready Packaging (RRP), in the pipeline
scheduled for release in March 2015, six months from now; it is expected to grow PPS
sales by 40% over three years
Cup and
Paper Stock
2014 ZS Associates
Cartons
Skin-packaging
- 35 -
Retail Ready
Packaging
Case
Pacific Packaging Supplies, Inc. Case - Sales Force Structure
The PPS sales force

consists of 107 sales
representatives: 87 fieldfacing reps who have
geographically
determined territories, 14
inside sales reps who
reach small and rural
customers via the phone,
and 6 national account
reps
Management expects
that reps will require
substantial training
before they can sell RRP
effectively - RRP training
programs will therefore
begin in three months
#
2014 ZS Associates
= Headcount
Current Sales Force Structure

1
VP of
Sales
National 1
Accounts
Manager
2
Regional
Manager
District
Manager
National
Account
Rep
- 36 -
Territory
Rep
Inside
Sales
Manager
10
87
Inside
Sales Rep
14
Case
Pacific Packaging Supplies, Inc. Case - Planning

PPS executives have decided to maintain their current sales force structure, but increase
the size of the field force in proportion to the forecasted increase in sales
Exhibit 1: Forecasted Sales, 2015
Forecasted
Sales 2015 (%)
National CPG
Accounts
Regional CPG
Accounts
Retail
Outlets
Cup and Plate Stock
26%
XXX
X
Product Type
Legend
X
0-20% of Sales
Cartons
14%
XX
XX
XX
20-60% of Sales
Skin-Packaging
48%
XX
XXX
XXX
60-100% of Sales
Retail Ready Packing
12%
XXX
XX
Exhibit 2: Rep Responsibility Map

Product Type
National CPG
Regional CPG
Retail Outlet
Legend
Cup and Plate Stock
National Accounts
Cartons
Field Force/Inside Sales

Skin-Packaging
Overlap
Note There is complete overlap between the Field
Force and Inside Sales Reps
2014 ZS Associates
Retail Ready Packing
Do you think the current plan will optimize sales?

If not, what alternative structure
would you recommend?
- 37 -
Case
Potential Solution 1: PPS could choose to specialize on the

product dimension with an RRP Specialist role
Option 1: RRP Specialist
1
VP of
Sales
National 2
Accounts
Manager
National
Account
Rep
2014 ZS Associates
2
Regional
Manager
National 1
RRP
Specialist
District
Manager
Regional 7
RRP
Specialist
Territory
Rep
- 38 -
1
Inside
Sales
Manager
13
116
Inside
Sales Rep
20
Case
Potential Solution 2: PPS could choose to specialize by carving

out the retail outlet, and cup and plate business
Option 2: Cup and plate/retail outlet focus
1
VP of
Sales
National 2
Accounts
Manager
National
Account
Rep
Regional
Manager
District
Manager
Territory
Rep
2014 ZS Associates
Inside
Sales
Manager
10
1
Retail
Sales
Manager
4
Retail
District
Manager
94
Inside
Sales Rep
- 39 -
14
Retail
Sales Rep
36
Agenda
Introduction
Sales Force Sizing

Wrap Up
2014 ZS Associates
- 40 -
Sizing
The most commonly used approaches to sales force sizing

and allocation are limiting and misleading
Same as Last Year
2013
Percentage of Sales
2014
200
200?
50
50?
25
Team
One
Team
Two
25?
Team
Three
Team
One
Team
Two
Team
Three
2010
Match Your Competitors
2012
2014
Squeaky Wheel
I need 100!
Our Size
I need 100!
I need 100!
Competitor One
2014 ZS Associates
Competitor Two
Product Team A
- 41 -
Product Team B
Product Team N
Sizing
Understanding account coverage requirements (workload)

is an important first step in sizing sales forces
Activity Element
Seg A
Seg B
Seg C
Number of Accounts
Effort per account (calls,
hours, etc.)
Lead Generation/Needs Identification

Promotion/Demos
Negotiation
Closing/Install
Relationship Maintenance
Total
Sum of total effort per account

X number of accounts
Rep Call Capacity
Calls or hours per year
FTEs
2014 ZS Associates
- 42 -
Sizing
A good understanding of account potential can help determine

affordable customer coverage and sales force size
Market potential and sales
history can indicate the
average sales value of
different customer segments
1,800
Incremental Sales
Cost to Serve
1,600
Rep workload based on

customer needs and the sales
process can quantify the cost
to serve each segment
Value per Acct ($)
1,400
1,200
Break-even
coverage
1,000
Cover top 7 segments:

Determine sales force
size from total workload
and rep capacity
800
600
400
200
0
#1
#2
#3
#4
#5
#6
#7
#8
#9
#10
Customer Segment
2014 ZS Associates
- 43 -
Sizing Exercise
Break-even analysis can provide a baseline for thinking about

sales force investments
Whats the fully loaded

cost of one rep?
Gross margin?
$250,000
Break-even =
$625,000
40%
What do your firms break-even numbers look like?

2014 ZS Associates
- 44 -
Sizing Exercise
How do you assess the value of a rep?
Sales Reps
50
100
150
Sales ($MM)
70
100
120
COGS
28
40
48
Gross Margin
42
60
72
Sales Force Cost
10
20
30
Other Marketing
Admin
Operating Profit
22
30
32
Sales per Rep
1.4
1.0
0.8
SF Cost as % of Sales
14%
20%
25%
Op Profit as % Sales
31%
30%
27%
2014 ZS Associates
- 45 -
Sizing
Sizing & allocation can be decided based on the cost/benefit of

alternative sizes
$ Financial Impact
Revenue
Profit
Contribution
Sales Force Size
Segment
# of
Accounts
AMs
Required
Cumulative
AMs
Cumulative
Rev ($M)
Cumulative
Profit Cont. ($M)
ROI
76
10
10
$24
$7
332%
95
19
$41
$11
252%
Required Hurdle
Rate = 100%
31
200
462
$429
$66
8%
32
233
466
$431
$66
7%
2014 ZS Associates
- 46 -
Agenda
Introduction
Sales Force Sizing

Wrap Up
2014 ZS Associates
- 47 -
Deployment Exercise
How would you respond?
Your company has placed some significant bets on new technology

and is banking on double-digit revenue growth, which has been reflected in your
quota for next year. You recognized the need for additional feet on the street
and have secured budget approval for additional headcount. You have
implemented a process to identify the best places to put new salespeople using
data to estimate sales potential and workload.
You have proposed to add a new salesperson into a geography where
one of your best salespeople is. The only way to make the new territory viable is
re-align some of the larger accounts currently covered by the top performer.
This salesperson has delivered some fantastic results, but you are convinced
the business can be growing even faster if a new salesperson is added. The rep
has threatened to leave if he loses any of his important accounts.
2014 ZS Associates
- 48 -
Deployment
Territory design has significant impact on achieved market coverage
Sub-optimal Alignment
Territories with
too much work
Optimal Alignment
Territory Workload
(Reps are overworked

or important customers
are under-supported)
Balanced
Range
Territories with
insufficient work
(Reps work part-time or
visit unprofitable
customers)
Highest
Territories
2014 ZS Associates
Lowest
Territories
- 49 -
Deployment
Heat maps can highlight where relocation may be needed
Legend
Shaded by: Rel Bal
0.00 80.00
80.00 90.00
90.00 110.00
110.00 120.00
120.00 200.00
2014 ZS Associates
- 50 -
Deployment
Mirroring specialist territories can help sales rep coordination
Mirroring the sales teams can make

customer coverage more effective
2014 ZS Associates
- 51 -
Deployment
A prioritized list of business rules should guide alignment decisions
Business Rule
Priority
Create balanced territories
Keep Regional span of control at 7 territories

Keep personnel home location within geography
Minimize account disruption
Maintain state boundaries
Do not split major market areas
Do not split ZIP Codes (Postal Codes)
Priority
2014 ZS Associates
High
Medium
Low
- 52 -
Deployment
Try to avoid the trap of designing around people
Resist the temptation of designing

territories for individual personnel
(i.e., designing larger territories for high
performers and smaller territories
for new or under-performers)
Remember these key points:
Outstanding personnel could be

promoted in the near future
Personnel frequently transition out of

the organization
Your customers will be with you longer than

your personnel, but only if serviced properly
Relatively well balanced territories

optimize account coverage and help
morale by balancing workload and potential
across territories
2014 ZS Associates
- 53 -
Agenda
Introduction
Sales Force Sizing

Wrap Up
2014 ZS Associates
- 54 -
Closing
Wrap Up
Have a clear segmentation

strategy this is the starting point for
all resource deployment decisions
Structure is not static but

rather dynamic
As markets continue to evolve,

traditional field sales force
structures are under pressure
(KAM and inside sales)
KAM is not a role, its a

business strategy
2014 ZS Associates
- 55 -
Closing
Wrap Up
Managing sales force size by ratios

is sub-optimal
It can be difficult to change territories

without a corresponding change in
incentive compensation plans
Design sales force territories around

the business not the people: balance
workload, link potential (account)
to instill fairness, and take a flexible
approach to comp plans as they
can break
2014 ZS Associates
- 56 -
Thank you!
2014 ZS Associates
- 57 -

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SMA Annual Sales Force

Optimizing Market Coverage

SMA 2014 - ZS Solem-Sims - Market Coverage

SMA 2014 - ZS Solem-Sims - Market Coverage

In this session, you will:

Share best practices on customer

Make ideas more relevant through

SMA 2014 - ZS Solem-Sims - Market Coverage

Sales Force Sizing

SMA 2014 - ZS Solem-Sims - Market Coverage

Sales Force Sizing

SMA 2014 - ZS Solem-Sims - Market Coverage

ZS Associates is a global leader in sales and marketing

Worked with 1,000 companies in 70 countries

Tight links to leading academics

SMA 2014 - ZS Solem-Sims - Market Coverage

ZSs focus on sales and marketing issues, combined with a

Strategy & Planning

Operations & Technology

SMA 2014 - ZS Solem-Sims - Market Coverage

Highly effective sales organizations are achieved through a clear

Sales Process & Decision Support Tools

Data & List Management

SMA 2014 - ZS Solem-Sims - Market Coverage

Sales Force Sizing

SMA 2014 - ZS Solem-Sims - Market Coverage

How much money are you leaving on the table?

(100% targeting effectiveness)

Even when good

Two common dimensions for segmentation are overall sales

Account Segmentation Strategy

How big is the account? How

How much share of wallet do we possess?

SMA 2014 - ZS Solem-Sims - Market Coverage

An effective segmentation should provide strong strategic

Understand whom to target in the

Identify key tactics that should be

SMA 2014 - ZS Solem-Sims - Market Coverage

How do you currently segment your customers?

SMA 2014 - ZS Solem-Sims - Market Coverage

Segmentation provides benefits to the organization across each

Enhanced profitability through focus

SMA 2014 - ZS Solem-Sims - Market Coverage

Sales Force Sizing

SMA 2014 - ZS Solem-Sims - Market Coverage

There are three key aspects of sales force structure

Roles & Responsibilities

Multiple dimensions to decide

SMA 2014 - ZS Solem-Sims - Market Coverage

There are many ways to design sales roles/positions

Many ways to organize

SMA 2014 - ZS Solem-Sims - Market Coverage

A schematic can help clarify sales rep roles

Products B&C Field Reps

Associate Field Reps

SMA 2014 - ZS Solem-Sims - Market Coverage

Case example: Fortune 200 capital equipment & financing company

Product Sales Specialists

SMA 2014 - ZS Solem-Sims - Market Coverage

The range and diversity of structure options currently in use

Complex Solution Selling Ability

SMA 2014 - ZS Solem-Sims - Market Coverage

The range and diversity of structure options currently in use