Speakers: Tim Robertson | SBI

Are you designing territories for 2016, or will be soon?


If so, click here and listen to this podcast for an example of how to do it correctly. It is an interview with Tim Robertson, US Vice President of Sales and Marketing at DHL, the most international company in the world with 285,000 employees in 220 countries.


Designing territories at DHL is difficult because the company has many business units, geographies, product and service lines, market segments, industry verticals, and specialized sales teams.


Due to this level of intricacy, Tim got very good at designing sales territories, and there is much to learn from him. By listening to this podcast, you can get Tim’s perspectives on:


  • Why a sales leader makes, or misses, his or her number based on territory design more than any other factor.
  • Why allocating accounts, territories, geographies, product lines, and channel partners to sales teams is the single most important strategic activity the head of sales performs each year.
  • How to:
    • Accurately baseline current performance.
    • Project current customer spend onto future prospect potential spend.
    • Take market potential down to account potential and stack rank accounts based on which will produce the most amount of revenue in the shortest amount of time.
    • Chose a territory design principle from the available best practices. (Ex. customer concentration, workload balancing, territory compression, etc.)
    • Rebalance territories without losing customers and/or star sales reps.
    • Produce territory plans so reps know which activities to focus on.


If you want to make your number next year, and believe territory design is the key to making that happen, click here and hear how to do it correctly.



Speaker 1: Welcome to the SBI Podcast, offering CEOs, sales and marketing leaders ideas to make the number.


Greg Alexander: Welcome to everybody. This is Greg Alexander, CEO of SBI, and you’re listening to the weekly SBI podcast. Today, I’m joined by a very special guest, Tim Robertson. Tim is the U. S. Vice President of Sales and Marketing at DHL. DHL is the most international company in the world, with 285,000 employees in 220 countries. The company has three divisions: DHL Express, DHL Supply Chain and DHL Global Forwarding, which is division Tim resides in. This division does many, many things and it’s difficult to explain, so I will try and simplify it by saying they are number one in the efficient coordination in movement of freight worldwide.


Tim, how did I do? Anything to add to that description.


Tim Robertson: You know, Greg, you did phenomenal here, so thank you very much for that intro and description. I would just go ahead and add here that Deutsche Post DHL is the world’s leading mail and logistics group. Our vision is that when you think of logistics, you think of DHL. I think you did a great job of describing the different divisions. Maybe another way for the listeners to think about the DHL Global Forward division as the market-leading global freight forwarder, you might want to think of us as a travel agency for business-to-business products and goods.


So as an example, a company may be exporting their finished products to a customer in Brazil via ocean freight, that they come to DHL Global Forwarding. Or that same customer may be importing its raw materials to make its products from a bunch of suppliers in India. And they’re importing via air freight and they need some assistance with U. S. Customs formalities. That exact same case, they think of DHL Global Forwarding. So that, I hope, helps position the DHL Global Forwarding business within DHL.


Greg Alexander: Okay, perfect. Thank you for that explanation and I like the metaphor of a B2B travel agency. A little bit about Tim himself. Tim joined DHL nine years ago as a district manager in Los Angeles. He got promoted to run business development in EMEA and then got promoted again to run sales and marketing in the U. S., which he has been doing for the last three years. He has 18 years of business experience and holds a chemical engineering degree from the University of Sydney and an MBA from Harvard. So Tim, you are one qualified guy and we’re really happy to have you on the show today.


Today, let’s talk about our topic. We are going to discuss Tim’s perspectives on designing sales territories. The reason why we’re going to talk about that is when this podcast airs, many of the listeners would be in the late summer/early fall, and they will be planning for their upcoming fiscal year, which will start in January for lots of companies. And they’re trying to think about how to allocate sales reps to sales territories.


For those that might not be familiar with the term, let me provide a quick explanation of territory design, for this term can mean many things to many people. So for the purposes of today’s show, a simple definition of territory design means we’re dealing with the allocation of territories, which could be accounts, geographies, industries, product lines, channel partners, et cetera, to the individual sales rep.


The objective of territory design is simple. You want to put your best salespeople into the territories with the most potential. Yet, territory design is problematic for many sales leaders. Sometimes, we see great sales reps assigned to territories with limited potential and vice versa. We see average sales reps who can find themselves in territories with very rich opportunity sets. Unfortunately, when a sales leader misses his or her number and sometimes loses his or her job, the root cause is poorly defined territories.


Tim and I want you to make your number, that’s the purpose of this show, and we want you to keep your job, so we’re going to dive into this concept. So Tim, you’re ready to talk about territory design?


Tim Robertson: Yeah, absolutely, Greg. Yeah.


Greg Alexander: All right. Just so we don’t ramble here, we’re going to use SBI’s six-step process to designing territories to guide our conversation. So, let’s go ahead and start with step one, which we define as base-lining current performance. This analyzes the current performance of each sales territory on items such as revenue, production, product mix, customer and prospect counts, close rates, et cetera.


So Tim, with your 18 years experience and here recently leading the U. S. sales and marketing group at DHL, how do you analyze the performance of sales territories at your company?


Tim Robertson: Yeah, look, I think it’s an absolutely fundamental point to start with in terms of territory design. One of the themes that we do here is – and you mentioned it in your opening, a lot of it stems from our sales strategy and ultimately our customer segmentation. So we need to segment our customers into different channels that are then served by our different sales teams. That customer segmentation is mission-critical, so you can create that baseline territory structure that you can then ultimately measure the performance of that portfolio.


As an example, here in our organization, we have a number of different sales channels that attack our segments, one of those sales channels is a telesales channel that goes after what we call small business customers. The portfolio and the territory that a telesales rep is tasked with managing and growing is extremely different than the portfolio and territory that one of our key account managers is tasked with, driving the growth from. Portfolio size is different, geographic nature is very different.


So, you need to ensure that your performance metrics are quite distinct for each of our sales channels, and that ultimately drills down to the territory level. In terms of performance, we think about things in a couple of different dimensions. We look at our activity levers of the rep within their territory. So what does their call activity look like? What does their customer coverage look like? What does their time in territory look like in terms of prospecting versus selling time versus maintenance versus servicing time? So these are some activity levers that help us baseline the performance.


Then we get into true customer acquisition performance within the territory. This, for us, is all about revenue growth, volume growth, it’s all about new customer acquisition and then it’s all about our hit rate on new business and our retention rate on existing business. Those measures are little bit based on the sales channel that that sales rep is serving and ultimately, the territory that they’re managing.


So I hope that, Greg, gives you a little bit of a feel in terms of how we think about the baselining of territories and the measurement of performance.


Greg Alexander: That’s fantastic. I love the fact that you start with sales strategy and market segmentation and then take it down to a channel analysis and all the way down to individual sales reps. When I was listening to your answer, you have a very similar approach to a friend of mine, a gentleman by name of Scott Whyte, who used to run sales ops at Rackspace and he’s now the Chief Revenue Officer at an exciting startup called ClearDATA.


He spoke about his approach in the Q2 Edition of the SBI Magazine, and for those that have a copy of that, specifically on page 27. Let’s make sure the listeners of this podcast can get their hands on a copy of that magazine and read Scott’s article. So let’s go to a quick break here and let this audience know a little bit about the SBI Magazine. We’ll be right back.


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Greg Alexander: Okay. Welcome back everyday. This is Greg Alexander, CEO OF SBI, and today, I’m joined by Tim Robertson, who is the U. S. Vice President of Sales and Marketing at DHL. Today, we’re talking about territory design on the SBI podcast. Just before the break, we heard from Tim how he baselines current performance. That was Step 1 of SBI’s territory design process. So let’s move on to Step 2, which we call analyzing customer spend.


This analyzes historical spend levels by customer profile and projects this onto the prospect universe, which produces a prediction of the available spend of each individual market segment. And Tim, you were talking about this – a little bit about how you do this at the market level earlier. But let’s get a little bit more specific. How do you predict the available spend of each market segment?


Tim Robertson: Yeah, this is, Greg, this is somewhat the diamonds are in the detail when it comes to predicting the available customer spend, right. We do via two methods. We use our existing active customer database to give us benchmarks and indices for customer profiles and what their logistic spend, which is the business that we’re going after is as a percentage of what their net sales is.


So that gives us an initial benchmark based on our existing customer base that we can then use to extrapolate when we lay on top of that existing customer data, the market data that we have. We use various different sources of market databases to give us the total market of customers out there. We cross-reference that market database against our existing customer database, so we can filter out the duplicates and then we get the true list of prospects within a territory.


Then we put that prospect list through our algorithms or our models that, based on that customer profile, isn’t likely to be importing, exporting. What is the industry sector that it’s in? Is it an industrial machining company that is likely to be exporting to, to Latin America or is it a pharmaceutical company that might be importing from Switzerland or France.


We use those different criteria to then estimate what is the likely percentage of logistic spend that that customer has and then we have a number of different models that we use to further break that down to what we call the addressable spend, because ultimately, our goal is to have 100% share of wallet with those customers, but in certain customer segments, typically the higher revenue customer segments, they like to diversify and have two, three logistics providers.


So we will further define that addressable spend for us by putting in a 50% share of wallet threshold or a 33% share of wallet threshold. So, at the end of the day, across the different channels that we have, we have a view and let’s be clear it is a view and it’s both art and science. But we have a view of what that customer – available customer spend is to us. I think on top of that, something might be interesting for you and your listeners is we then, also based on sales channel, try to project out what is the lifetime value of that customer, with some estimates on how loyal they are likely to be to DHL and ultimately what we think we can generate in terms of bottom-line returns on those customers.


Greg Alexander: Yeah. I was going to ask about that lifetime value, which I think is a critical component of this. Also, when you juxtapose that with the customer acquisition cost, you can get a ratio. So how much does it cost to acquire this customer and what’s that lifetime value? Obviously, you want your lifetime value to be far in excess of your customer acquisition cost. Have you gotten to that point where you can calculate how much it cost to acquire a certain type of customer?


Tim Robertson: We have. I would say we’re still in the experimentation phase, because the challenge is really estimating the lifetime value. The cost of acquisition based on the different sales channels is relatively easy to measure. We’ve got some decent analysis in terms of how long these customers stay with us, how long it takes us to close a deal. We have targets for a number of visits to close. We’re adding to that all of the additional resources that are brought to the table in the deal because it’s certainly not just the sales resources, not even just the sales and sales support resources, but we have a tremendous amount of product and service and operations that we bring in. So I think we’re probably 50% of the way of really being able to check the ROI based on lifetime value and cost of acquisition.


Greg Alexander: Yeah, okay. All right. Let’s just do a quick recap here. So Step 1 was baselining the current performance and we talked about how to do that. Step 2 was analyzing the customer spend, and we just discussed how Tim is doing that at DHL. So let’s jump to Step 3, which is determining the market potential. What this does is it takes the output from Step 2, which what we call in our six-step process, frontier analysis, down to the individual accountant level. The output of this is the stack ranking of accounts, top to bottom based on spend potential, with the most potential at the top and the least potential at the bottom.


So moving from marketing segments and sales channel analysis all the way down to the individual account, this is hard to do when you’re a very big company, but we do live in the era of Big Data. So the tools are available to make this happen. This is a critical transition step because remember, we’re designing individual sales territories. So I want Bob who is my rep in Chicago to show up on Monday morning and know that he should be calling on these 37 accounts and start with Account Number 1, because it has more potential than Account Number 37.


So, Tim, talk to me a little bit about how you determine the value of each account. Do you stack-rank them based on potential?


Tim Robertson: This is, for me, to your earlier point, Greg, about ensuring that we have the right people in front of the right accounts at the right time, this is the mission-critical step in territory design. As you said, it’s not easy. Part of it is based on some hard science, but also I cannot really overemphasize the role that the salesmen plays in the weekly coaching sessions that we enforce out in the field to sit down with the rep and look at the territory, look at the portfolio, look at the opportunities and then discuss how they’re spending time in front of each of these opportunities.


Built into that process, we have a prioritization metric. I think it is not as probably rigorous as the SBI approach is. But one thing that we do to help on the prioritization is around the ability or the propensity for that customer or that prospect to buy multiple products from DHL, that’s one way that we force-rank the customers, we force-rank the market opportunity.


So if we see that a customer is likely to buy more than two or three products from us, then it moves up the prioritization chart and we want to ensure that the rep is spending more time, a disproportionate amount of time in front of that customer, particularly if it is an existing customer where we already have penetrated one or two products, because that third, a product sale or that fourth, a service sale is certainly less costly to the organization.


So that is the, I guess, the other dimension that we bring in here to help us support the reps in terms of which customers do they need to get in front of on a daily and a weekly basis.


Greg Alexander: You mentioned something there that is so critical, which is the role of the sales manager and how valuable local, tribal knowledge. We’re talking about doing a data analysis to design territories and augment a sales strategy by making sure we’re allocating the best people on the best accounts. That local sales manager has to drive the actual activity. It’s one thing to load all this information into an IT system and it’s another thing for people to actually use it.


I recently had a brilliant sales leader on SBI TV. His name is John Gleason, and he is the Chief Sales Officer of Ryder’s Fleet Management Business. And he spoke about how he does this. We did a territory design project for him and then he took it and gave it to his sales managers and build a cadence around it. It’s just a fantastic example of blending art and science. If you’re listening to this podcast, you’re going to want to watch this episode of SBI TV and you might not be familiar with it. So let’s go to a quick break and make the audience familiar with SBI TV and specifically John Gleason’s episode.


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Greg Alexander: Okay. Welcome back everybody. This is Greg Alexander, CEO of SBI. You’re listening to the weekly SBI podcast. Today, I’m having a conversation regarding territory design with Tim Robertson, who is the U. S. Vice President of Sales and Marketing at DHL. Up to this point, we’re about halfway through our six-step process design territory. Step 1 was baselining current performance, Step 2 was analyzing customer spend and Step 3 was taking this market potential information all the way down to the individual account, so we know which accounts have the greatest spend potential.


Let’s pick this back up on Step 4, which is, now we’re ready to progress to producing initial territories. The keyword there is initial. Here, we have to choose a territory design principle. And we ask clients to choose between three different options. The first one is customer concentration, which I’ll describe all of these in a moment. The next one is activity-driven approach, and the third one is trying to balance workload, which is a cost-driven approach. We refer to that as territory compression.


So just a brief description of each of these and then we’ll pull Tim and then see what his design principle is for allocating territories. So the customer-driven approach results in a named account approach. So here, a sales territory is a list of accounts, named accounts. When we usually see this in kind of a national account program or key account program or strategic or global account program, so that’s with the definition of that one.


The second one is an activity-driven approach, which results in an account approach that seeks balance. So, when I say activity, I mean kind of a workload analysis. So, how many sales calls do I need to make in order to open up a piece of business? What is the post-sale support requirement on me as a salesperson to maintain these customers over time? So it’s an activity-driven approach. There, you’re just trying to make sure that an average person can serve the territory correctly.


The third one is territory compression. This is usually a geographic assignment. This is where a salesperson sells to all customers, all products in a given geo. This is really used most often by companies that are trying to lower their cost of sale. So those are three design principles to think about. There’s others, but these are the ones that we see most commonly used. So, Tim, at DHL, what is your primary design principle when designing territories?


Tim Robertson: Yeah, Greg, so we – because of the sales channel approach that we have, having multiple different sales channels, we’re actually using probably two out of the three. So, as you mentioned, the customer-centric or customer concentration approach for national accounts or a key account management organization, that is exactly what we – the approach that we use without our strategic customers or our global customers. We may, in some instances, where there is a geographic cluster of an industry vertical. So, a good example, right, the hi-tech sector, we have a tremendous amount of hi-tech business in Silicon Valley in California, you have another cluster in Texas. You have some emerging customers now in the Northeast area in Boston, New York.


So we will first use the customer concentration design principle, but then, have a look at the geographic principle as well to ensure that we’re not having a rep that’s based in Boston cover a portfolio of accounts sitting in San Francisco. So that is one of the design principles we use. For our, what we call, our field sales organization, which is very much a territory-driven sales channel, but we are very much focused on the geographic design principles here, where within a zip code geography, that that sales rep is responsible for, for the customers in that geography.


Now, there is a caveat there, it is based on the sales segment, it’s based on the customer profile. So you can have, within that same territory, a telesales executive that is responsible for the small business customers and then you can have an account executive that is out in the field responsible for what we call the medium-sized business customers. So we use a, I would say, combination of the two approaches. The third interesting aspect of our business that we have is a part of the organization called Trade Lane Sales. And this is, I think, one of the unique aspects of our business and particularly our sales organization.


If you think about customers, we’re often dealing with both an importer and an exporter. So, a shipper here in the United States and then somebody that’s importing that elsewhere in the world. Depending on the terms of sale in the contract between those customers, the customer that we deal with may be the exporter here, but it may also be the importer sitting in China. So we need to have a way to attack that piece of business on both ends of the transaction and we do that through what we call our Trade Lane Sales organization.


That is an additional sales channel that supports the rest of our team structures to go out and drive trade where you have an importer or an exporter both involved in the decision making approach. The territory design for that organization is probably much more like the activity base that you’ve described here because it is much more about post-sales process, it’s much more market intelligence on the trade. So I think in reality, we’re probably using all three depending on the sales channel that’s going to market here.


Greg Alexander: Yeah, which is not surprising given how many employees you have and how many countries and how many customers, et cetera. I want to make a point to the audience. Those three approaches, one is embedded in the other, the question is what’s appropriate for you. And if you are a large business like Tim’s, it’s highly likely that you would use multiple design principles. So, really interesting to hear about that Trade Lane concept. My colleague, Aaron Bartels wrote a blog post detailing our approach to territory design all the way back in 2011. This blog has reached classic status for us for that it has been read over 100,000 times, if you can believe it.


So, those listening to this might want to read this blog post. So let’s take a quick break and let everybody know how to get their free subscription to the SBI Blog.


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Greg Alexander: Okay, welcome back everybody. This is Greg Alexander, CEO of SBI, and this is the weekly SBI podcast. Today, we’re talking to Tim Robertson, who is the U. S. Vice President of Sales and Marketing at DHL and we’re discussing territory design. We’re walking through our six-step process and we’re through Step 1 through Step 4. So let’s pick up on Step 5, we have two steps left. At this point in time, we have some initial territories.


So Step 5 is about rebalancing territory assignments. This involves rebalancing the previous step by focusing on things like the number of customers, the number of prospects, total market potential, average number of hours per week per rep, et cetera.


So the idea is to make sure that the territories as comprised can be served adequately by a normal person. Very often, we see too much work put on a sales rep or in some cases, we see too little expectations set for a sales rep.


The output of this exercise is a final step of territories. So, Tim, my question to you here regarding your version of Step 5 is this question of balance. So how do you balance territories at DHL?


Tim Robertson: I think this is really where, Greg, the expertise and the finesse of the sales manager comes in because as you rightly said before, we have used some technology and some tools and some systems to generate some reports. We’ve put some algorithms in, we’ve spun out some initial territories. Now, you need to get this in the hands of the sales managers, so they will look at based on their experience of covering their territories themselves, what is realistic, what is practical, what is underweight, what is overweight. It often doesn’t just come down to the number of customers sitting within a portfolio.


We look a lot at the geographic density of that portfolio. So, a portfolio in downtown Los Angeles will look extremely different to a portfolio that’s covering Northern Wisconsin. The only way that you can really properly balance the territories is, in my view, with the experience of the sales managers that knows exactly what is practical in terms of covering your customer base every 90 days in terms of visiting all of your up-traded every 90 days in terms of visiting all of your down-trading customers every 30 days.


So we use some of those basic principles. But then we let the sales managers make the ultimate decision in balancing the portfolio. Now we have, I guess, one of the advantages that we have today in our marketplace is it’s still a highly fragmented market with tremendous market potential. Depending on the market that we’re in, a market share may be no more than 10% or 12%.


So, there is a tremendous amount of upside. So we can always explain to the reps that there’s so much more potential and they will not be capped out or tapped out. So we use that – we use the sales manager inside and then we recognize this is an iterative process. You have to make adjustments as you go throughout the year. We think this is critical not just for driving sales performance, but also for driving commissions and incentives. So we do a portfolio and a territory review on a monthly basis between the sales rep and the sales manager.


We’re making adjustments throughout the year. So, as you say, we’re not unfairly punishing somebody because of a territory that we’re giving them. If we see a weakness, we make a quick adjustment and then they can get back out there and prove in the next 30 days that they now are a top performer or a high performer.


Greg Alexander: That’s a great lead-in to Step 6, which is creating territory plans. You talk about the monthly rebalancing. So this last step, territory plan, this involves assigning goals for the territories. These can be revenue goals, new accounts opened, share of wallet, which is something that you mentioned earlier. It also identifies the activities required and expected to accomplish each goal.


So tell the audience a little bit about this monthly management system that you have and how you are rebalancing and spot-checking goals and quotas for each of the sales territories at DHL?


Tim Robertson: Yeah, this is a critical part of how we drive sales performance. It also starts with how we hire people. It starts with how we train people. It’s how we train our sales managers to be the coaches for competitive greatness out in the field. That’s what their mission is. It’s built on a foundation of weekly one-on-one, what we call, performance dialogue sessions, where every sales rep every week will meet with their sales manager to do a very structured performance dialogue that looks at previous week performance, looks at planning for the upcoming six weeks, where we review their territory plans and which customers they’re going to visit.


Then we have a monthly performance dialogue as well that is a little bit longer in time, but now it gets more into details in terms of goals and performance. And that will be around two dimensions. We have our very basic portfolio sales goals that the rep needs to be perform, but then we have a number of, let’s call it, campaigns or initiatives that we’re driving. So good example is right now, we’re focused on selling a product that is called OCEAN CONNECT, which is a Less-than-Container Load product. Each rep needs to have a minimum number of opportunities. Each month, they need to have a minimum number of closes. So that performance dialogue on a monthly basis will review how the rep is performing around those sales initiatives.


And then thirdly, we look at some basic activity metrics around customer coverage, around percentage of down-traded visited, percentage of churn customers visited. These are where the sales manager will have the data at their fingertips to determine is the rep spending the right amount of time in territory and is it a territory design issue or is it a rep performance issue?


Those, let’s call it, management feedback sessions happen at all levels of the organization starting at my level. So I have a weekly review, weekly performance dialogue with my sales leaders. We then do a monthly management feedback session, and this cascades down through the organization. I love, when I’m out in the field, to sit in on the performance dialogues and really observe. I’m there to observe and after which give some coaching to the sales managers. But for me, this is one of the most rewarding and constructive aspects of my job.


Greg Alexander: Yeah, fantastic. Well, unfortunately, we’re out of our time limit here. I’m hopeful that those listening gained an appreciation for how important designing territories is and how to do it correctly by listening to Tim’s approach. If you want to learn more about this, you can go to our website, Salesbenchmarkindex.com and simply type in “territory design” into the search bar. And all kinds of information will come up.


So, Tim, speaking for the thousand of SBI podcast subscribers, I want to thank you for sharing your time and your wisdom. And we’re all the better for it.


Tim Robertson: Great, thank you very much. I hope something came out for the listeners here. And remember, when you think of logistics, you think of DHL. Okay.


Greg Alexander: All right, great. Thanks, Tim.


Tim Robertson: Thanks, Greg.


Greg Alexander: Bye, bye.


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