SALES TERRITORY

DESIGN
 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.
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.
 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.
Designing Sales
Territories
Designing sales Territories
 Procedure for setting up sales
territories
1. 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.
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.
• Planner then decides the territory shape.

Circle: Appropriate when accounts and

prospects are distributed evenly throughout
the area.

Clover Leaf: When accounts are located

randomly through a territory.

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.
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.
 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
 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.
 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.
• 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”.
 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