Next year Cozmix will be launching a number of sales force strategy resources. The first one will cover customer segmentation. At this stage we’re doing research. But in the age of social media I thought it would be interesting to get some input from friends and colleagues scattered afar. Of course all comments and suggestions will be acknowledged in any materials we create (and you’ll get a complimentary copy). Please enter your comments in the comments section at the bottom of this page or email me at firstname (steve) dot surname at yahoo dot com (this is my personal email address as I don’t want spam to my business email). Don’t feel as if you need to answer all of the questions – all insights are appreciated. So here goes:

1. What are some of the basic mistakes you’ve seen companies make when it comes to customer segmentation?
2. What needs to be in place before you segment your customers?
3. What are the warning signs that indicates the current segmentation of customer needs to be reviewed?
4. How often should you review your customer segmentation?
5. What approach can you use to segment e.g. Market Data Segmentation, Simple Attribute Segmentation, Modeled Potential Segmentation, Attitudinal Segmentation, Latent Class Segmentation – have I missed any?
6. Does anyone actually use Attitudinal Segmentation or Latent Class Segmentation?
7. How many segments are appropriate?
8. What are the common implementation “gotchas” that people have encountered (and how do you avoid them)?
9. What other systems interact with the segmentation i.e. what systems we need to be mindful of when we re-segment (CRM comes to mind)?
10. What is best practice when communicating the segmentation to the sales force?
11. Any other insights?

Please get in touch if anyone has a case study that they are able to share, or if anyone is willing to be interviewed about a recent segmentation exercise they have gone through (and the lessons they learnt).  As I’ve already said, all contributions will be fully acknowledged.

You might think that once you’ve designed the sales territories you can leave them alone and just focus on managing sales and the reps.  Well that’s a big mistake – the truth is all sales territory alignments decay over time and the decay is detrimental to sales in the long-term.

Recently we helped a client realign their sales territories.  It was a company we had worked with many time before.  In fact we had designed their sales force alignment four years ago.  In those four years the company’s business hadn’t really changed much.  No significant product launches and no changes to the teams size.  It had been four years of steady-as-she-goes stable growth.  At the start of the project I had assumed there would only be a few changes (I assumed most managers would value stability).  I was wrong.  When we took a closer look at the alignment it had decayed.  By this I mean there were incontiguous territories, ugly territories and a wide variation in the workload and potential across sales force.  In short – it was a mess.  In those four years since the last sales territory design project the alignment had been pushed, pulled and prodded in every way possible.  After thinking about this for some time I identified the following reasons why sales territories decay:

The biggest source of sales territory decay is due to accommodating short-term circumstances, where there is a temporary change to the alignment which is intended to be reversed within six months but in reality take much longer. For example if a rep goes on maternity leave their territory may be covered, in their absence, by the three or four neighboring reps.  This would seem much more desirable than leaving the territory vacant for two to six months (or a year if its Canada!).  But nevertheless there is at least some temporary decay to the alignment.  And of course on occasions reps do not return to work after maternity leave, resulting in long-term decay to the alignment.

The second most significant cause of alignment decay is accommodating sales reps circumstances.  Taken one-by-one the reps circumstances are invariably reasonable.  The most common being, “I live just outside of the territory, can I have the zip code where I live aligned to my territory?”.  Other I have encountered over the years include:

My girlfriend / boyfriend / fiancé / parents lives in this zip code

I drop my kids off at school in this zip code

My Father / Godfather / Fraternity Brother owns an account in this zip code

All the reasons seem to have at least some validity.  But reps change; and these quirks of the alignment tend to go unnoticed, leading to territory alignment decay.

The two reasons given thus far are orientated around the sales rep and their personal circumstances.  There are also business reasons why the territory alignment decays.  There are changes to the customer segmentation.  For example, an account may initially be a low potential account – but after the launch of a new product (i.e. a change to the product portfolio), in a new category, the account may be bumped up to top priority status (which needs more calls).  Or an account may naturally grow and need to be reclassified.  Whatever the reason, the results is change to the workload of the territory, which when added up with other changes to the segmentation results in a decay in the balance of the territory alignment.

If you accept that sales territories decay you need to carry out regular audits.  We’d recommend and annual alignment audit (which we can help you with).  As regards the recommended frequency for a full realignment; that’s a topic for another post.

It would seem to be such an advantage for a sales rep to be able to take an order.  They are able to see immediately if their closing techniques actually work.  If they do or don’t manage to get the order they have a feedback point to add to their repertoire of knowledge which hopefully will enable them to fine tune their selling skills.  As a result, industries which do not allow their sales reps to take orders (e.g. ethical pharmaceuticals) often look with envy at those which do (e.g. over-the-counter medication).  But is it really that simple…

From our work with sales forces we have found that taking an order may, in many situations, be more of a distraction than a benefit.  Let me explain by asking a question – is the role of the rep to sell product in to a customer (who will then sell it on to the final consumer) or to build the brand equity of the product in the mind of the retailer?  If the rep focuses on clearly showing the retailer (e.g. a pharmacist) the benefits of a product (e.g. what it does, when it should be used, who should use it, who should not use it, etc.) the retailer is then is a good position to confidently make recommendations to their customers.  This encourages product usage i.e. sell-out.  And if there is sell-out, there will be no problem selling in.  In contrast if the rep focuses on selling the product in, there is a risk that the customer (e.g. the pharmacist) makes the order without fully understanding the unique aspects of the product.  And without a full understanding of the product benefits they are less likely to recommend the product to their customers and more likely  to view it as a commodity.  If as a result of few recommendations the product sits on the shelf you are going to get more returns and the retailer is going to be more resistant to future sell-in activity.

Another more subtle potential problem with an order centric business is the limit it can have on call frequency.  If the reps thinks they must take an order on each visit, the call frequency will be limited to the amount of stock and the rate of sales.  This call frequency may be much lower than what is necessary to communicate all the necessary marketing messages.

Here are some points to consider if you are in an industry where the sales force takes orders:

• Highlight to the sales force the different tasks to be performed in a customer call (e.g. detailing the products, merchandising, checking stock and taking an order) and underline the importance all tasks, not just taking the order
• Make it clear to the reps that it is quite acceptable to make a call, or customer contact, without taking an order as long as they are completing their call objectives and communicating the marketing messages to the customer
• When on a ride-along with a rep look out for the time they spend explaining the product benefits.  Ask yourself if they are clearly communicating the marketing message or if they are moving as fast as possible to get an order?
• Review the bonus plan and consider penalizing reps for product returns due to overstock

Naturally the applicability of this article will vary from industry to industry and country to country.

We have just come back from a trip to Moscow.  It’s my first time to Russia (although we’ve worked in Eastern Europe many times before).  We managed to taste the local food and see the classic sites (Kremlin, Red Square and St Basel’s church).  Of course we weren’t there for fun, we were helping a client with some Sales Force Sizing and Resource Optimization.  In the days of communism there were virtually no sales reps (who needs reps when the government controls supply and demand).  This means the people who are now sales reps probably didn’t train to be reps.  Here are some generic insights which you may find helpful if you’re setting up a sales force in Russia:

• Most of the sales reps will have degrees or professional qualifications.  For example a medical rep will most likely be a qualified doctor or an animal health reps will most likely be a veterinarian.  This sounds great, and it often is, but there are potential pitfalls.  I have seen cases where the sales force sees their role as one of a “lecturer” rather than a sales person.  If this is the case, the reps will normally focus on the technical aspects of a product and skim over (or even ignore) the sales process.
• Geography would seem to be more important in Russia than in most other countries.  Russia spans nine time zones which covers many different climates and regional cultures. In the context of sales force sizing it may, in some cases, be wise to create regional detailing plans (especially if the portfolio has seasonal or climate dependent product).  This means not all sales reps will have the same selling priorities at any given time.  CallMix is a great tool for creating more complex detailing plans.
• On the financial side, Moscow seemed to be an expensive city. I had expected it to be quite expensive but US$40 for a buffet breakfast in a mid range western hotel is crazy!  The sales reps turn out to be quite expensive as well.  It’s not that they are paid exorbitant salaries and bonuses but more the taxes and additional running cost which mount up. In the context of a Sales Force Sizing analysis the expensive reps will push down the optimal size of the sales team since we need to make a healthy return on each ruble invested.

Cozmix Inc. Signs Partnership with Trends Consultoria, Brazil’s Leading Sales Force Optimization Consultancy

Trends Consultoria will be the representative for Cozmix in South America, promoting and supporting Cozmix’ sales force optimization solutions, SizeMix, AlignMix and CallMix.

ORLANDO, FL, September 27, 2010 – Cozmix Inc., a US based sales force strategy consultancy and software development company, has partnered with Trends Consultoria, based in São Paulo Brazil.  Trends Consultoria will be the South American representative for Cozmix’ sales force optimization solutions; including SizeMix (sales force sizing), CallMix (sales for structure) and AlignMix (sales territory design).     

SizeMix is an easy to use yet powerful sales force sizing and resource optimization tool that puts sales managers in greater control of their sales forces.  Now, instead of hiring outside consultants, managers can utilize the SizeMix Process to size and optimize their sales force in-house as part of the standard business planning process.

AlignMix is Cozmix’ new sales territory design solution, which has been designed as an easy to use sales force alignment application.  Cozmix will be working with Trends to customize AlignMix for the Brazilian market.  Visit the AlignMix website for more information (http://www.alignmix.com).

Steve Maughan, President of Cozmix, looks forward to the relationship with Trends Consultoria, “Our partnership with Trends Consultoria is a great opportunity to penetrate the Brazilian and South American markets which have tremendous potential.  We look forward to a successful long-term relationship with Trends”.

For more information please contact Cozmix (http://www.cozmix.com) or Trends Consultoria (http://www.consultoriatrends.com.br/).

Cozmix Inc. is pleased to announce that the next version of SizeMix, its sales force sizing and optimization application, has entered the beta testing phase.  Version 3.0 is a significant upgrade which brings improvements in power, speed, reporting and usability.

Cozmix is pleased to announce the launch of its new website and branding.  The new logo refects the “optimization” component that runs through most of our products and services, while the website provides a framework for adding additional products and services.