Pooling sales forces, a lucrative strategy for food and fast moving consumer goods groups?
Some manufacturers are switching from several specialized sales forces to a pooled salesforce. What are the reasons behind such an approach and what conditions need to be put in place for it to succeed?
Regarding the mass retail sector, the long-standing fundamental tendency of food and fast moving consumer goods (FMCG) companies has been to specialize sales forces by product category or brand. For the past few years, large groups – such as Danone, Pernod-Ricard or Mondelēz International – have been adopting a different strategy: reorganizing their sales forces so that each sales outlet no longer has a point of contact for each range/product category, but a single point of contact. The question is why?
A tendency boosted by the economic situation
If a priori this pooling runs counter to the area managers’ (AMs) “shelf expertise” that previously held sway, it addresses challenges and problems that the economic situation is only making worse:
>> Cost reduction challenges – In a context in which manufacturers are struggling to pass on the cost increases they are experiencing (raw materials, packaging, energy, transport) in their sales prices, creating a pooled salesforce enables them to rationalize headcount and, consequently, their wage bill, while enhancing sales efficiency.
Moreover, assigning each geographical sector to a single area manager automatically translates into a reduction in the sales force’s dedicated vehicle fleet and the costs that go with it (fuel, insurance, maintenance).
>> HR challenges – In a tight employment market, FMCG companies are finding it hard not only to recruit salespeople, but also, and above all, to retain them. If the time spent each day on the road and the number of overnight stays are making this profession less attractive, this applies all the more to the increased number of tasks that most area managers perform in-store, and which are not really in line with their aspirations…
A well thought-through pooling strategy makes for a reduction in sector and portfolio size, and therefore the mileage driven by salespeople. The fact of working on several product categories and a larger number of stock keeping units gives the AMs more power within each store and increases their potential turnover. Finally, a pooling project may provide the opportunity to make AM-sales promoter pairs more widespread – which, by reducing the tasks to be done by the AMs and enabling them to spend more time on negotiation and developing their turnover, makes the profession more attractive and helps retain them.
>> CSR challenges – A pooled salesforce makes an objective contribution to the company’s CSR commitments: a reduction in sales teams’ mileage and a better organization of field activities translates into lower greenhouse gas emissions, an improved carbon footprint and better working conditions for mobile workers.
Does this strategy lend itself to all companies?
After this long list of potential benefits, you might think that pooling sales forces is the universal answer to the challenges currently facing FMCG actors. Evidently, this is not the case. Embarking on this course of action only makes sense if this type of organization is consistent with the company’s overall strategy. The creation of a single salesforce seems particularly appropriate in the following two cases:
in which the question of “duplication” inevitably arises or, on the contrary, gaps in terms of sales teams and sales management;
Changes in strategic direction
in which a group which was previously pushing competition between its brands/subsidiaries decides to present a single face to have greater weight with retailers.
Pooling is also a valid option for sales management teams in France compelled to slim down their sales force at the behest of an international head office with a poor understanding of the specifics of the French market – notably the importance of independent/franchised stores justifying a continued nationwide presence.
Finally, it bears pointing out that pooling operations typically concern sales forces operating within the same channels, typically the large and medium-sized supermarket channel. Inter-channel pooling operations are rare but may be considered in dense urban sectors where the neighborhood logic may beneficially take precedence over category-based logic. In this set-up, a salesperson will have both Monoprix and Franprix outlets in his portfolio, along with bakeries and cafés, all within the same neighborhood.
The 3 pillars of successful pooling
Irrespective of the company’s size, switching from several specialized sales forces to a pooled salesforce it is not something that can be improvised. Given the HR implications and economic challenges, this type of reorganization requires:
- Sound preparatory studies – Benchmarked against comparable companies, the challenge is to establish the number of salespeople/sales promotion staff required for optimal territorial coverage, as well as the level of sales pressure to be applied to the store base to achieve the sales objectives. This macro approach is a vital prerequisite for defining and confirming the theoretical optimum by quantifying the impact of its implementation on deployed staff numbers.
- A new sales territory segmentation – in pooling projects, territorial segmentation based on new objectives is even more complex as it entails multiple HR arbitrations. Very specific questions need to be answered, typically:
Which salesperson is best placed geographically to take on a particular sector?
In which new sectors do we currently have no salesperson? No sales promotion person?
AMs/sales promotion personnel
Which AMs/sales promotion personnel might agree to move if so required?
Where will we need to recruit?
These are all questions which cannot be resolved without consultation, coordination, and negotiation with the company’s employee representative bodies. Cooperation with Nomadia’s Sales Performance teams, combining consultancy and tools, facilitates these initiatives, and speeds up decision-making by running simulations and presenting different segmentation scenarios and their repercussions.
>> It is important to emphasize here that a salesforce pooling project never consists in dividing the pre-existing headcount by 2, 3 or 4 depending on the number of entities being merged. As each salesperson is required to represent several categories/brands and more stock keeping units than before, the increased workload justifies the creation of smaller geographical sectors and a reduction in the size of individual portfolios. This often translates into a greater number of sectors and a matching number of AM and sales promotion positions to be filled. On the other hand, the merging of several sales forces is accompanied by rationalization at managerial level: there is no reason, and it would even be counter-productive, to retain as many managers as there were categories/brands prior to pooling.
- Sustained support for teams – As with any major organizational transformation, the success of a pooling project requires a solid training and team support program.
Training is absolutely essential if all the AMs are to master the entire gamut of products and stock keeping units they will be required to sell. This is the precondition for them acquiring the famous “shelf expertise” that their opposite numbers in store legitimately expect of them. And when this requires them migrating from almost 100 stock keeping units in one and the same category to 400 or 500 encompassing between 3 and 5 categories, it will be appreciated this doesn’t happen overnight!
Operational support is equally important in establishing new working practices and methods. The fact of having an individual action plan spelling out sales and visit frequency targets for each sales outlet can only help the salesperson master his new responsibilities. The provision of a planning and route optimization tool will enable him to organize his time and movements optimally without losing sight of his new targets.
Experience shows that it takes between 6 and 12 months for all the trained co-workers and for the new pooled organization to be fully operational. This running-in period also enables all the necessary adjustments in terms of territorial segmentation to be made to ensure that the entire store base is covered and that the sectors are fair in terms of workload and potential. The Territory Manager tool considerably simplifies these detailed adjustments by displaying the impact of each individual change on the overall balance.
>> Are you thinking about pooling your sales forces or reviewing your geographical sales segmentation?
Experienced in these issues, Nomadia’s Sales Performance department’s Retail experts are there to advise you and help you set up the organization which will best serve your company’s objectives – from the preliminary macro study to operational support of your teams.
Don’t hesitate to get in touch! > Contact us