World Class Territory Design Process Step 2 resized 600

 

This step is grounded in the belief that past behavior is the best predictor of future actions.  Therefore, existing customer spend is analyzed to look for predictors of future spend potential.  Before getting deep into the analysis, it is necessary to brainstorm a list of firmographic attributes that could drive spend levels within your customers.  A partial list of characteristics World Class companies contemplate using include:

 

  • Revenue
  • Market Cap
  • Industry
  • # Employees
  • # Locations/Facilities/Stores
  • # Customers
  • Size of Fleet
  • Geography
  • SG&A Spend
  • R&D Spend
  • Operating Income
  • Net Income / Earnings
  • Revenue Growth
  • Earnings Growth
  • Debt/Equity Ratio
  • Offering – Product/Service
  • Decision Making – Central/Decentral
  • Ownership – Public/Private/Non-Profit/Government
  • Market Share
  • Credit Score
  • Willingness to Outsource
  • Acquisitions
  • Industry/Government Regulations
  • Etc

 

With the list of characteristics identified, it is now time to enrich the existing customer database to add the attributes you want to analyze.  Often this requires additional data buys and the concatenation of lists.  Once the full customer database is populated, correlation analyses are run looking for the attributes with the greatest determination on past spend levels (including associated confidence levels).  An example of the analysis is displayed in the figure below which maps customer revenue to customer spend:

 

Territory Frontier Analysis resized 600

 

If the correlation proves strong, then a spend frontier is applied.  It is not advised to use average or median spend for the frontier as that often understates the opportunity within accounts.  It’s also not advised to use the maxim spend as this often overstates the opportunity within accounts.  World Class companies typically use the 80th percentile spend for their frontier assignment – if you have 10 customers, sorted highest to lowest you would roughly take the spend level of the 3rd highest customer.

 

With the attributes and the frontier determined, customers can now be clustered in “segments”.  Within each segment a spend potential is assigned.  The example below shows how assigning accounts to industry and revenue “segments” then applying an 80th percentile spend frontier to project expected revenue from each account within each segment.  

 

Territory Spend By Segment resized 600

 

In this case a “small” Consumer Products company should spend $132K while a “medium” Professional & Business Services company should spend $918K while a “large” Technology & Software company should spend $1.98M.

 

These are a couple examples of the rich information that can be mined from existing customers.  This step forms the baseline that will allow us to determine market potential and complete our territory design.

 

ABOUT THE AUTHOR

Aaron Bartels

Helps clients solve the most difficult challenges standing in the way of making their number.

He founded Sales Benchmark Index (SBI) with Greg Alexander and Mike Drapeau to help business to business (B2B) leaders make the number. The world’s most respected companies have put their trust in and hired SBI. SBI uses the benchmarking method to accelerate their rate of revenue growth. As an execution based firm, SBI drives field adoption and business results.

His clients describe him as a consultant who:

 

“Makes transformational impacts on me, my people and my business”

 

“Solves my most difficult problems that to date we have been unable to solve ourselves”

 

“Brings clarity to an environment of chaos”

 

“Has real world sales operations experience making him qualified to advise us on a variety of sales and marketing challenges”

 

“Is able to spot proven best practices that once implemented will make a material impact on my business”

 

“Constantly challenges status quo and compels us to act”

 

“Focuses on execution and driving change to stick in our environment”

 

“Makes good on his promises while enabling our business to realize his projected results”

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