TU BBA 7th Semester

Fundamentals of Selling
Unit 6 – Arrangement of Sales Territories &
Sales Quotas
 What is a Sales Territory?
• A sales territory refers to a geographical area
assigned to a salesman for the purpose of
marketing the products of his concern.
• Generally, a firm divides the markets into
specific geographical zones or areas & assigns
each salesman a specific zone in which he has to
carry out his selling operations.
• The specific geographical zone or area assigned
to a salesman becomes his sales territory. Each
of the territory is served by one or more
salesmen.
 Conceptually, a territory may represent:
• A particular geographical area mostly.
• A group of customer accounts or prospects,
e.g., hospitals and institutions.
• A market.
• An industry.
 Considered operationally, a territory represents a
customer grouping. Though most of the companies
emphasize geographical territories, some companies
with technical style of selling ignore this basis and
assign salespersons to a particular customer
grouping.
 Reason for Establishing Sales territories/Importance:
• To facilitate effective sales planning.
• To cover and manage the entire market.
• To assign salesmen’s responsibility for a particular territory.
• For a better evaluation of performance of the salesmen.
• To reduce the selling costs.
• To facilitate coordination in marketing functions.
• To make the marketing research functions.
• Development of fair competition among all sales persons.
• To improve the customer relations.
• To appoint salesmen matching with the territory & customers.
• Independent work area for each salesman.
• To compete effectively with competing institutions.
 Sales Territory Planning & Management:
• Research the geographical area
• Divide the area on the basis of population, accessibility, potential etc.
• Study the consumer behaviour of the territory
• Assess the revenue potential from the respective territories
• Analyze the hurdles that may be present in the territories
• Define the products suitable for the territory
• Probe further to find out specific needs and wants of the people within
the territory
• Prepare a plan for each territory with quotas & tasks to
be accomplished
• Appoint sales people or sales team for each territory
• Monitor and track the performance of each territory
• Review sales people performance for each territory, and
• Avoid overlapping territory , it causes conflict among the
sales people.
Factors Influencing the Size of Sales Territories
• Prospect density or the number of prospects in
the specified area.
• The extent of ground to be serviced.
• Possible volume of sales,
• Frequency of visits necessary.
• Intensity of selling effort required during each call.
• Ease with which one can travel within the territory and
the mode of transport available.
• The inventory turnover at the retail level.
• Whether it is easy to sell the product or difficult. As a
rule, the smaller the territory, the better it is for travelling,
and the greater the depth of selling effort. Salespeople,
however, would like to have as large a territory as
possible. But smaller territories are serviced intensively.
 Factors to be Considered/ Kept in Mind
while Allocating Sales Territories
• Even distribution coverage (uniform distribution)
• Elimination of duplication of activities
• Equal opportunity
• Flexibility in allocation
• Controllable
• Capable of comparative study
• Uniformity in income
• Economical
• Efficient performance
• Allocation to new salesmen
 Territory Management
• Territory management is an account sharing
system that grants access to accounts based on
the characteristics of the accounts. It enables
your company to structure your Sales force data
& users the same way you structure your sales
territories.
• With Territory management businesses are able
to increase overall revenue by ensuring that all
market segments are covered. Having an
informed, data-driven plan in place allows
companies to focus on growth and scaling up for
the future.
 Benefits of Territory Management
 Territory management has several benefits. It
provides a powerful solution in case you need
to structure your records. Its key benefits
include the following:
• Categorized sales reports
• Multiple forecasts based on
territory membership
• Support for territory transfer
• Support for changing sales
structures
•
Elements of Territory Management
 1. The salesperson sales quota:
• A salesperson is an individual who sells goods and
services to other entities.
• The successfulness of a sales person is usually
measured by the amount of sales he or she is able to
make during a given period and how good that
person is in persuading individuals to make a
purchase.
• If a salesperson is employed by a company, in some
cases compensation can be decreased or increased
based on the amount of goods or services sold.
• A salesperson quota goals may involve: sales
volume quotas, profit quotas, expense quotas,
activity quotas and customer satisfaction scores.
 2. The account
analysis:
 Account analysis is identifying accounts and their varying levels
of sales potential. There are two general approaches to account
analysis these are the undifferentiated selling approach and the
account segmentation approach.
A. The Undifferentiated Selling Approach
• The salesperson uses this when an organization see the market
as similar and the selling strategies are designed and applied
equally to all accounts.
 B. The Account Segmentation
•
Approach
This type of approach recognize that their
territories contain accounts with heterogeneous
needs and differing characteristics that require
different selling strategies.
 3. Set Account Objectives and Sales Quotas:
 It is the third element for individual’s products
and for current & potential accounts. Objectives
might include increasing product distribution to
prospects in the territory or increasing the
product assortment.
• Sales volume quotas
• Profit quotas
• Expense quotas
• Activity quotas
• Customer satisfaction scores
 4. Territory –Time Allocation:
 This is the element we will know on how
salespeople’s time allocated within territories. Time
allocation is the time spent by the salesperson
traveling around the territory and calling on
accounts.
 Basic factors to consider:
• Number of accounts in the territory
• Numbers of sales calls made
• Time required for each sales calls
• Frequency of customers sales calls
• Travel time around the territory
• Non-selling time
• Return on time invested
  Sales Response function
• The salesperson invests sales time in direct proportion
to the actual or potential sales that the account represents.
• The most productive number of calls is reached at
the point at which additional calls does not increase sales.
• The relationship of sales volume to sales calls is the
sales response function of the customer to the salesperson
call.
• Return on Time Invested
• Time is a scarce resource
• Breakeven analysis
• The management of time
 Plan by the day, week, and month
 Qualify the prospect
 Use waiting time
 Records and reports
 5. Customer Sales Planning:
 Developing a sales-call objective, a customer
profile, and a customer benefit program including
selling strategies for individual customers.
 You need to do the following for each sales call:
• Develop sales call objectives
• Create customer profile
• Create customer benefit plan
• Select FABs
• Develop marketing plan
• Develop business proposition
• Develop suggested order
• Develop your sales presentation
 6. Scheduling and Routing
 Scheduling is establishing a fixed time for
visiting customer’s business while routing is the
travel pattern used in working a territory.
 Routing and scheduling plans aim to maintain
the line of communication, and to optimize sales
coverage and minimizing wasted time. When the
management knows the where-about, where the
salespersons are in the field or at least knows
where they are the present time, it is easy to
contact them to provide any needed information
or last minute interactions.
  Strict formal route designs enable the company to:
• Improve territory coverage
• Minimize wasted time
• Establish communication between management and sales
force in terms of location and activities of individual
salespeople.
• Carefully plan your route
 Using the Telephone for Territorial Coverage
• Satisfy part of the service needs of accounts by telephone
• Assign smaller accounts that contribute less than 5
percent of business to mostly telephone selling
• Do prospecting, marketing data gathering, call
and scheduling by telephone
• Carefully schedule personal calls to distant accounts
 7. Territory and Customer Evaluation
 Territorial evaluation is the establishment of performance
standards for the individual territory in the form of qualitative
and quantitative quotas or goals.

 Summary of Sales of Selling Issues:

• How salespeople invest their sales time is a critical factor
that
influences territory sales.
• Proper time and territory management is an effective method for the
salesperson to maximize territorial sales and profits.
• A sales territory comprises a group of customers or a geographical area
assigned to a salesperson.
• Companies develop and use sale territories for a number of reasons
• Performance can be monitored when territories are established
• There are also disadvantages to developing sales territories.
• Time and territory management is continuous for a salesperson
– it involves seven key elements.
 Sales Quotas
• According to Philip Kotler, ‘A sales quota is the
sales goal set for a product line, company
division, or sales representative. It is primarily a
managerial device for defining and stimulating
sales effort.’
• It is an expected performance objective. Quotas
are routinely assigned to the sales units, such as
departments, divisions, and individuals, and they
proceed to reach at these quotas in their
respective domain. They are sales assignments
or goals, which are to be achieved in a specific
period of time.
 Main Characteristics of Sales Quotas:
• It is the sales goals set for a product as well as of a
salesman.
• There is a time-dimension of a sales quota.
• Sales quotas are assigned to salesmen, middlemen, or a
branch.
• It requires a desired level of performance.
• It is a managerial tool of direction and control of sales
activities.
• Sales quotas are determined on the basis of sales
forecasting, sales potential, estimates of costs, and other
market studies.
• The success of sales quotas system will depend on
accuracy of data and information used for forecasting.
 A Brief Detail of Objectives in Setting Sales Quotas:
• For determining the goals of salesman, sales territory, sales department,
or branch office.
• For evaluating the market territories in respect of prospects of sales and
marketing situations.
• For balanced growth of market territories. The territories where the
sales are comparatively lower, efforts can be made for increasing the
sales.
• To motivate the salesman towards achievements of the prescribed
quota within the prescribed time.
• For facilitating the sales manager to evaluate the salesman’s
productivity. In case of failure to achieve the set quota, the reasons for
which can be analyzed.
• For the development of effective remunerative plans for the salesman.
Those who achieve more than the prescribed quota are provided with
commission or bonus.
• To control the activities of salesman and to encourage them to achieve
the prescribed quota within the prescribed time limit.
• For controlling of sales expenses by fixing a limit on every sales quota
allotted.
 Contd..
• For facilitating to evaluate the results of contests. Certain
minimum
sales sales quota is fixed for each salesman to be achieved, to
ensure his participation in sales contests.
• Sales quotas serve as the basis for preparing the budget for advertising
and sales promotion.
• It is the basis to define the rights and duties of every salesman, sales
department or a branch.
• It is the basis to avoid the duplication of activities as the rights and
duties of every salesman, sales department or branch office are clearly
defined in advance.
• It determines uniformity in workloads between each salesman and
sales territories.
• For estimating the future needs of every salesman, territory, branch or
middlemen and also to estimate future requirements of sales-force,
office employees and other requirements if any, in advance.
• To establish coordination with other departments, such as production,
purchase, warehousing, finance etc. These departments will be able to
undertake their respective functions in accordance with the sales quotas
allotted to each territory.
 Different Types of Quota Practiced in
Different Organizations
 Companies set different types of sales quotas.
The method of selecting the quota largely
depends on the business practice, the design of
the organization, and the level of competition
in that industry. Broadly, quota types include:
#sales volume quota,
#sales budget quota,
#sales activity quota,
and #combination
quota.
 Type # 1. Sales Volume Quota:
 Sales volume quotas communicate the organization’s
expectations in terms of what amount of sales for/in
what period.
 For example, Torrent Pharmaceuticals uses rupee sales
objectives, whereas a company like General Motors
uses the number of cars and commercial vehicles.
 Examples
• If a salesperson has: to sell 30,000 units of a product
from March to August then this can be called as the
sales volume quota for the said six months. This kind of
quotas can be set for geographical territories, different
product lines, different marketing intermediaries, or for
more than one of these in combination with any unit of
the sales organization.
 Type # 2. Sales Budget Quota:
 These kinds of quotas are set for various units by
the organization in order to control expenses
(expenses quota), gross margins, & net profits
(profit quota).
 The overall intention of setting a budget quota is
to make it clear to the salespeople that they are
more of a responsibility centre where the job
includes not only obtaining the desired sales
volume but also making good profit.
 This means the cost to acquire customers should
be less than the revenue generated from those
new customers.
The manufacturing department provides the sales manager with
information regarding the cost of goods sold, which includes the cost
of manufacturing the product. By subtracting the cost of goods sold
and the direct selling expenses from the sales volume, one can
determine the net profit quota.
• The salesperson is bound to achieve either the required gross
margin or net profits while achieving sales quota. Gross margin
quota is determined by subtracting the cost of goods sold from
sales volume.
 Type # 3. Sales Activity Quota:
 The activity of a salesperson has direct influence
on the sales of the organization. The salesperson
is not always involved in sales realization; for
example, a retail salesperson has a job of
providing information only.
 In this case, the quota can be fixed on the
activity a salesperson has to perform, rather than
the final outcome.
 In addition to the direct sales activity, the
salesperson is expected to do some non-selling
activity and the quota can be set as a mix of
these activities.
Sales undertake time & motion studies &
managers
conduct work-studies for deciding on the optimum
combination of activities for a salesperson. Activities quota
set objectives for job- related duties, which help the
salespeople in achieving their performance targets. They
help the salespeople to do the non-selling activities
perfectly, as they become part of the job definition.
 Type # 4. Combination Quota:
 Many organizations use a combination of these
quotas. The most common combination is the
sales volume and activity quota.
 Combination quota is used to control sales force
performance on the basis of selling and non-
selling activities.
 A combination sale quota can be achieving a
sales target of 1000 units along with developing
20 new key accounts, identifying 100 prospects,
and bringing back 50 lost customers.
 Methods of Setting Sales Quota
 Organizations follow various methods for setting sales
quota. Though the explanations before gives us an
understanding of fixing the quota and types of quota,
we need to be understand the practices followed in
organizations for fixing sales quota.
• Quotas Based on Sales Forecasts and Potentials
• Quotas Based on Forecast
• Quotas Based on Past Sales or Experience
• Quotas Based on Executive Judgment
• Quotas Based on the Judgment of Salespeople
• Quotas Based on Compensation
 Problems in Setting Sales Quota:
• Sales managers face various problems while fixing
sales quota for the organization. This is the basic reason
why we see a variety of quota setting methods in
different sales organizations.
• There is a high level of individual difference in every
organization. The ability of individuals in performing
certain duties varies, as it is dependent on personal
effectiveness, personality type, and skill of the
individual.
• While setting sales quota, differences in the ability,
quality, experience, and position of the salespeople are
not considered suitably in many organizations, as the
basic objective of setting quota thorough the scientific
process of quota management is difficult to attain.