October 2011

Smarter Allocation: The Key to Greater Sales on the Same Budget

smarter allocation

When Bentley Systems, a global provider of software solutions for sustaining infrastructure with annual sales of $500 million, approached Wharton professor Len Lodish in 2009, it was spending US$71.5 million on its sales force. Lodish, an expert on improving the productivity of marketing decisions, used a Sales Force Strategy Model (SSM) to show the company that by optimally deploying its existing sales force across specific geographic areas, industry sectors, and product lines, sales could increase by 9.84 percent — pushing sales above the billion dollar mark.

Bentley Systems was able to move beyond the methods it once used to determine allocation of its sales force. That method, which is similar to ones used by thousands of organizations, used a straightforward formula that utilized gross domestic product (GDP) growth numbers by geographic area and budgets set by management. It resulted in arbitrary guidelines that did not adequately reflect future goals such as entering new markets and maintaining market share in strategic areas. In addition, the budgets set by management were partially based on information from the previous year.

While similarly positive results are possible for most organizations, a desire to stick with old decision-making frameworks can prevent them from achieving better outcomes. "It's the way we've always done it." Lodish says he hears this line every time he begins Wharton's Leading the Effective Sales Force program. "Participants are there to make improvements; they know there are better ways of training, deploying, compensating their salespeople. They know Paddy [V. Paddy Padmanabhan, INSEAD marketing professor] and I are the experts. But old frameworks aren't always easy to remove."

Past participant Victor van Solinge, global director of Sales Force Effectiveness for Merck Animal Health, agrees. "Incremental thinking can really hold you back," he notes. Many people are stuck in one framework and don't see that there are others that could prove more helpful. In the program, you learn to self-reflect, rethinking the fundamentals of your organization, including how budgets are set and resources allocated. At Merck Animal Health, we now take a deep look in the mirror every year, and systematically analyze what needs to change, and what should stay the same."

Lodish teaches participants to use a model similar to the one he introduced to Bentley Systems. He provides a software package that analyzes sales force deployment decisions as well as instruction in how to use the system to address specific organizational challenges. "In fact," says Lodish, "during the program, participants often find an opportunity to reallocate and thereby increase revenue and profit. They leave us with concrete ideas and a 100-day reallocation action plan to implement them. We check in via email once the program is complete to check progress on the plan."

Van Solinge stayed in contact with Lodish and Padmanabhan, and has worked with them on projects. He now returns to Wharton twice a year as a guest speaker/lecturer in the program. "I explain the practical side, how they can implement what they are learning. Leading the Effective Sales Force is not about beliefs and opinions — it's about research. This is a real strength. There is science behind the methodologies, and knowing the facts drives more rational decision making. It has had a very positive impact on what we do."