In today's business climate, sales organizations think that they have to increase their activities to counteract the increased reluctance of customers to buy. These increased activities will however not necessarily be rewarded by higher revenue.One might end up trying to get more juice from an already squeezed out lemon. Read below the thoughts of Ian Brodie, triggered by my mentioning of diminishing returns to sales calls in a previous post:
“A few years ago I was involved in some consulting work for a large pharma company where we used Operational Research techniques to try to identify the optimum call frequency for doctors. Normally you can’t do this in Europe because you don’t know the exact number of drugs prescribed by each physician (only the number of prescriptions picked up in pharmacies in postcode “bricks”). But in our case we could – it was vaccines delivered and used at each clinic so we knew exactly what the demand was and could correlate it to the sales calls.
Traditionally, the company had concentrated on calls to high prescribing physicians. Any extra resources it had it put into more calls to these physicians.
But our statistical analysis identified that after about 10-12 calls per year to this group, additional calls made no difference. They had heard the message and bough in to it – any extra calls were just “preaching to the converted”.
In contrast, there was a distinct segment of physicians who were typically younger and early on in their careers, and who prescribed less – but an extra visit to those physicians generated a significant increase in sales.
Then finally there was a group that no matter how many times you visited they weren’t going to prescribe your product.
The company ended up diverting resource from both the non-prescribers and some from the over-visited high prescribers to the middle “high response” segment – and sales went up by nearly 20% - a huge leap in the competitive pharmaceutical world.
I still see today many segmentation models being used which aim to put the most resources to the “biggest” customers – not necessarily matching resource with where the highest response may come from.”
Let me add another spin to Ian's conclusion: While not all sales organizations will be in the fortunate position to produce such hard evidence to segment their territories, all can develop a certain level of understanding where to focus activities on. The first step is though to be willing to break away from some “handed down management wisdom” like bigger is better or that increased activities lead to a higher chance of making the numbers.
If you want to read more from Ian Brodie, you can visit his blog Sales Excellence.