MT455 Unit 3 Sales Coverage Model Analysis Example

Sized by Workload, Priced by Segment: An MT455 Unit 3 Coverage Model Analysis for an Access Control Company

[Student Name]

Purdue University Global

MT455: Strategic Management of Sales

Unit 3 Coverage Model Analysis

[Instructor Name]

[Date]

Keystrand Access, its segments, its costs and every figure are composite; the sources cited are real.

The Question

The Unit 2 memo concluded that Keystrand Access, a composite maker of door readers, locks and cloud access control software, deploys its sellers against the strategy: field sellers spend most of their hours on small deals, while health systems and large apartment operators, the segments the board chose, go underserved. This analysis designs a coverage model from the ground up and prices it.

Two Tests, Applied in Order

Every segment is assigned a channel by two tests, always in the same order. First, what is the segment worth: the average annual value of an account and how much selling cost it can bear. Second, how do its customers buy: whether they expect in-person meetings, involve many people, negotiate centrally or prefer to buy without a seller at all. Value alone would push the most sellers toward the richest accounts regardless of how they buy; buying preference alone would ignore cost. Zoltners et al. (2004) recommend sizing a sales force from the workload each segment requires rather than from last year's headcount, and the model follows that method.

The Workload Method

For each segment the model estimates the number of accounts, the contacts each account needs in a year and the contacts one seller in the assigned channel can make. A field seller, traveling to meetings, can make about 560 meaningful customer contacts a year. An inside seller, working by phone and video, can make about 2,400. Dividing a segment's total contacts by the channel's capacity gives the headcount. Loaded annual cost is about $232,000 for a field seller and $118,000 for an inside seller.

Health Systems and Campuses

There are about 380 health systems and university campuses in Keystrand's regions. Each needs about 16 contacts a year, because a sale involves security, facilities, IT, compliance and clinical leaders, plus an integrator partner, and renewals require ongoing attention. That is 6,080 contacts, which at 560 per field seller needs 11 field sellers. The cost is about $6,700 per account against an average annual account value of about $58,000. Value supports field coverage, and buying behavior confirms it: these buyers expect site walks and in-person security reviews.

Large Multifamily Operators

About 110 operators each manage more than 5,000 apartment units. Each needs about 15 contacts a year, mostly at headquarters, where portfolio-wide contracts are negotiated, and then during rollout. That is 1,650 contacts and 3 field sellers, at about $6,300 per account against an average value of about $74,000. Value alone would push field sellers here, and buying preference confirms it: operators negotiate in person at headquarters and expect one owner of the relationship.

Mid-Market Multi-Site Customers

About 3,400 mid-sized organizations run several sites: clinics, offices, schools and retailers. Each needs about 5 contacts a year, and these buyers are comfortable with video calls and online demonstrations. Their 17,000 contacts become 7 inside sellers at 2,400 contacts each, about $243 per account against an average value of about $9,800.

A comparison row tests the alternative. Covering the same mid-market with field sellers would need 30 people, at 560 contacts each, and cost about $2,047 per account. That is more than a fifth of the segment's average annual value spent on selling alone. The comparison is the clearest single argument for inside coverage.

Field coverage for the mid-market would cost more than a fifth of what each account is worth.

Smaller Multifamily Owners

About 2,400 smaller apartment owners each need about 3 contacts a year. Their 7,200 contacts become 3 inside sellers, about $148 per account against an average value of about $4,200. Owners at this size buy by phone and often through an integrator who installs the hardware.

Single-Site Small Businesses

About 21,000 single-site businesses buy a few readers and a basic subscription, with an average annual value of about $1,900. No seller can cover them economically. Instead, 4 partner managers, at about $165,000 each, work with the integrators who already install security systems for these businesses, and a digital program at about $942,000 a year runs online quotes, self-service ordering and marketing. Together these cost about $76 per account.

How Accounts Move Between Channels

Segments are not permanent. A mid-market customer that grows to a dozen sites and begins asking for in-person security reviews should move to a field seller, and a small apartment owner that sells most of its buildings should move to the partner channel. The model sets two triggers for review: an account whose annual value passes $40,000 is reviewed for field coverage, and an account whose value falls below $2,500 is reviewed for partner or digital coverage. Reviews happen twice a year, and an account in an active sale stays with its seller until the deal closes. Without such rules, sellers tend to hold on to accounts that have outgrown or shrunk below their channel, and the costs the model was built to control creep back.

Totals

The model totals 14 field sellers, 10 inside sellers, 4 partner managers and the digital program. Field coverage costs about $3.25 million, inside $1.18 million, partner management $660,000 and the digital program $942,000, for about $6.03 million a year. Today's organization of 38 sellers and their support costs about $7.48 million.

What the Difference Is For

The difference of about $1.45 million is not a saving to be banked. The model covers new business and expansion, but it does not yet size coverage for renewals of the growing subscription base, which the strategy depends on. Renewal coverage will be sized separately once renewal volumes by segment are known, and the difference is held for it. Rackham and DeVincentis (1999) argue that sales organizations create more value when they match the cost of selling to the value each type of customer places on the seller's involvement, and the renewal question is exactly that.

Limits of the Model

Three limits apply. Contact capacities are averages, and a seller new to health systems will make fewer meaningful contacts in the first two quarters. Contacts per account are estimates from current sellers and should be checked against a sample of actual account histories. And the model assumes integrators will take on single-site customers; if partner recruitment lags, some single-site demand may go unserved for a year. Johnston and Marshall (2021) note that coverage models should be revisited as soon as real workload data replaces estimates, so the model will be rerun after two quarters.

References

Johnston, M. W., & Marshall, G. W. (2021). Sales force management: Leadership, innovation, technology (13th ed.). Routledge.

Rackham, N., & DeVincentis, J. (1999). Rethinking the sales force: Redefining selling to create and capture customer value. McGraw-Hill.

Zoltners, A. A., Sinha, P., & Lorimer, S. E. (2004). Sales force design for strategic advantage. Palgrave Macmillan.