Potential vs. Penetration

Having an estimate of account potential gets you only halfway there. The second critical item is account penetration — the ratio of the account's current annual sales to the estimate of account potential. With these two data items, along with gross margin performance by account, you are ready to begin some very powerful, data-grounded, sales territory planning.

The scatter diagram below is a great illustration of why you need both data items. Account penetration has been plotted for about 1,000 accounts, broken into three groups on each axis. What does this chart tell us?

 

1.   Highest penetrations (over 10%) are concentrated in accounts with the lowest potential.

2.   Lowest penetrations (none to 1%) include at least 50% of the accounts analyzed.

This picture becomes even more striking when you break it down by sales rep. In fact, you can almost assess sales rep performance by comparing such charts.

Balancing Sales Territories

With account potential estimates available, you will be able to assess sales territories in terms of balance. You are likely to discover wide differences in territory potential ...more...

 

A Very Scary Chart

This is a real chart from a large, smart, well-managed company. To us, it is a truly scary chart if you think about what it says:

Most of the highest potential accounts are in the none or low penetration categories.

At least half of the medium potential accounts are in the none or low penetration categories.

Worse yet, if you were to overlay this chart with the account sales rep's estimate of time allocation, you would probably see the largest allocations concentrated in the low potential area.

If so, it would seem that the selling effort targeting might be entirely misdirected.

You often see this sort of pattern in sales organizations where quota-driven order-taking dominates true selling. It is usually easier and faster to get orders from smaller accounts.

Properly targeted selling normally allocates time according to sales potential. This messes with quota-driven compensation so that the comp scheme must usually be adjusted as well.

These charts can be amazingly powerful sales planning and management tools.