CHAPTER 6

DESIGN AND SIZE OF SALES
TERRITORIES

Copyright © 2001 by Harcourt, Inc. All rights reserved.

LEARNING OBJECTIVES
The design, size, and operation of sales territories are critical to a
firm's success because they allow the firm to provide service to
customers. This chapter will help you to understand:

1

The definition of a sales territory.

2

Who is responsible for territorial development.

3

The factors to consider when designing sales territories

4

The importance of reducing sales leakage.

5

How computers can help design territories.
Copyright © 2001 by Harcourt, Inc. All rights reserved.

Inc.WHAT IS A SALES TERRITORY? A sales territory is composed of a group of customers or a geographic area assigned to a salesperson. Copyright © 2001 by Harcourt. . All rights reserved.

All rights reserved. Inc. .WHO IS RESPONSIBLE FOR TERRITORIAL DEVELOPMENT? Development of sales territories is usually the responsibility of the sales manager overseeing the larger sales units within the organization. Copyright © 2001 by Harcourt.

7 To benefit salespeople and the company. 5 To reduce sales expense. 3 To evaluate performance. 2 To establish a salesperson’s responsibility. 4 To improve customer relations. 6 To allow better matching of salesperson to customer. Copyright © 2001 by Harcourt.WHY ESTABLISH SALES TERRITORIES? 1 To obtain thorough coverage of the market. . All rights reserved. Inc.

Why sales territories may not be developed: 1 Salespeople may be more motivated they are not restricted. 2 The company may be too small. 3 Management may not want to take the time. 4 Personal friendship may be the basis for attracting customers. if . Inc. or have the know-how. Copyright © 2001 by Harcourt. All rights reserved.

2 return on assets.FACTORS TO CONSIDER WHEN DESIGNING SALES TERRITORIES Sales force objectives may be based on factors such as 1 contribution to profits. or 5 customer satisfaction. 4 market share. 3 sales/cost ratios. Copyright © 2001 by Harcourt. Inc. All rights reserved. .

FACTORS TO CONSIDER WHEN DESIGNING TERRITORIES S e l e ct B a s i c C o n tr o l U n it A n a lyz e W o r k lo a d D et e r m i n e B a s i c T er r ito r ies E v a l u a t e. All rights reserved. R e v i s e i f N ee d e d C u s t o m er C o n t a ct P l a n A ssign to T er r ito r ies Copyright © 2001 by Harcourt. . Inc.

. Inc.SELECT BASIC CONTROL UNITS • States • Counties • Cities and zip-code areas • Metropolitan statistical areas • Trading areas • Major accounts • A combination of two or more factors Copyright © 2001 by Harcourt. All rights reserved.

. All rights reserved. 2 intensity of market coverage. and 3 type of products sold.ANALYZE SALESPEOPLE’S WORKLOADS Workload is the quantity of work expected from sales personnel. Copyright © 2001 by Harcourt. Inc. Three of the main influences on workload 1 involve the nature of the job.

. Inc.Intensity of Market Coverage Distribution methods: 1 Intensive distribution 2 Selective distribution 3 Exclusive distribution Copyright © 2001 by Harcourt. All rights reserved.

Inc. All rights reserved. . or number of customers.DETERMINE BASIC TERRITORIES The breakdown approach uses factors such as sales. Sales Force Size = Forecasted Sales Average Sales per Salesperson Copyright © 2001 by Harcourt. population.

. 5.SIX STEPS TO CONSIDER WHEN DETERMINING A FIRM’S BASIC TERRITORIES 1. Inc. 3. Determine the number of accounts for each territory. Tentatively establish territories. territories. Determine the number of 6.Forecast sales and determine sales potentials. Determine the sales volume needed for each territory. and draw the boundary lines. 2. Copyright © 2001 by Harcourt. All rights reserved. Finalize the territories. 4.

5 Nonselling time. 4 Travel time around territories. and size of customers and prospects to determine the frequency of sales calls and amount of time a call takes by using such data as: 1 Time required for each sales call. location. Copyright © 2001 by Harcourt. . Inc. 3 Time intervals between sales calls.Equalized Workload This method uses the number. 2 Frequency of sales calls per given customer. All rights reserved.

others prefer territories with smaller cities.ASSIGN TO TERRITORIES Some salespeople can handle large territories and the travel associated with them. some are best for new people. Some territories require experienced salespeople. Copyright © 2001 by Harcourt. . All rights reserved. Inc. Some people want to live in metropolitan areas. some can’t.

Copyright © 2001 by Harcourt.CUSTOMER CONTACT PLAN The customer contact plan involves scheduling sales calls and routing a salesperson’s movement around the territory. All rights reserved. . Inc.

3. 2. Minimize wasted time. strict formal route designs enable the salesperson to: 1.Scheduling refers to establishing a fixed time when the salesperson will be at a customer’s place of business. All rights reserved. Copyright © 2001 by Harcourt. Establish communication between management and the sales force in terms of the location and activities of individual salespeople. . In theory. Inc. Improve territorial coverage.

L i n e P a t t e r n F i r s t C a ll c B ase c C lo v e r le a f P a t t e r n c c c W o rk B ack M a jo r. 3 1 5 4 1 . All rights reserved. Inc.THREE BASIC ROUTING PATTERNS S t r a ig h t .C ity P a tte r n 2 c c c c B ase c c c c c c c c c c c c c c c c c c E ach L eaf O u t an d B ack Sam e D ay Copyright © 2001 by Harcourt.D o w n to w n .

Using the Telephone for Territorial Coverage 1. • Developing leads and qualifying prospects. Sales generating • Selling regular orders to smaller accounts. . such as offering price discounts on an individual product. Inc. All rights reserved. Copyright © 2001 by Harcourt. • Selling specials.

Inc. Order processing • Ordering through the warehouse. • Checking if shipments have been made. Copyright © 2001 by Harcourt.Using the Telephone for Territorial Coverage continued 2. • Gathering credit information. . All rights reserved.

Customer service • Handling complaints. Inc. Copyright © 2001 by Harcourt. All rights reserved. • Answering questions.Using the Telephone for Territorial Coverage continued 3. .

3 Doing prospecting. replacing some with telephone calls.Most people can benefit from adopting the following practices: 1 Satisfying part of the service needs of accounts by telephone. 4 Carefully scheduling visits to distant accounts. market data gathering. 2 Assigning smaller accounts to telephone selling. All rights reserved. Copyright © 2001 by Harcourt. and call scheduling by telephone. Inc. .

.EVALUATION AND REVISION OF SALES TERRITORIES Territorial control is the establishment of standards of performance for the individual territory in the form of qualitative and quantitative quotas or goals. All rights reserved. Inc. Copyright © 2001 by Harcourt.

THE SALES TERRITORY IS A BUSINESS THE RIGHT SALESPERSON PAYS OFF Copyright © 2001 by Harcourt. . All rights reserved. Inc.

• Lost sales due to the time needed for the new salesperson to build sales productivity. All rights reserved. Vacant territories experience the following: • Lost sales due to the vacancy. . Copyright © 2001 by Harcourt.OPEN SALES TERRITORIES Open sales territories are those left vacant until new salespeople are assigned to them. Inc.

Sales leakage refers to the lost sales due to both the vacancy and the time required for the new salesperson to produce at average. . Copyright © 2001 by Harcourt. Inc. All rights reserved.

THE BOTTOM LINE According to salespeople. . Developing sales territories has advantages as well as certain disadvantages. Inc. intensity of market coverage. Copyright © 2001 by Harcourt. managing time and territory is the most important factor to be considered when carrying out their selling duties. All rights reserved. and products sold. Sales force objectives are usually converted into individual sales territorial goals. The three main influences affecting the sales personnel’s workload are nature of the job.

The customer contact plan includes scheduling sales calls and routing salesperson’s movement around the territory. managers must consider six factors.THE BOTTOM LINE continued Before designing sales territories. Copyright © 2001 by Harcourt. Territorial control allows actual performance to be compared with standards of performance for evaluation purposes. . All rights reserved. Inc.