3 Ways to Uncover Sales Growth by Understanding ‘Market Potential’

Research indicates that the average company can increase profitable revenues by 10% or more through programs that improve sales organization structure, optimize sales force size and balance territory coverage.

Of course, to figure out the best way to deploy sales resources, CEOs need to work with their sales organizations to determine which customers are the most valuable to target. Leading sales forces know that market potential—or the amount that a current customer or prospect could buy from a company—is the keystone for accomplishing this and improving strategic and tactical sales force decision-making.

Knowing that 80% or more of revenue will likely come from 20% of the customers, a smart leader looks to customer potential as a way of increasing the odds that sales efforts will be richly rewarded through improved targeting and resource optimization.

Measuring potential is not easy. Many sales forces do not have estimates of local market potential readily available, and developing them requires work and creativity. These  approaches include:

Scott Sims1. Buying existing data. In many industries, including airlines, pharmaceuticals, publishers and catalogs, data companies sell information on sales of all competitive products by account or local market.

2. Deducing the data. If you can’t buy competitive sales data, you can likely buy or find data that is a good market potential surrogate. A greeting card company, for example, used U.S. Census Bureau data to estimate the potential of each retail store nationwide by looking at population and average household income within a 3-mile radius. In another instance, a company that sold insurance and financing as part of a bundled service offering on retail sales of motorcycles used customer demographics, competitors, the presence of local credit unions and the onset of spring weather (which triggered an increase in motorcycle sales) to predict territory potential.

3. Building the data. This can be done in two ways. First, you can conduct primary market research to create market potential data. For example, a seller of contact lenses demonstrated this type of research when it surveyed ophthalmologists across the country to determine the size of their practices and their need for the company’s products. Second, you can ask the sales force to conduct market research. A medical imaging company in one instance asked its salespeople to collect data on the type, manufacturer and acquisition date of installed equipment at every hospital and imaging center in their territories.

GE Fleet Services, a business within GE that leases over-the-road trailers to trucking, retail and manufacturing companies, used estimates of customer market potential to help the sales force focus effort on the most attractive opportunities and ultimately meet ambitious revenue growth goals. Customer profile characteristics such as fleet size and composition, company size and industry, were used to predict customer potential. The information allowed the business to redeploy several sales territories into more lucrative markets, to increase qualified leads by 33% in one year, and to increase sales productivity by 7%. The business gave back a budgeted $2 million for additional headcount because the productivity improvements allowed the sales organization to meet growth goals without adding salespeople.

While companies should reevaluate measures of customer potential periodically as a business standard, they should especially take notice in any of the following occurrences:

  • Changes in customer demographics, needs or buying processes
  • Changing economic conditions
  • Advances in technology that can improve timeliness of data provided to salespeople
  • Changes in the competitive environment
  • Shifts in the product portfolio
  • Evolving company marketing goals and strategies
  • A new sales process or go-to-market model
  • Sales force feedback suggesting inconsistencies in the quality and usefulness of customer potential data
  • Data analysis showing a weak correlation between account potential and account sales across the customer base

Understanding local market potential significantly improves sales force decision-making, and estimates of potential—even imperfect ones—are better than no estimates at all. CEOs that encourage their sales organizations to invest to develop measures of account or territory market potential will see payoffs through improved productivity and higher sales and profits.

Scott Sims
Scott Sims is a Managing Principal with ZS in Chicago, Illinois. With 31 years of sales and consulting experience, Scott has worked with over 200 companies in high technology, telecommunications, industrial and professional services markets. He is a co-author of The Power of Sales Analytics, written by more than 20 thought leaders from ZS.

PARTNER CENTER