Sales force density  

Sales Revenue Management

It's the numbers game in sales. Revenue management is analyzing the targets v/s actuals.


Sales force density


If you meet a traditional sales person, he may come up with a simple rule 'Sales is a simple function of the number of sales people you have unleashed on the customer'. This may look like at shotgun approach, but followed by most of the sales executives in different shades. The multiplicity of channels, 3rd party distributors etc are essentially in effort to increase the sales force density and geographical coverage.

If you meet a traditional sales person, he may come up with a simple rule 'Sales is a simple function of the number of sales people you have unleashed on the customer'. This may look like a shotgun approach, but followed by most of the sales executives in different shades. The multiplicity of channels, 3rd party distributors etc. are the tricks to increase the sales force density and geographical coverage.

Sales force density is defined as the number of sales people who are selling your product within a given geographical area per 1000 of potential customers. The desired level of density has to be measured in context of industry benchmark.

While the productivity, velocity and quality of sales is equally important, the purpose of this topic is to focus on the density of sales force aspect.

Sales force density is associated with the objective of giving depth to your presence,. Companies can have different strategies in terms of increasing width (say opening X offices in Y locations) OR depth (opening X offices in only one location).

To increase the density, a sales head can expand the channel base (direct sales force, direct marketing agents, 3rd party distributors, dedicated and exclusive agents, brokers, representative offices, kiosks/counters, telesales etc..).

Success Drivers for Sales force Density

Maintaining the value proposition for the sales force:

With increasing density, the potential market for each sales person may diminish and so will be his income potential and so will be the effort needed to close the sales. One has to ensure that the value proposition is maintained, otherwise you will have a high level attrition for the sales force. A counter argument used by some is the market operates by it own rule of 'self-selection' whereby the trick is to inject more sales persons in the market than needed and the good ones will survive at the cost of the other who will attrite over time. This is not a wrong strategy as long as it is supporting the longer term business objectives.

Managing Conflicts within the sales force on same customer (s):

With too much density, the sales people may clash (unfortunately to the visibility of the customers), for the same customer set, and this leads to an unhealthy view of the organization in-front of customer community. Some ways to handle it is:

  • Proper training
  • Rules of conduct
  • Sharing of sales commissions across multiple sales staff and
  • A quick and strong arbitration process.

Ramping-up and ramping down capability

The need of density of sales force may change given the circumstances, the seasonality, product launch schedule and sales budget etc. A capability to make your sales force density a variable to these factors, is a key determinant to success. That's the reason that companies adopt multi-channel strategy with fixed (direct sales force, exclusive marketing agents..) along with variable (3rd party distributors, brokers, non-exclusive re-sellers..) to achieve this objective. The challenge is to maintain the quality and commitment of the variable sales force.

Minimize the linkage between the density and absolute sales compensation:

Sales force density equation works well and is sustainable, if the sales force compensation is variable and linked to the results. While the 3rd party distributors, brokers are typically variable, there is some level of fixed components linked to the direct sales force and exclusive/tied agents. it is also the fact that tied arrangement typically yield a better productivity. Therefore a head of sales has to manage this balance.

Active sales force

While a company can have high number sales force (direct as well as indirect) on paper, the real sales force density should be measured on the 'active' sales force. The definition of 'active' may vary, and so will be the numbers. For example, The active sales force number will vary, if you define 'active' as making one sale in a month vs. making 3 sales in a month.

TIP- The number of active sales force staff, depends on multitude of factors. However, keeping all other assumptions (product, price, incentives, compensations..) as same, you can increase your active sales force by better communications, reporting, insisting on discipline, maintaining a better touch and ensuring that the incentives of the sales manager responsible for sales force density are linked to maintaining the number of active staff.

Measures/Facts for Sales force Density:

  • Number of Sales staff

KPI-Metrics for Sales Force Density:

  • Sales people per 1000 target customers.
  • Sales people per 1000 target customers during red, green, yellow seasons. (color coding is generally used by companies to show he seasonality of demand).
  • Number of active sales people per 1000 target customers
  • Number of active sales people per 1000 target customers during green, yellow and red seasons.

Dimensions/Attributes for telemarketing, around which you can slice and dice your measures and KPIs

  • Location
  • Product
  • Channel
  • Time
  • Status of the sales force person (Active, inactive..)

Key Decisions related to Sales density

How much should be the mix between the direct sales vs. indirect sales people?

Direct sales is typically more committed, and have better productivity, but are have a greater fixed component. The indirect distributors OR resellers are less costly and more variable, but typically lesser productivity.

How much should be the mix between exclusive vs. non-exclusive tie-ups for 3rd party distributors and re-sellers?

Exclusive tie-ups have better productivity and sales quality and branding, but need a greater investment from the business, whereas non-exclusive tie ups need lesser investment, but also typically have lesser productivity and sales quality.