A Case Study Report on McBridge Electric Corporation (Need for Revision of Sales Territories)

BY: Amare Berhanu Bantamlak Habtamu Christian Kassa Gizachew Yehualashet Hanna Lemma Kumneger Alemu

Submitted to: Teklegiorgis Assefa, MBA (Asst. Professor)

June 21, 2013

Table of content 1. Case Summary 1.1. Organization and Sale Territories.. 1.2. Major Concerns 1.3. Recent Development.. 1.4. Management Decisions 2. Literature Review 2.1. Sells territories 2.2. The Sales Territories Concept.. 2.3. Reasons for Establishing or Revising Sales Territories. 2.4. Procedures for setting up or revising sales territories . 2.5. Optimizing sales territories. 2.6. Establishing Sales Territories. 2.7. Territory revision.. 2.8. Change Management 3. Case Analysis 4. Reference..

1. Case Summary 1.1. Organization & Sales Territories

McBride Electric Corporation is a manufacturer of electric equipment and accessories. It was organized in 1910 and headquartered in Detroit. The company has grown steadily (organic growth) and become the major US supplier Products. McBride established sales territories along country lines with thirty-five person field sales force which are working our of 8 district offices. The company sold most of its products through nationwide network of distributors but some products were sold direct to few major accounts. The Management of McBride convinced that a procedure that facilitates the comparison or performance of each sales person performance and that assures equal sales opportunity for the thirty five sales persons should be adopted. Therefore, they have opted for assigning a responsibility for covering a varying number of counties in a way that gave each sales person as close to one thirty-fifth of the total number of the distributive outlets as possible.

1.2. Major Concerns on the Case

In recent years, it had become increasingly clear that a need existed for redesigning the sales territories as with the expansion of McBrides business, there was no modification in design of the sales territories. Because of this some sales persons found themselves so much sales potentials in their territories making it for them impossible to provide adequate sales coverage. Although this situation had come to the managements attention nothing had been done to resolve territorial design. However management had submitted revision plan to the sales force few years back which later backed off from implementing with the aim of keeping high sales force morale since the plan would have resulted in increasing some territories and decreasing the size of others which caused so much friction among sales staff.

1.3. Recent Developments and Causes

Current analysis showed that this situation was becoming increasingly serious. Investigation into the coverage of representative territories revealed that salespeople were concentrating on the easy-to-sell, high-volume accounts and were neglecting numerous good prospects. Consequently, good potential orders are lost.
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Thus Competitors are gaining accounts that McBride should have secured. In addition, most territories were receiving uneven sales coverage. The major factors which created this situation are basically can be summarized in to two. i. The strength of competition The nature of competition had changed substantially form area to area. In some territories, previously competitive environments became a salespersons dream as competition disappeared for one reason or another. In other territories, ones where competitors in the past had been weak, other competitors had become firmly rooted, thereby making it necessary for McBrides sales personnel to cover those areas more intensively and more frequently to just maintain a token share of the business. Therefore, some areas in certain territories received virtually no coverage by the McBride sales staff. ii. Economic Factors Economic conditions had changed from territory to territory making certain once desirable territories considerably less profitable for the salespeople to cover.

1.4. Management decisions

The market influences mentioned here above indicated that management should expand some territories and shrink others. The vice-president of sales and the sales manager agreed that the situation had got out of hand & agree on some corrective measures listed hereunder. i) Reviewing the current sales territorial set up ii) Revision to improve sales efficiency and sales control iii) Developing more appropriate sales territorial design iv) Tow criteria for an improved territorial design pattern would be a) lowering selling costs b) increased sales volume

2. Literature Review Relevant for the Case Analysis

2.1. Sells territories
Establishing the sales territories facilitates the matching of selling effort with sales opportunities. (what the company lacks in the case) sales personnel are assigned the responsibility for serving particular groupings of customers and prospects and provide contact points with the markets. Territorial assignments lend direction to the planning and control of sales operations. In establishing sales territories management is taking an important step toward accumulating knowledge on the companys strength and weakness in serving different markets. Through utilization of this knowledge in planning sales operations managerial effort to improve competitive position become increasingly effective. Realistic sales planning is done by a territory-by-territory basis. Characteristics of customers and prospects vary from one sales territory to another and sometimes even from one country to the next. The territory is more homogeneous unit than the market as a whole. (The Kebele is more homogeneous than the sub city and the sub-city than the city and so on) Breaking down the total market into smaller unity makes control of sales operations more effective. Assigning responsibility for achieving specific objective to subordinate line executives and individual sales personnel bring selling efforts into alignment with sales opportunities. Direction is lent to gathering information on individual performances, and comparisons of performances with sales opportunities present in each territory provide sound bases for appraisal.

2.2.

The Sales Territory Concept

The emphasis in the sales territory concept is upon customers and prospects rather than upon the area in which an individual sales person works . Operationally defined, a sales territory is a grouping of customers and prospects assigned to an individual salesperson. Many sales executives refer to sales territories as geographic areas. But in contrast, in some companies, particularly those in which the technical selling style is predominant, geographical considerations are ignored and sales personnel are assigned entire class of customers, regardless of their locations. Whether designated geographically or not, a sales territory is a grouping of customers and prospects that can be called upon conveniently and economically by individual sales person.
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To emphasize the point that designation of territories should not be solely along geographical lines. Other situations exist in which sales territories are not designated geographically. Certain companies have highly specialized sales personnel, each with responsibility for serving customers who need his/her special skill. In other companies, it is common to have more than one salesperson assigns to work in the same city metropolitan area and it is difficult to divide the area among them, not only because of scattered locations of accounts but because leads furnished by established customers often require calls in different part of the city. Small companys introducing new products requiring the use of different marketing channels often do not use geographically defined territories at all or if they do use rough divisions such as entire states or census regions. In these instance, there is no to assign territories, since existing sales exchange capabilities are inadequate relative to sales potential. In most marketing situations, however, it is advantageous to assign sales personnel to territories. Determining the territorial assignment requires consideration of customers service requirements and the cost of providing service. Geography affect both a companys ability to meet customers service requirements and the costs of meeting them. Even when territorial boundaries are geographical, each salespersons assignment is a grouping of customers and prospects, and the only reason of convenience and economy a geographical cluster-the emphasis is on customers, not on their locations.

2.3.

Reasons for Establishing or Revising Sales Territories

Sales territories are set up and subsequently revised as market condition dictate to facilitate the planning and control of sales operations. More specifically there are five reasons for having sales territories for revision. i. To provide proper market coverage ii. To control selling expense iii. To assist in evaluating sales personnel iv. To contribute to sales force morale and v. To aid in the coordination of personal selling and advertising effort 1. Providing proper market coverage Sometimes a company loses business to competitors because it doesnt have proper market coverage. Sales management has not matched selling efforts with
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sales opportunities effectively, competitors have a better match, and they obtain the orders. To overcome problems of this type, generally management must establish sales territories, if the company does not have them, or revise those that it has. If sales territories are set up intelligently and if assignments of sales personnel to them are carefully made, it is possible to obtain proper market coverage. Note that mere establishment or revision of the sales territories should not enough. The design of the territories should permit sales personnel to cover them conveniently and economically. Territories, in other words, should represent reasonable workloads for the sales staff while assuring that all prospects who are potentially profitable can be contacted. Good territorial design allows sales personnel to spend sufficient time with customers and prospects and minimize time on the road. This permits them to become thoroughly conversant with customers problems and requirements. Successful selling is based upon helping customers solve their problems, not just upon making sales or, even worse, upon taking orders. Well-designed sales territories, combined with appropriate sales force assignments, result in call upon different classes of customers and prospects at needed frequencies. Call regularity is important in selling products purchased on a repeat basis, and persistence turns many a prospect into a regular account. 2. Controlling selling expenses Good territorial design combined with careful salesperson assignment results in low selling expenses and high sales volumes. These saving, plus the higher sales volumes from increased productivity, selling time, reduce the ratio of selling expenses to sales. Even if dollar selling expense remains unchanged, the sales increase produced through proper market coverage reduces the selling expense percentage. Reduced selling expense ratio does not, however, follow automatically. If territorial planning is unsound or is not combined with appropriate assignments of sales personnel, selling expenses ratio will increase. If the planner, for instance, ignores normal travel routes and geographical barriers, sales personnel spend time traveling when they could be calling on customers; this results in higher selling expenses and lower sales volumes. Nor should management overlook the possibility that dollar selling expenses may have to go up to obtain a lower selling expense ratio. To secure larger
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sales volumes, sales personnel may have to incur additional expenses. Securing larger orders may require more frequent sales calls, which increases selling expenses. Well-designed sales territories and appropriate assignments of sales personnel increase the total time available for contact with customers and prospects. Thus prepaing the ground for improved sales volumes. Sales managements problem in controlling selling expenses is not to minimize them but to obtain the best relation between dollar selling expenses and dollar sales volumes. Short-term reductions in the selling expenses ratio are not always desirable; the long-term result is important. Rises in selling expenses may not be followed immediately by increased sales volumes in the future. The intelligent setting up or revising of sales territories is one step management takes to see that selling expense dollars are spent to the best advantage. 3. Assisting in evaluating sales personnel Well-designed sales territories assist management in evaluating sales personnel. Selling problems vary geographically, and the impact of competition differs widely. When the total market is divided into territories, analysis reveals the companys strengths and weakness in different areas, and appropriate adjustment can then be made in selling strategies. Through analyzing the market territory and pinpointing sales and cost responsibility to individual sales personnel, management has information it needs to set quotas and to evaluate each sales persons performance against them. 4. Contributing to sales force morale Good territorial designs help in maintaining sales force morale. Well-designed territories are convenient for sales personnel to cover; they represent reasonable-sized workloads, and sales personnel find that their efforts produce results. All are responsible for achieving given levels of performance within their own territories, so all know what management expects of them. Results that come from each sales territory are correlated with the efforts of individual sales personnel. Good territorial design plus intelligent salesperson assignment help to make each person as productive as possible and make for high earnings, self-confidence, and job satisfaction. Morale is high also because there are few conflicting claims of sales personnel to the same accounts-when sales territories are not used. There are numerous conflicts. Even with well-designed sales territories, some conflicts arise, because some customers transact business in
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more than one territory, but well-designed territories reduce the magnitude of the problem. Finally, sales force morale is high because excellence in planning territories and making territorial assignments causes sales personnel to spend minimum time on the road. 5. Aiding in coordination of personal selling and advertising Management may set up sales territories or revise existing territorial arrangements to improve the coordination of personal selling or advertising efforts. In most situations, personal selling or advertising alone cannot accomplish the entire selling task efficiently or economically. Prior to launching an advertising campaign for a new consumer product, territorial assignments make every dealer the responsibility of some salesperson and proper routing ensures that sales personnel contact all dealers at appropriate times relative to the breaking of the consumer advertising campaign. In some cases, the manufacturers marketing plan calls for dealers to share in the costs of advertising the product; here, again, sales personnel sell such cooperative programs to dealers. In situations where sales personnel do work related to the advertising effort, the results are more satisfactory if the work is delegated on a territory-by-territory basis rather than for the entire market.

2.4.

Procedures for setting up or revising sales territories

In setting up or in revising sales territories, there are four steps i. Selecting a basis geographical control unit -the starting point in territorial planning is the selection of a basis geographical control unit. The most commonly units are countries, zip code numbers, cities, standard metropolitan statistical areas, trading areas, and states. Sales territories are put together as consolidations of basic geographical control units. There are two reasons for selecting a small control unit. One reason is to realize an important benefit of using territories, the precise geographical identification of sales potential. If the control unit is too large, areas with low sales potentials are hidden by inclusion with areas having high sales potentials, and areas with high sales potentials are obscured by inclusion with those having low sales potentials. The second reason is that these units remain relatively stable and unchanging, making it possible to redraw territorial boundaries easily by redistributing control units among territories.
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ii.

Determining sales potentials present in each control unit- the territorial planner needs some way to measure sales potentials, which you will recall, represent the maximum possible sales opportunities open to a specific company selling a good or service during a stated future period to particular market segments. For the present purpose, substitute a particular control unit for a particular market segment, in other words, each control unit is a particular geographical market segment. Geographical market segments, like all market segments, are made up of present and prospective customers, so the territorial planner must identify the buyers of the product as precisely as possible. Market potentials are generally converted into sales potentials by analyzing historical market shares within each control unit, adjusting for changes in company and competitors selling strategies and arriving at estimates. Having made these estimates, the territorial planner ascertains those control units with sufficient sales potential to justify sales coverage. Combining control unit into tentative territories-the planner next combines units into tentative sales territories. This is only a tentative arrangement because, as explained later, subsequent adjustment must be made for relative coverage difficulty. At this stage the planner assumes that no significant difference in the physical or other characteristics individual control units exists. The purpose is to obtain a first approximation of sales territories, by combining contiguous control units into tentative territories, each containing approximately the same sales potential. At this point, however, the planner decides the number of territories, by assuming that all sales personnel are of average ability, is identical to deciding sales force size .Basically, the planner estimates the percentage of total sales potential that the average salesperson should realize. Analysis of past sales experience helps in making these estimates, which, once made, is used to determine the number of territories. In effect the planners estimate the sales potential, thus arriving at the number of sales personnel units-and territories required. Adjusting for difference in coverage difficulty and redistributing tentative territories- the final step is to redistribute the tentative territories through adjusting for coverage difficulty. The tentative territories each contain approximately the same sales potential, but almost certainly, territories with nearly equal sales potentials require different selling efforts and in turn, selling expense totals. Significant difference in physical and other characteristics make providing sales coverage more difficult for some control units than for others. Certain large cities, for instance, have greater sales potential for most products
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iii.

iv.

than some states, but for the time required to contact customers and prospects in cities is much less, and the same is true of selling expenses. Differences in coverage difficulty represent difference in workloads. The planner ascertains how large the maximum work load-the largest work load for any sales person should be. All workload need to be the same size, since sales personnel vary in ability as well as in drive, and some can safely be assigned larger workloads. However, since there is an upper limit to the desirable work load and this also limits a territorys maximum geographical extent. When final adjustment for coverage difficulty are made, sales territories have varying amounts of sales potential and different-sized workloads, but none exceeds the amounts of sales potential and different-sized workloads, but none exceeds the maximum desirable work load. Redistributing to adjust for coverage difficulty(that is, difference in workloads) is a seven step procedure namely 1)Determining number, location, and size of customers and prospects in each tentative territory, 2)Estimate time required for each sales call, 3)Determine length of time between call, that is the amount of time required to travel from one customer to the next, 4)Decide call frequencies, 5)Calculate the number of calls possible within a given period, 6)Adjust the number of calls possible during a given period by the desired call frequencies for the different classes of customers and prospects, 7)Finally check out the adjusted territories with sales personnel who work or who have worked in each area, and market further adjustments as required.

2.5.

Optimizing sales territories

Another area of opportunity is the allocation of sales territories to particular salespeople. This can be an inefficient manual process that can be automated using statistical techniques to optimize the ratio of time spent with clients to time spent on the road. Zoltners and Lorimer believe that many sales forces are losing millions of dollars each year because of sales territory imbalances. They cite a study of 4,800 sales territories from 18 companies in four different industries where more than half the territories were imbalanced because they were either too large or too small. They also note that there are very real obstacles that prevent companies from optimizing their sales territories: Sales forces resist change; Sales force incentives and compensation plans can work against achieving the best alignment;
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 Realignment is a cumbersome task; Data required for alignment are often not readily available. These are the internal difficulties associated with any changes to existing sales territories. The realignment or optimization of sales territories can also be problematic and confusing for customers. Zoltners and Lorimer believe that sales territory alignment is one of the most frequently overlooked areas of sales force productivity and provide a methodology for overcoming the obstacles that includes obtaining buy-in from the sales force and making territory decisions based on accurate data.

2.6.

Establishing Sales Territories

Territory design is an important organizational issue since it is a major determinant of salespeoples opportunity to perform well and their ability to earn incentive pay where incentives are linked directly to territory-level individual performance. Faulty territory design decisions prevent the best use of expensive selling activities and can harm salespeoples attitudes, behavior and effectiveness when they believe they have been treated unfairly in territory allocation. Indeed, research has shown that the more satisfied sales managers are with territory design, the greater the level of salesperson and sales unit effectiveness. It is therefore important for sales managers to pay much attention to the establishment of effective territories. Their task can be aided by developments in information technology. There are two basic considerations used to allocate salespeople to territories. First, management may wish to balance workload between territories. Workload can be defined as follows:
W = niti + ntk

Where workload; number of calls to be made to customers in category i; average time required at call for each category i; total number of calls to be made; average time required to travel to each call. This equation is useful because it highlights the important factors which a sales manager must take into account when assessing workload. The number of calls to be made will be weighted by a time factor for each call. Major account calls are likely to be weighted higher than medium and small active accounts since, other things being equal, it makes sense to spend longer with customers who have greater potential. Also, calls on prospects may have a high weighting since salespeople need extra time to develop a new relationship and to sell themselves, their company and its products. In addition, the time required to travel to each customer must be taken into account. Territories vary in their customer density so travel time must be allowed for in the calculation of workload.
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The data will be determined partly by executive judgment, e.g. how long to spend with each customer type on average, and, where a sales force already exists, by observation, e.g. how long it takes to travel between customers in different existing territories. These data can be obtained during field visits with salespeople and estimates of current workloads calculated. For new sales teams the input into the formula will of necessity be more judgmental, but the equation does provide a conceptual framework for assessing territory workload. The second consideration management may wish to use in working out territories is sales potential. Equalizing workload may result in territories of widely differing potential. This may be accepted as a fact of life by some companies and dealt with by assigning their best salespeople to the territories of higher potential. Indeed, moving salespeople from lower to higher potential territories could be used as a form of promotion. If company policy dictates that all salespeople should be treated equally, then a commission scheme based on the attainment of sales quotas, which vary according to territory potential, should establish a sense of fairness. However, if, after preliminary determination of territories by workload, sales potentials are widely disparate, it may be necessary to carry out some adjustment. It may be possible to modify adjacent territory boundaries so that a high potential territory surrenders a number of large accounts in return for gaining some smaller accounts from a neighboring lower potential territory. In this way differences in sales potentials are reduced without altering workload dramatically. If this is not easily done it may be necessary to trade off workload for potential, making territories less similar in terms of workload but more balanced in terms of sales potential. Designing territories calls for a blend of sound analysis and plain common sense. For example, it would be illogical to design territories purely on the basis of equalizing sales potential if the result produced strips of territory which failed to recognize the road system (especially motorways) as it exists in the country today.

2.7. Territory Revision

A sales territory should not be considered a permanent unit. The following factors may suggest the need for territory revision: Change in consumer preference; Competitive activity; Diminution in the usefulness of chosen distribution channels; Complete closure of an outlet or group of stores; Increases in the cost of covering territories; Sales force complacency. Before deciding that changes are necessary, a number of aspects of the sales effort should be investigated. The most common indicators that something might be wrong with the territorial structure is falling sales volume. However, great care must be taken
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before accepting this as a reason for territory revision. Sales may be falling because the selling and promotion effort within the territory is not as effective as it should be. If this is the case, then it is not the boundaries of the sales area that need revision. Salespeople may be calling only on the prospects which offer the greatest potential. If there is no systematic plan for the territory, salespeople may make a poor job of planning their calls and this may result in an increase in non-selling time (e.g. travelling time). Furthermore, the supervision may be at fault. If sales personnel are not supervised properly, they may lose their enthusiasm for the job or even for the product. Before changes are implemented, a reappraisal of market potential should take place. It may be that the original distributors of the products are in need of replacement or motivation because they have become disenchanted with the company, its products or policies. Consumer acceptance of the product may need to be investigated before territories are revised. This may require a limited market survey. The current activities of competitors should also be investigated. If territories are to be revised, the sales force must be fully informed about the extent of the changes and the reasons behind them. The extent to which the boundaries are changed will be governed by the need to increase coverage, reduce costs or increase sales. The sales manager should enlist the aid of supervisors and salespeople when the task of altering territories begins. While the overall design of territories, size, number of customers, etc., are the responsibility of the sales manager, once allocated, the salesperson too (sometimes in conjunction with the sales manager) can play an important role in managing this territory in order to achieve maximum sales effectiveness. In fact, much of this aspect of territory management comes down to effective self-management on the part of the salesperson. Information technology can aid territory management and revision.

2.8.

Change Management

In order to mitigate possible resistance and friction from the sales force during the territory redesign the management should follow appropriate change management strategies.

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3. Case Analysis
The case questions are: Should McBride Electric Corporation have revised its sales territories? Why or why not? If you feel that the company should have changed its sales territories outline in detail the procedures that should have been followed? The answer of our group for this question is positive, and the justification lay under the following fact. The world is going through a period of rapid and wrenching changes. The emergence of the new world economic order and the rise of globalization reshape and reform the way the world business environment used to be. For this and other dynamic nature of marketing, a frequent and consistence revision and supervision of marketing strategy is a must. McBride Electric Corporation as a business entity is also subjected to the dynamics of this market environment. The issue raised in the case, i.e. the sales territories, is a marketing element which defined as the customer groups or geographic districts for which individual salespeople or sales teams hold responsibility. Territories can be defined on the basis of geography, sales potential, history, or a combination of factors. Companies strive to balance their territories because this can reduce costs and increase sales. As it is discussed in the case, there is an unbalanced division of sales territories in McBride Electric Corporation, some for greater opportunity and some for loss. It implies that there is a need for revision of its sales territories. The purpose of a sales force coverage (or sales territory) metric is to create balanced sales territories. There are a number of ways to analyze territories. Most commonly, territories are compared on the basis of their potential or size. This is an important exercise. If territories differ sharply or slip out of balance, sales personnel may be given too much or too little work. This can lead to under or over servicing of customers. When sales personnel are stretched too thin, the result can be an under-servicing of customers. This can cost a firm business because over tasked salespeople engage in sub-optimal levels of activity in a number of areas. They seek out too few leads, identify too few prospects and spend too little time with current customers. Those customers, in turn, may take their business to alternate providers. Over-servicing, by contrast, may raise costs and prices and therefore indirectly reduce sales. Over-servicing in some territories may also lead to under-servicing in others. Unbalanced territories also raise the problem of unfair distribution of sales potential among members of a sales force. This may result in distorted compensation and cause talented salespeople to leave a company, seeking superior balance and compensation.
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Achieving an appropriate balance among territories is an important factor in maintaining satisfaction among customers, salespeople and the company as a whole. The reason for revising sales territories with good territorial design are based upon thorough knowledge of sales potentials and coverage capacity. The major goal of this company should be to increase the sales volume and reduce costs, so a well designed territory assist the attempts to improve market coverage and customer service, reduce selling expense ratios, secure coordination of personal-selling and advertising efforts, and improve the evaluation of personnel performance. The existing territorial design does not reflect the current market situation and economic reality. Within the company itself, there has been a steady growth and expansion of the business which brought so many sales potential in many territories but it was impossible for salespeople to provide adequate sales coverage. Although the management of the company is aware of this situation; it did not take any action to improve the territorial redesign. The findings also shows salespeople are concentrating on the easy-to-sell and high-volume accounts and many good prospect are being neglected which resulted large amount of sales being lost since the potential orders are taken by competitors and many orders going unwritten. On top of these, most territories are not receiving even sales coverage. It is known that the design of sales territories is very important to salespeople and management of an organization, as sales and profits performance are linked to the well designed sales territories. The ideal objective in territory design is to have equal opportunity (or sales potential) and equal sales force workload for all sales territories. Typically, this objective is difficult to achieve in practice, although sales managers, take great effort to achieve the same. Any differences in sales potential and workload of sales force in different territories, which remain at the end, can be taken care of when sales quotas are set up for salespeople and sales territories. Therefore, we believe it is now time for the management of McBridge Corporation to resolve all these problems by revising its sales territories. The major steps in designing the sales territory can be summarized into four:

I.

Selecting a basic geographical control unit

The first step of the sales territory process is to select appropriate geographic control units that can be combined to form sales territories. Control units must be small enough to allow flexibility in setting boundaries. These units must have less area than a territory and clearly recognized boundaries. Examples of commonly used geographic
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control units are countries, states, provinces, counties, cities, customers. The selection of an appropriate control unit represent a tradeoff between the flexibility allowed by small units and the higher costs of manipulating data for a large number of control units. As we have mentioned in the literature review the first step in revising sales territories is selecting the geographical control unit. The basic reason to use this step is to realize an important benefit of using territories, the precise geographical identification of sales potentials. If the control unit is too large, areas with high sales volume are obscured by inclusion with those having low sales potentials. When we see the case of McBridge, it is the view and believes of our group that the county level control unit used by the company is too large and hides the high sales volume potentials at lower levels and hence needs to revise the sales territories geographical controlling unit to the smaller unit (Zip number in U.S. context).

II.

Analyze planning and Control Unit Opportunity

This step focuses on deciding on allocation criteria. Various criteria can be employed to guide the manager in combining geographic control units into viable sales territories. Criteria may include such basic principles as equality of opportunity, quantitative factors related to current sales and potential and subjective factors such as the ability and preferences of the sales force. The idea of building sales territories to ensure equality on some dimensions has great appeal to both sales managers and salespeople. Equality among territories should provide a sense of fair play since every sales person has a chance to earn equal pay. In addition similar territories make it easier for the sales manger to identify and reward outstanding performance; that is, if territories are essentially the same, differences in productivity can be attributed more readily to individual efforts. a. Quantitative factors: - there are three basic allocation factors that are commonly used to design sales territories. Your objective should be to build territories that are evenly balanced on all three criteria. These factors include: i. Number of current customers ii. potential number of accounts or Buying power index iii. Size

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b. Additional factors:-includes the location as rivers, lakes, bridge, mountains and read. Sales managers often keep relief maps in their office so that they can see how to graphical features will influence sales force travel patterns. The availability of bridges and super highways often influences how boundaries are drawn for sales territories.

2.

Form Initial Territories

The third step in sales territory design is to select geographic locations to serve as starting points for new territories. Sales persons home:- It is common because costs of relocating salespeople can be avoided, and representatives remain near family and friends. Large city: - sales people in urban locations usually have access to a large number of customers and there is less need for extensive travel. Around the need of major clients:- in this case the location of the largest customer in an area might be selected as the home base for the salesperson and other areas are added to complete the territory. Central geographic location and the preferences of the salesperson: these are occasionally used as a staring point. This approach assumes that a place can be found for the salesperson to live after the territory has been created.

3.

Asses Territory Workload

Once staring points has been selected, the next step is to combine control units. The most popular way to do this is known as the build up method. To be effective, you need to keep running totals on the allocation criteria for each new territory. If a number of customers per country is the criteria, you first combine, the countries adjacent to each starting point and keep track of the total number of customers in each territory. Then you assign counties in between different stating points to territories to balance the number of customers across the new territories. The process of allocating counties to starting points continues until all control units are assigned to individual sales people.

4.

Finalize Territory design

This step is deciding on basic territories which can be done by two methods i. the build up method ii. the breakdown method
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Recommendation Our group suggests and recommends the following for the management of McBaldrige to take into account after conducting the redesigning to make sustainable and to improve sales efficiency and control as well as enabling the redesigned process more effective and efficient. We suggested the redesigning, assuming the following are not problems of the company: Promotional activities Assigning sales persons

However, during our group discussion based on the theoretical foundations, we came up with the recommendation that the assignment of responsibility to the sales personnel should be based on the potential and capability of each sales person and should consider an established performance index rather than arbitrary assigning each sales person to each sales territories with a one thirty-fifth of the total distributive outlasts. Because an assignment without this consideration ignores again the effectiveness of a sales person in one region and he/she may not be in another region. We also cited a practical example during our discussion that we experienced that a sales person who had been effective in Territory A was not totally become ineffective when transferred to Territory B due to cultural difference and impact of religion and language. He was worshiping together with his existing and potential customers and this reinforced the selling activity while in territory A. The recommendation of this group for the management is, therefore, to consider the above in assigning sales people to the different control unit. The other problem cited in the case, neglecting prospective and focusing on the major accounts, may be also be resolved by proper supervision of the sales people and or transferring the major accounts to home office and let the sales people and nationwide distributors concentrate on the prospective customers and minor accounts.

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4. Reference
Jober, David and et al, (2008) Selling and Sales Management (8th Ed).Pearson Prentice Hall Inc. Still, Richard R, et al, (1988) Sales Management, Decisions, Strategies and Cases, 5th edition Prentice Hall Inc. Scott G. Dacko, The Advanced dictionary of marketing, Oxford University Press, 2008 www.lectureshare.com/download.php