SALES AND DISTRIBUTION MANAGEMENT

06 Management of Sales Territories and Quotas

Sales Territory
A sales territory comprises a group of customers or a geographical area assigned to a salesperson. The territory may or may not have geographical boundaries. A salesperson is assigned to a geographical area containing present and potential customers. The total market of most companies is usually too large to manage efficiently. In technical selling style, geographical considerations are ignored and sales personnel are assigned entire classes of customers, regardless of their locations.

Sales Territory

Why do some firms change territory assignments as often as their socks?

What are the repercussions of such fickle-mindedness?

Reasons for establishing Sales Territories

Better market coverage Effective use of sales force Convenient way to evaluate the performance of a salesperson Enhance employee morale Understand and serve customers in a better way Develop loyalty Develop specific marketing programmes for the specific territory Develop trade promotion strategy Cost control

Reasons for not setting-up Sales Territories

The sales territory designing may not be possible in the following: New companies Small companies Where customers are geographically dispersed Some organisations may need industry specific groups

Size of the Sales Territories

Nature and demand of the product Mode of physical distribution Selling process Transport and communication facilities

Other factors Government regulations Density of population Population spread within the territory Market potential Growth rates Level of competition Companys sales policy Ability of sales people
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Assigning Sales Territories

Know the market Score the potential opportunity Draw the borders Involve the sales team Minimize future changes but plan for them

Designing Sales Territory

Factors influencing The modification Of a territory Merger Market consolidation

1.Select the basic geographic Control units

2.Decide on the criteria for allocation

Split in division
Sales force T/O Customer relocation

3.Determine basic territories

Product life cycle change

Product line change

4.Assign sales force to new territories

5.Revising sales territories

Designing Sales Territory

1. Select the basic geographic control units While designing territories, the first step is to select a geographical control unit as a territorial base. A typical territory may compromise several individual units

2.

Decide on the criteria for allocation Management should determine the location and potential of both present and prospective customers within each selected control unit. To get information, the company can make use of lot of data which is easily available.

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Designing Sales Territory

3. Determine basic territories Methods of determining the territory are Build up method

Breakdown method

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Buildup method

Management must determine

Desirable call pattern (call frequency)

Total calls needed In each control group

Workload capacity

Tentatively set territorial lines by combining control units until total calls needed = total calls possible

Modify territories as needed

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Breakdown method
Sales potential

Management must determine

Company sales potential

In each control unit

Sales volume expected from each salesperson

Tentative territorial boundary lines by combining control units until total sales potential = expected sales volume

Territorial modifications As needed

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Designing Sales Territory

Routing the sales force Routing is the managerial activity that establishes a formal pattern for sales reps to follow as they as they go through their territories Territory shapes Circle Wedge Cloverleaf

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Designing Sales Territory

4. Assigning salespeople to territories

Sales representatives age, selling skill, experience, initiative, creativity etc. has to be taken into account while allotting the territory Many companies design territories of unequal sizes to take care of this aspect

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Assigning Salespeople to Territories

Sales Manager should consider two criteria Relative ability of salespeople, based on key evaluation factors Product knowledge Market knowledge Past sales performance Communication Selling skills Salespersons Effectiveness in a Territory Decided by comparing social, cultural and physical characteristics of the salesperson with those of the territory Objective is to match salesperson to the territory.
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Management of Territorial Coverage

Planning efficient salespeople

routes

for

Scheduling salespeoples time Using time-management tools

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Routing
Routing is a travel plan used by a salesperson for making customer calls in a territory. Benefits of routing Reduction in travel time and cost Improvement in territory coverage Importance of routing depends on the application Nature of the product Type of jobs of salespeople

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Procedure for setting up a Routing Plan

Identify current and prospective customers Classify each customer into high, medium or low sales potential Decide call frequency for each class of customers Build route plan around locations of high potential customers
Base (B)
C 1

B B
C 5 C 4 C 3 C 2

Straight line / Hopscotch

Circular

Clover Leaf
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Scheduling
Scheduling is planning a salespersons visit time to customers.
Sales Manager communicates to salesperson major activities and time allocation for each activity Salesperson records actual time spent on various activities for 2 weeks Sales Manager and salesperson discuss and decide how to increase time spent on major activities Companies specify call norms for current customers, based on sales and profit potentials and also for prospective customers.
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Time Management Tools

Laptop computers and cellular phones Inside salespeople provide clerical support, technical support and support for prospecting and qualifying

Outside salespeople can then spend more time getting orders & building relationships with major customers.

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Sales Quota A sales quota is the sales goal set for the product line, company division or sales representative.

It is primarily a managerial device for defining and stimulating sales efforts.

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Assignment Territory Management

Rajesh is the star salesperson in a company. His quota for the year is Rs 10 crore. Each sale he makes averages at about Rs 1 crore. Rajesh knows that he spends nearly 0.1 day for each opportunity in the prospecting stage of the selling process and that only 10% of those opportunities are worth pursuing and qualifying. He spends about 2 days qualifying every opportunity, understanding requirements and developing the opportunity. He ends up qualifying only about 60% of the opportunities and eliminates the others from his funnel. He spends about 5 days in developing his solution and presenting these to the customer. He is put on the shortlist for about 70% of these opportunities. Finally he spends about 3 days closing each opportunity. This includes revising proposals, negotiating and answering any customer concerns.
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Assignment Territory Management

He has a reasonably high win ratio since 85% of the opportunities he works on closing are actually won. There are typically fewer than 220 working days in a year. Rajesh had wanted to take vacation for 7 days, had planned on attending training in new products (requires 5 days). He needed to spend time supporting current customers and handling administrative tasks (requires 10 days). Based on the way he manages his activities in selling, he finds that he will not have enough time to manage his territory.

Questions How many days does Rajesh need to achieve his sales quota?
If he takes vacation for 7 days, goes for training for 5 days and also spends 10 days in administrative tasks, what should he do to achieve his sales quota so that he still saves some time? You may assume the qualifying time is reduced to 1.5 days for each opportunity, 4 days for developing the solution and 2 days in closing the opportunity.
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Assignment Territory Management

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