This KPI class measures the level of ‘feet on the street’ in a given location. In other words, it measures our ability to reach the prospective customer, within a given location. The Sales Revenue through Geographical Spread along with Sales Force Density gives the overall presence of an organization.

Business Objective behind this KPI-Class:

Optimize the sales channel density given the business objectives

Explanation & Specification

Sales channel density KPI class is an important component in terms of how an organization manages it business reach to the end-customer. Here is how this KPI ‘could be’ linked to the organization performance, and how it can be interpreted in different ways given the organization context:

• A higher sales channel density means that we have a better reach to the customer
• A higher sales channel density means that we are overcrowding our presence leading to same customer hounded by multiple sales staff.
• A higher sales channel density means that we are compromising width for depth.
• A lower sales channel density means that we are not investing enough into the channel.

Therefore a lot depends on what is your strategy, and this defines your expectations out of the KPI

Definition

Sales channel density is the number of sales staff  OR number of sales outlets per unit of target customer base.

Calculation formulae

Sales force density calculation is= the number of sales staff OR number of sales outlets /Number of potential customers in a given location

Type of KPI

• Why (Is a KPI class which support a higher level KPI. A performance on this KPI is not directly linked with the business performance)
• Leading (Help projecting performance)
• Balance-Sheet or ‘at a point of time’ (tells the status of KPI at a point- like balance sheet account)

Examples of KPIs in the sales force density KPI class

• Sales channel density for total sales force
• Sales channel density for active sales force (every business has its own definition of what is an active sales force)
• Sales channel density for core location only
• Sales channel density including non-core locations (this includes the locations where sales force is not in direct reach, but can still access the customer (by long travel ..)
• Sales channel density for core customer segment
• Sales channel density for core customer segment
• Sales channel density including non-core segment. This includes more liberal definition of customer segment. For example you may define, ‘employed with age more than 35 years’ as you core segment. Your non-core segment could be ‘employed with age between 25 and 35 years’
• Sales outlet per unit of target customer segment- Sales outlets is another derivative of sales force

Inclusions

These are typical inclusions you should do to get clearer picture

• Take average sales channel density for a period, instead of end of the period. This means that numerator (Sales channel) as well as the denominator (customer base) can be taken as daily or weekly average. Customer base numbers don’t change fast and one may not be concerned about that area. The sales channel numbers may change fast and averages will work better here.
• Sales channel can include different hierarchies. For example – Apart from regular sales force interacting with the customer, you may also like to include the people not closing the sale but helping in the sales process like telemarketers.

Exclusions

• Look at the sales force density from ‘total sales force’. ‘active sales force’, ‘inactive sales force’.
• You may like to view this KPI both from the existing customers, total customers (existing and potential) and only potential customers, . Though the existing customers will always form a small %age of the total potential customers, it may give us a more accurate perspective, especially if you are market leader.

Clarity is needed on:

• How do you define the customer base?
• How do you measure the customer base? Generally you should rely upon a third party authoritative data

Success Factors of sales channel density

You can refer sales channel density management page for more details

• Maintaining the value proposition for the sales force
• Managing Conflicts within the sales force on same customer (s)
• Ramping-up and ramping down capability
• Minimize the linkage between the density and absolute sales compensation
• Level of Active sales force

Interpretation and root-cause analysis

Apart from looking at the success-drivers (as mentioned above and which will point to most of the root causes), one can also look at some other root causes:

If the KPI performance is coming lower than expected,:

• Check the sales channel hiring pipeline- it could be a timing issue.
• Tenure of your office or launch could be less, as it takes some time to higher the peak level sales force.
• Budget constraints- Shareholder might want to test the market before investing more..

If the KPI performance is higher than expected,:

• Are we looking at entire sales channel force or only active.
• Has there been a sudden hiring (as it some times is not possible to hire in absolute organic way (campus hiring, hiring campaign through advertising, hiring from competition..)

Measures of sales channel density

• Number of Sales channel outlets
• Number of sales channel staff
• Number of existing customers
• Number of potential customers

Dimensions or attribute on which you can slice and dice the Sales channel density KPI class

• Location (sales channel density for London area)
• Product (If you products are diverse and you are having different sales force selling different products)
• Business Unit (different business units having different sales force)
• Time (sales value density for a period)
• Tenure slab of sales staff
• Sales channel status (active-inactive)
• Sales channel

Direction of improvement

Depends on business objectives. Typically the direction is to “optimize”

Industry Relevance

All

Functional Relevance

Sales & Distribution