Sales Response Functions (also called Sales Response Curves) are a fundamental concept used in SizeMix and other Sales Force Optimization solutions.
In its simplest form a Sales Response Function is the cause and effect relationship between selling effort and sales. Figure 1 below is an example of a sales response function.
If you know the Rep Equivalents you can use the Response Function to predict the likely sales. In the example above, at 10 Rep Equivalents (REs) the sales of SuperProduct will be $91 million. However, at 20 REs the sales will be $104 million.
Sales Response Functions normally have the following characteristics:
- They are normally non-linear i.e. the incremental response to the first RE is normally different from that of the fifth RE.
- Generally, Sales Response Functions exhibit diminishing marginal returns, which means as you add sales reps it becomes progressively more difficult to generate incremental sales.
- “S” shaped Sales Response Functions are sometimes observed for new products, where a threshold of effort must be reached before diminishing marginal returns are observed.