Claim & Commit: Using Total Addressable Market To Improve Sales Force Segmentation
min(s) to read
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April 25, 2022
Written by
Tom Hill
When working to define total addressable market (TAM), this is what we landed on: A measure for analyzing the total market demand for a specific offering and determining the maximum amount of revenue a business could possibly generate by selling in a specific market. Though it’s virtually impossible for a business to completely capture its TAM, it can be a useful measure for financial modeling and planning.
When TAM is defined for revenue segments, it clarifies how resources can best be allocated strategically across verticals such as industry and company size. Here, we present a case study showing how one company used an approach we call “claim and commit” to improve their share of TAM.
The company suspected there were untapped pockets of their market, which proved to be true. By indexing industries to the company’s product and expertise in serving those industries, we found that the sales team was under-penetrating several large segments. They were spending too much time on industries with relatively low close ratios and not enough on industries where their products were highly valued and win rates were higher. This analysis enabled the company to determine which industry verticals they should avoid and improve deployment through segmentation to prioritize in their sales efforts.
It also emerged that the company’s sales team was not optimally deployed to pursue large accounts and their subsidiaries. Our TAM analysis revealed that close to 45% of the revenue associated with mid- and small-market clients resided with the higher-level enterprise (greater than $2 billion) and corporate ($200 million to $2 billion) teams. This was because company rules of engagement specified that all subsidiaries of a parent account were owned by the account’s rep.
The result was that a small enterprise team now owned thousands of accounts that were subsidiaries of their main accounts. Unfortunately, this allocation of resources resulted in sub-optimal service to the smaller accounts, meaning lost opportunities. How could this issue be solved?
We initially recommended that the company assign new subsidiary accounts based on the subsidiaries’ revenue size, with exceptions made for cases in which centralized buying practices by the parent company made it clearly advantageous to combine the parent and subsidiary accounts with one rep.
However, our client lacked data on centralized vs. decentralized buying practices within the corporate structures of their accounts, leading us to develop an alternative solution that could be more easily implemented and relied on sales rep input and field knowledge.
We developed three options for account assignment, each based on a different pursuit approach.
For cases where the parents and subsidiaries remained tightly bound together, we recommended increasing quotas for the enterprise and corporate teams. The new quotas would more accurately reflect the potential of the accounts assigned, while also motivating greater sales activity since quotas could not be met with the existing penetration levels.
However, while this assignment option would strengthen the company’s commitment to each account, it could potentially increase risks—primarily the potential for the enterprise and corporate accounts to reach the limit of their account serving capacities. This risk can be mitigated by integrating the other assignment options into the total strategy.
The “claim and commit” option takes a Goldilocks approach to account pursuit, in which some are too large, too small or “just right.” In this option, the enterprise and corporate account owners would review all the subsidiaries currently assigned to them, labeling each subsidiary as either parent-centric or decentralized based on their familiarity with the accounts. They would then “claim and commit” to servicing only the parent-centric subsidiaries. The remaining unclaimed subsidiaries would be re-classified and reassigned to appropriate sales reps by their revenue/territory segment.
Optimizing this approach requires establishing an annual review process for claims and criteria for ‘de-claiming’ accounts. It also means balancing realistic capacity levels with quota settings that reflect the true potential of claimed accounts. To that end, claimed accounts need to receive minimum effective levels of sales activity, so in addition to setting motivational quotas, the company needs to ensure that sales reps are actually reaching out to the accounts they have claimed.
The “open season” option loosens the bonds between parent and subsidiary accounts even further. In fact, it eliminates consideration of parent/subsidiary relationships and allows reps to pursue any subsidiaries that fall within their segments.
The main challenge of this approach is that it limits upstream and downstream pursuit of parent and subsidiary accounts.
The final step in implementing this segmentation and assignment strategy was setting a workflow. We recommended using the claim and commit process as a workflow foundation to define how marketing, sales operations and inside sales interact and route new opportunities.
At this stage, enterprise and corporate account owners would review all subsidiaries currently assigned, designate these accounts as parent-centric or decentralized and “claim and commit” to servicing parent-centric subsidiaries. Any subsidiaries not claimed would revert to a revenue/territory model of assignment.
Resulting from this approach, sales forces should see improvements in seller efficiency as measured by average days to close and average revenue per account, along with better camaraderie and teamwork between company teams and leadership.
