Spatial Data Motivate Sales Forces
Business Geographics
By Robert J. Wilkening, President, Wilkening & Co., Park Ridge, Ill.

Every year, U.S. companies spend billions of dollars in compensation to motivate their sales forces to sell more, sell better and meet strategic objectives. A recent study revealed the cost of selling was more than 12% of sales. Often, these monies are wasted because even well designed sales pay plans aren't built on a strong motivational foundation. As we approach the next century, a nontraditional tool will be employed to help motivate sales forces--geographic information systems (GIS).

Sales Force Pay

A sales compensation plan is an arrangement between the company and its sales force designed to motivate them to achieve the full potential of their customer base and specific account goals. For that, companies are willing to pay fair and appropriate cash rewards. But, if the sales force isn't motivated, the pay plan--and the company--will fail.
Sales pay plans come in various "flavors." Most combine salary with a monetary incentive or commission based on some criteria or performance measure. The incentive payment also may be linked to quota or goal achievement.
Traditionally, the design of an effective sales pay plan has been the domain of sales executives, human resource specialists or consultants. They employ proven compensation/performance devices, such as:

• Sales goals.
• Performance and payout thresholds.
• Incentives and commissions.
• Bonuses.
• Salaries and salary adjustments.

However, traditional pay plan tools alone won't motivate a sales force.

What Motivates a Sales Force?

Perhaps the question should be, "What de-motivates a sales force?" Numerous factors exist. To explore them, put yourself in the shoes of a sales rep for XYZ Industries.

XYZ Industries manufactures and sells proprietary medical supplies. The typical XYZ sales rep is responsible for 100 to 250 current customers and some number of prospective customers. Each current or prospective customer has varying levels of need and presents a different opportunity for the company. The sales rep must call on each customer location periodically to fill customer requirements and snub competitive activity. The company's account assignments generally are made based on customers' geographic locations. XYZ sales reps must visit and service their customers face-to-face. Bill Smith is one of XYZ's 30 sales reps.

For the last six months, XYZ has made a significant investment in carefully designing a a new sales compensation plan that will encourage business growth. Sales reps stand to earn 50% more in commissions and bonuses if they exceed their territories' growth goals. The pay plan is acknowledged by most sales reps to be lucrative and well designed.

During the sales meeting to introduce the plan, however, Smith concludes:

• My territory doesn't have nearly the opportunity to grow that exists in most other territories. I just don't have enough good accounts or prospects.
• Don't they realize I have 240 accounts in three states assigned to me! They expect me to call frequently on every account and prospect. I don't have enough time to call on all my current accounts, let alone prospect for new customers.
• The sales manager set my sales goal 15% higher than last year. It's not fair. Territories with better growth potential have the same goal.

Will the new pay plan motivate Smith? Would it motivate you? In fact, Smith isn't even thinking about pay. The company created what appears to be a fairly designed pay plan, but Smith can't make any money because three other "fairness factors" aren't in place -- opportunity, work-load and goals. If Smith is typical, XYZ's new sales pay is dead on arrival.

GIS Technology Promotes Pay Plan, Motivates Staff

Sales managers should follow steps to motivate their staffs by a proper sales compensation plan.

Step 1. Ensure each sales rep has fair opportunity to succeed. Each sales territory should have the right mix of potential and opportunity for a sales rep to succeed and make money. This is best accomplished by estimating your products' current market share and total market size in each territory.

You can accomplish this by determining the underlying end users for your company's products and estimating how much an average company will buy based on factors such as company size. Using U.S. company demographic databases, the number of potential customers and sales volumes can be determined for any sales territory. GIS technology can help define both sales territories and high opportunity locales. With this information, market share and the potential for any sales territory, county or ZIP code can be determined.

Should each territory's potential be equal? No, but adequate potential must exist to support a sales force, and no sales force member should consider the opportunity unfair.

Step 2. Ensure each sales rep can do the quantity of work required to succeed. Many sales territories are either too large or too small. In this case, the terms large and small refer to the work required for a sales rep to complete sales calls and other tasks needed to serve all customers and prospects.

Evaluating territory fairness requires a company to establish a sales plan for each current account or prospect. The sales plan is determined by perceived account potential and generally is defined in terms of required sales call activity and end results. With this information, companies can use sales territory analysis software to evaluate a territory's productivity and fairness. GIS technology helps define each sales territory (by ZIP code, for example) and locates each account (and prospect) on a digital territory map. For example, GIS and territory design software can simulate one year of sales activity and provide summary statistics for:

• Time needed to service the territory annually.
• Time spent with customers and prospects.
• Travel time required.
• Time for prospecting or other nonplanned activities.

The key to constructing a fair territory is to ensure that it contains roughly a year's worth of work. More or less is unfair to the sales rep and current accounts that won't get adequate attention in an oversized territory.

If necessary, sales territories can be redesigned for fairness and improved sales productivity through reduced travel. Typically, an additional 15% in annual sales calls is possible in redesigned territories. This process also is an accurate way to determine sales force size. Territories don't have to be equal in workload to be fair.

Step 3. Ensure that goals and quotas used to measure performance and determine pay levels are fair and reflect the territory. When you complete Steps 1 and 2, you'll have a perfect data resource to help you set accurate sales goals and identify future sales performance drivers, such as:

• Territory or portfolio sales.
• Number of accounts or calls to make.
• Market share.
• Territory geographic profile.
• Mix of current and potential accounts.
• Business mix.

This information is assembled into a database and analyzed with basic statistical tools. As a result, a process is developed to predict future territory sales based on your company's "success drivers." GIS technology provided the foundation that facilitated goal setting.

Now, the company's sales goals are objective and established on factors all understand and agree to. This also allows the company to have territory differences and still have fair quotas or goals.

Let's revisit XYZ Industries. If the company had followed this three step prescription, XYZ could have motivated its sales force with the new pay plan. Smith would be thinking about the pay plan, how to grow his territory and make more money. He'd be excited, not frustrated.

Use GIS to motivate your sales force with "fairness factors" that support your sales compensation plan. The motivation could be the difference between sales force--and company--success or failure.