EVALUATION OF SALESFORCE SIZE AND PRODUCTIVITY THROUGH EFFICIENT FRONTIER BENCHMARKING

The efficient operation of a salesforce is a critical element in the p rofitability of many firms. Three factors play key roles: the salesfor ce's size, its allocation and its productivity. This gives rise to the following questions: can salesforce performance be improved by (1) hi ring more salespeople, (2) allocating them more effectively to the var ious sales districts and/or (3) improving salesperson productivity thr ough better calling patterns in terms of consumers and product line it ems? The practice of most firms and the methodology used in most of th e academic literature to address salesforce design and productivity qu estions is a ''Bottom Up'' approach. This approach starts with assessm ents by each salesperson of the sales and effort corresponding to each customer and prospect in their territory. These assessments are then aggregated to the territory, district and national levels. This paper takes an alternative ''Top Down'' approach. It is based on an estimate d relationship between district level sales and salesforce size, effor t and other variables. This more macro level decision tool can be used by management in parallel to, and as an objective check of, the more conventional and more subjective ''Bottom Up'' approach. We develop an efficient frontier methodology which allows us to estimate how total district sales respond to salesforce size, district potential and comp etitive activity in the firm's best performing districts. The methodol ogy utilized is based on Data Envelopment Analysis (DEA) and yields a benchmark measure of each districts efficient frontier sales (sales as suming the district's salesforce allocates its effort as done in the b est performing districts). Based on the estimated response function we discuss the three potential sources of increased profitability: closi ng the inefficiency gap of each of the lower performing districts, opt imally reallocating the current salesforce to the various districts, a nd changing the current size of the salesforce to its optimal level. T he inefficiency gap issue is addressed through comparison of the param eter estimates for the best districts obtained through our methodology with those of an average district sales response function obtained us ing regression analysis. This comparison points to an important method ological finding. The use of multiple estimation results may lead to a n improved understanding of the phenomenon being studied (in our case, the identification of the likely causes of district productivity inef ficiencies). The latter two sources of increased profitability, salesf orce reallocation and changes in the current salesforce size, are addr essed analytically given the district level efficient frontier sales r esponse function. The proposed ''Top Down'' procedure using the effici ent frontier methodology and the insights it provides are examined by evaluating the operations of two different sales forces, one selling m anufacturing equipment and the other business equipment. In both cases , regression-based analysis would have resulted in a declaration that the status-quo was close to optimal, while the frontier-based analysis pointed out that strong gains were possible in certain districts. In particular, for both firms, the greatest increases in profit are obtai ned through improved salesforce efficiency in the lower performing dis tricts, not through salesforce size or district allocation adjustments . At the more micro-level, a comparison of the frontier and regression parameters made it possible to identify which specific changes in the daily operations of the salesforces would allow the realization of th ese potential productivity gains. In our two cases this could be obtai ned through more emphasis on pursuing prospective accounts.