31373639 sales-territory-design
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A sales territory is a grouping of customers and prospects assigned to an individual salesperson. There are several reasons for establishing and revising sales territories, including providing proper market coverage, controlling selling expenses, assisting in evaluating sales force personnel, contributing to sales force morale, and aiding coordination of selling and advertising efforts. When designing sales territories, a basic geographical unit is selected and sales potential is determined for each unit. Units are then combined into tentative territories with approximately equal sales potential. Territories are adjusted based on differences in coverage difficulty to equate incremental sales per dollar of selling expenditures among territories. Assigning sales personnel considers differences in ability and effectiveness in different territories. Routing and scheduling aims to optimize coverage and minimize wasted time.
31373639 sales-territory-design
- 2. The Sales Territory concept Defined as: A sales territory is a grouping of customers and prospects assigned to an individual salesperson. • Irrespective of geographical designations sales territory is grouping of customers and prospects that can be called upon conveniently and economically by an individual salesperson. • For instance: When sales personnel sell mainly to personal acquaintances as in selling insurance or investment securities, little logical basis exist for dividing the market geographically.
- 3. The Sales Territory concept House Accounts : • An account handled by a group of executives or home office personnel. • Generally house accounts are responsible for significant shares of company’s business.
- 4. Reasons for Establishing / Revising Sales Territories 1. To provide proper market coverage. 2. To control selling expenses. 3. To assist in evaluating sales force personnel. 4. To contribute to sales force morale. 5. To aid in the coordination of personal selling and advertising efforts. 6. To establish a sales person’s responsibility. 7. To improve customers relations.
- 7. Procedure for setting up sales territories1. Selecting a basic geographical control unit. Commonly used units are postal code numbers, areas, towns or cities. Sales territories are put together as consolidations of basic geographical control units. 2. Determining the sales potential present in each unit. Sales potential : Maximum possible sales opportunities open to a specific company selling a good or service during a stated future period to particular market segment. Identify the present and prospective buyers precisely in a unit and ascertain the unit’s total market potential that the company has an opportunity to obtain i.e. Sales Potential.
- 8. 3. Combining control units into tentative territories. Assumption : No significant differences exist in the physical and other characteristics of the control units. Contiguous control units are combined into tentative territories having approx. same sales potential. Planner decides the number of territories.
- 9. • Planner then decides the territory shape. Wedge: For territories containing both urban and non urban areas. Radiates out from densely populate urban center. Travel time among the adjoining wedges by balancing urban and non urban calls. Clover Leaf: When accounts are located randomly through a territory. Circle: Appropriate when accounts and prospects are distributed evenly throughout the area.
- 10. 4. Adjusting for differences in coverage difficulty. • Removal of unrealistic assumption that no differences in the characteristics of geographical control units exist. Certain large cities, for instance, have greater sales potential than some states but time required to contact the customers in city is less as compared to the state. • The optimum arrangement is reached when incremental sales per dollar of selling expenditures are equated among all territories. • Differences in coverage difficulty represent differences in work loads. When final adjustments for coverage difficulties are made, sales territories have varying sales potential and different sized work loads, but none exceeds the maximum desirable work load depending upon the capacity of the sales person.
- 11. Factors influencing the modifications of a territory: • Mergers • Market consolidation • Split in division • Sales force turnover • Customer relocations • Product life cycle change • Product line change
- 12. Deciding assignment of sales personnel to territories • Up to this point in territorial planning an implicit assumption has been that all sales personnel are “average”, i.e. all are interchangeable, each capable of producing same results at similar costs regardless of territorial assignments. This assumption is unrealistic . • Sales persons vary in ability, initiative and effectiveness and also in the desirable work load. One sales person might be outstanding in one territory but a failure in another. Performance, moreover is conditioned by customer characteristics, customs and ethnic influences.
- 13. Routing and Scheduling Sales Personnel• Routing and scheduling plans aim to maintain the lines of communication, to optimize sales coverage and minimize wasted time. • When management is informed at all times about the whereabouts of sales person it is easy to contact him and give last minute instructions. • While deciding the route detailed information is required on the numbers and location of customers, means of transportation and desired call frequency rates. • Routing and scheduling plans reduce wasted time by sales personnel in backtracking and travelling and gives a optimized sales coverage which automatically builds up the size of average order and increases the efficiency and productivity of sales personnel.
- 14. • In assigning sales personnel to territories, management seeks the most profitable alignment of selling efforts with sales opportunities. • Management should “ assign each sales person to the particular territory where his or her relative contribution to profit is the highest”.
- 15. Advantages of designing a sales territory It ensures better market coverage Effective utilization of the sales force Efficient distribution of workload among sales people It is convenient to evaluate the performance of sales people To control over the direct and indirect costs of the sales function Optimum utilization of sales time by sales people
Editor's Notes
- #3: The emphasis in the sales territory concept is upon customers and prospects rather than upon the area in which an individual salesperson works. When house accounts are excluded from sales territory – adverse effects on sales force morale are possible,, if the sales personnel feel that they are being deprived of the best customers. However if sales force understand that their territories are particular customers and prospects rather than geographical areas, then their morale is less affected by House account designation to them or not.
- #5: If territories are set up intelligently, it is possible to obtain proper market coverage. The design of territories should permit the sales personnel to cover them conveniently and economically. Good design allows the sales force to spend sufficient time with customers and prospects and minimize the time on road. Good territorial design along with proper assignment to the sales force results in low expenses ( sales force spend fewer nights away from home – reduces lodging and food charges, transportation charges ) and high sales volume ( from increased productive selling time i.e contact time with the customers and prospects ). By analyzing the market territory by territory and assigning the sales and cost responsibility to individual sales personnel, management has the information to set the sales target and evaluate each persons’ performance against them. Well designed territories are convenient for sales personnel to cover, represent reasonable work load, makes the personnel as productive as possible, few conflicting claims to the same accounts and minimum time spend on roads increase the morale of the sales personnel. Territorial assignments make every dealer the responsibility of some of the sales personnel and proper routing and scheduling ensures that the sales person meets the dealer at appropriate time relative to the break of consumer advertising campaign and equip the dealer with the product and promotional tools prior to targeting the customers through advertising.
- #8: Two reasons for selecting a small control unit : a. Precise geographical identification of sales potential : clear demarcation between the high and low sales potential areas. b. Small units remain usually stable and unchanging : possible to redraw the the territories easily by redistributing control units among the territories.
- #9: 3. Number of territories : If planner estimates that average sales person should realize Rs. 2500 of total sales potential of Rs. 25000, then number of territories or number of sales persons required = 25000/2500 = 10.