GURU GHASIDAS VISHWAVIDYALAYA

(A CENTRAL UNIVERSITY ESTABLISHED BY CENTRAL UNIVERSITIES ACT, 2009)

BILASPUR (C.G.) 495009

DEPARTMENT
OF MANAGEMENT STUDIES
MASTER OF BUSINESS ADMINISTRATION PROGRAMME
(M.B.A.)
SESSION: 2018-19
M.B.A. 4rd Sem.

SUBJECT: SALES AND DISTRIBUTION MANAGEMENT

PRESENTATION TOPIC: “ALLOCATING SALES EFFORTS AND
QUOTA”

Submitted To: Submitted by:

Dr. (Mrs.) Bobby.B .Pandey PRASHANT DUBEY
Assistant Professor (Senior Scale)

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 INDEX
CONTENT PAGE NO.

1. Sales quota 3
2. Importance of quota 3
3. Types of quota 5
4. Customer satisfaction 9
5. Methods for setting sales quota 10
6. Sales territories 13
7. Reason for establishing sales territories 15
8. Sales territory design 16
9. Conclusion 23

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 SALES QUOTA
A quota refers to an expected performance objective. Quotas are routinely assigned to sales
units, such as regions and districts. Quotas also are assigned to individual salespeople.

Quotas are tactical in nature and thus derived from the sales force strategic objectives.
Strategies stem from marketing and sales plans, sales forecasts, and budgets. Thus, quotas are
guides for what needs to be done and a means of evaluating how well they were done.

Importance of quota
Quotas are of major importance because they establish the "end state*—the bottom line
sought by the sales force. They are not static but are dynamic guides to sales force behavior.
Quotas are ever-changing due to experience, feedback, and internal and external forces to the
organization.

QUOTAS PROVIDE PERFORMANCE TARGETS

Quotas give direction to the sales force. Efforts and resources can be directed toward specific
ends or targets the organization designates as important—for example, a 6 percent sales
increase. Targets, in turn, provide incentives.
Because the organization tends to reward the type and level of behavior needed to reach
corporate objectives, salespeople typically find financial rewards attached to the attainment
of quotas. Job quotas represent the manager’s expectations about the activities to be
accomplished and about the level of accomplishment targeted for die time period.

QUOTAS PROVIDE STANDARDS

Quotas provide standards or means of determining job activities. They are a means of
obtaining feedback and evaluating the salesperson’s performance.
Management compares the salesperson’s assigned quotas with actual accomplishments.
These quotas become the primary basis for evaluating the performance of sales groups (that
is, regions or districts) and individual salespeople. For example, sales quotas are used to
evaluate the results of sales contests and to determine pay increases and promotions.

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QUOTAS PROVIDE CONTROL
Quotas provide control because they serve to guide or direct the behavior of salespeople.

Authority is the formal right to exercise control. When a new salesperson joins the company,

he or she enters into an authority relationship with the superior. The superior has the formal
power to ask the salesperson to do something the person would not do otherwise and the right
to punish for noncompliance. The salesperson's acceptance of this authority gives the
organization a means by which to influence or control the salesperson.

Control can serve as an indirect supervisory technique. The superior has the authority to
require the salesperson to average ten calls each day. The salesperson fills out call reports
and sends them to the superior. Even though the superior is not working directly with the
salesperson, the salesperson knows that ten calls must be made, so the salesperson’s activities
are indirectly monitored. Quotas may be set for total sales volume, individual products’ sales
volume, expenses, or the number of new accounts. The salesperson, therefore, concentrates
efforts on these activities.

QUOTAS PROVIDE CHANGE OF DIRECTION

Quotas may serve to redirect the activities of the salesperson. For example, Colgate might
emphasize only part of the product line during a sales period of two months.

At the beginning of a period, a company holds sales meetings to present the products to be
emphasized to the customers. Sales quotas, possible contests, and selling techniques are
discussed. Different behavior is achieved by placing sales quotas on different products. For
example, salespeople slow up on selling a product the firm is not emphasizing during the
current sales period and concentrate on selling a new product with a quota attached to it.

QUOTAS ARE MOTIVATIONAL

Quotas provide performance targets, standards, controls, and direction. Most important of all,
quotas directly influence salespeople's motivational levels. Set a quota people believe in,
promise them a reward for making quota, and then stand back and watch them work hard to
reach their goal.
Quotas cause the entire sales team to turn their efforts toward common goals. Everyone
gets excited about the challenge of making quota. One extreme example of this excited
motivational style is Fred Thomas of Xerox Corporation, who is known to be so obsessed

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with quotas that he never turns off his drive.This leads to his selling at home, on vacation,
and during other aspects of his personal life.Thomas motivates his fellow salespeople as he
propels the excitement toward meeting the quotas. Quotas directly influence the amount of
energy salespeople aim toward the sales target.

Types of quota
Organizations set many types of quotas.The most common quotas concern sales volume,
gross margin or net profit, expenses, activities, and some combination of these four.

SALES VOLUME QUOTAS

Most, if not all, companies have sales volume quotas for their salespeople. Sales volume
quotas include dollar or product unit objectives for a specific period of time. For example,
General Mills uses dollar objectives, whereas Ford Motor Company’s Mamie Quinn uses
quotas based on the number of cars and trucks. Companies with relatively few items that
carry high unit prices, such as cars, appliances, electronics, and airplanes, often use units
instead of sales.
Total sales volume quotas are first set for the year. The yearly total volume quota is then
set for shorter time periods such as six months, three months, two months, and one month.
Break Down Total Sales Volume Once salespeople know what their sales targets for the year
are and how much they have to sell throughout the year to reach the total sales objective, they
need to get down to the specifics.To do this, they ask themselves these questions: To whom
are we going to sell? Where are they located geographically? Which products will be sold?
Which products will sell the best? During what time period will these sales occur?

While answering these five questions, salespeople will establish sales volume quotas for
the following:

■ Product lines.
■ Individual established and new products.
■ Geographic areas based on how the sales organization is designed,
which would include:

■ Sales divisions.
■ Sales regions.

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 ■ Sales districts.
■ Individual sales territories.
Companies often establish sales quotas for each of the items for which they make a sales
forecast. Once set, these quotas become important sales targets and serve to evaluate job
pcrformance.Table below shows the total district sales volume quotas for a .sales manager.
As you can see, the district did not make sales quota this year due to salesperson McNeal.
Three of the four salespeople made quota. Later in this chapter, you will see other quotas and
performance data used by this company.

Profit quota
Although sales volume is important, profits are more important.Today, sales managers are
asked to generate profitable sales. Firms may set profit quotas, along with sales volume
quotas, for salespeople, districts, regions, and even products and customers. Companies
realize they must make a profit to stay in business.

THE TWO TYPES OF PROFIT QUOTAS Companies develop profit quotas using either the gross
margin or the net profit approach.The gross margin quota is determined by subtracting cost
of goods sold from sales volume. The cost of goods sold information is supplied by the firm’s
manufacturing department. It tells how much it costs to manufacture the product.

Some companies go one step further and determine net profit. The net profit quota is
determined by subtracting cost of goods sold and salespeople’s direct selling expenses from
sales volume. This latter method is shown in Table 7.2. Cost of goods sold averaged around
80 percent of sales for this company. Salesperson Hise sold $5,792,000 with manufacturing
costs of $4,633,600, or a gross profit margin of $1,158,400. Hise’s salary was $45,600. Car,
travel, entertainment, and administrative expenses were $22,400, leaving a net profit of $
1,090,400 for the territory. This company uses a sales-to-net-profit ratio to evaluate profits.
Hise’s 18.8 percent ratio (net profit/sales) compares favorably to other salespeople in the
district. An 18.5 percent ratio is considered acceptable by management. Salesperson Ford was
asked to reduce his expenses so the ratio would rise above the 18 percent level.

One drawback to using profit quotas is that sales personnel generally do not set prices and
have no control over manufacturing costs; therefore, they are not responsible for gross
margins. Another problem arises when the net profit approach is used. Salespeople may cut

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back so far on expenses that it has a negative impact on sales. This may have happened with
salesperson McNeal. He was asked to spend more on entertaining his prospects and
customers. It was felt this might help his sales. The sales manager constantly must monitor
expenses to make sure salespeople
people are spending enough, yet not too much, toward generating
profitable sales.

EXPENSE QUOTAS
It is costly to operate a sales force.The cost of automobiles, entertainment, meals, and lodging
keep going up and up. Many companies establish expense quotas aimed at controlling costs
of sales units. Often expenses are related to sales volume or to the compensation plan.
A salesperson may receive an expense budget that is a percentage of the territory’s
terri sales
volume.The salesperson must manage this expense dollar amount as if it were a bank
checking account.

Other companies prefer to set upper dollar limits on items such as lodging, meals, and
entertainment.These same companies often pay all expenses related to the car and office
expenses. In this
is manner, they hope salespeople will avoid decreasing expenses to such a low
level that they hurt sales.

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ACTIVITY QUOTAS
According to Jim Mobley of General Mills, the activities of a salesperson have a direct
impact on sales. “There is no doubt about it,” he says. “Certain activities create sales, so we
put quotas on them.”
“For example,” he adds. “One additional sales call a day is 5 a week, 20 a month, and 240
calls a year. If the average salesperson sells an extra product to 10 percent of the people
contacted, you have an extra 24 sales a year.”
“Multiply that by the number of salespeople in the sales force,” Mobley concludes,
con “and
you’re talking about big dollars.”
Quotas cause salespeople to respond to them. If a sales force averages six sales calls
cal a day
and the manager wants to increase the average, chances are the manager can—
can—by setting a
quota of seven calls.The same thing can happen when quotas are set on the number of
prospects contacted each day.
Activity quotas set objectives for job
job-related
d duties useful toward reaching sales
salespeople’s
performance targets. They help direct salespeople toward performing im
important
portant nonselling
activities. For example, activity quotas are used in food sales where displays are built and
products are straightened on the retailer’s shelves. They are common in consumer and
industrial sales where the salesperson must provide ser
service after the sale.
Unfortunately, many salespeople do not view some activities as important. They prefer to
do things resulting in sales today, not next month.Thus, salespeople may do the activity but

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infrequently or at a low-quality level.They have been known to falsify their activity reports
on jobs not felt important.
Activity quotas typically should not be a basis for rewards. Rather, their attainment helps
the manager better understand why salespeople do or do not meet their sales volume quota.
Table below shows how a company uses the sales call activity to compare salespeople.
This company computerizes this information. It has determined that its “average” salesperson
works 46 out of 52 weeks (considering time off for vacations, holidays, illness, and meetings)
or 230 days each year.This salesperson works 5 days a week and makes 6 calls per day for a
yearly total of 1,380 sales calls.Thus, three of the four salespeople shown in Table are above
the yearly company sales call average.

CUSTOMER SATISFACTION
Companies increase sales by reselling to current customers and getting new business
through customer referrals.Thus, it is very important to keep customers happy. Customer
satisfaction refers to feelings about any differences between what is expected and actual
experiences with the purchase. To measure customer satisfaction, organizations typically
construct questionnaires that ask for customer feedback on factors such as the product
purchased, price, after-sale follow-up, and the salesperson.

It can become very difficult to keep track of all the customer satisfaction data. Therefore,
organizations find it easier to develop a Customer Satisfaction Index (or Rating).This index
is usually a compilation of all scores into one number or percentage. For example, a company
can ask customers to rate 50 items or factors related to their satisfaction, take an average of
all those scores, and call it the index. A firm also can weigh the responses according to
importance and then create an index from the weighted scores. However it is done; remember
that the Customer Satisfaction Index is not each individual rating but an average or
compilation of many ratings.

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QUOTA COMBINATIONS
Many companies in all industries use a combination of these quotas. The two most common
are sales volume and activity quotas. These quotas influence selling and no selling activities.

It is important not to have too many quotas; otherwise, the salespeople may become
confused as to what is expected. Several quotas should be used, but they should be on tthe
most important activities, total sales volume, and the products that result in the most sales.
“There are 15 items that we sell that comprise 70 percent of our business,” Jim Mobley says.
“We really concentrate on them by set
setting volume quotas on these items.”

Methods for setting sales quotas

Sales quotas may be set in several ways. Let’s survey several basic methods companies use
most frequently for setting quotas and then examine how they actually set quotas.

QUOTAS BASED ON FORECASTS AND POTENTIALS

For the large national corporations in the United States, the most common method for setting
quotas is the use of sales forecasts plus market and territory potentials. The majority of sales
managers profiled in this book use this method. Here is a general explanation
planation of how it is
used to set quotas.
The first step is generally a total volume or unit sales forecast for the company, product
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lines, and then individual products. Each of these three forecasts can be done on a geographic
basis. For instance, let’s assume the market potential of a given geographic area is related to
factors such as population and buying power. A forecaster may find that Illinois has 5.79
percent of the total United States population and 8.28 percent of the buying power. The
forecast can be based on one of these market indexes, or both can be combined into a
multiple factor index. Assuming the forecaster comes up with a multiple factor index of 6.97
and that anticipated industry sales in the United States total $100 million, then anticipated
industry sales in Illinois would be $6,970,000. The forecaster then would determine the
company’s estimated share of the market to come up with a final sales forecast. If the
company has a 10 percent market share, the total sales volume quota for the Illinois
salesperson would be $697,000. Now product line and individual product sales quotas can be
set.

QUOTAS BASED ON FORECASTS ONLY

The prior procedure is common for the large national companies. Some firms, however, do
not have the necessary information, data, money, and people to determine sales potentials for
individual sales territories .This is especially true of companies that sell in small geographic
areas.
Some firms set quotas in relation to their sales forecast or total market estimates. They
then usually establish quotas based on past sales in a geographic area without regard for sales
potentials. If a sales region sold 25 percent of the firm’s past year’s sales, its quota would be
25 percent of the forecasted sales for the next year.

QUOTAS BASED ON PAST EXPERIENCE

Some companies do not make sales forecasts for total sales volume, product lines, or
individual products. They take the past year’s sales for each geographic unit, add an arbitrary
percentage, and use the results as their sales volume quotas. A few companies set quotas
from an average of sales for several years. This average is preferred since it covers sales
trends and the effects of exceptionally good or bad years.
Everyone’s goal is to beat the past year’s sales figures. This plan, however, ignores sales
potentials. What if two territories have a potential of $500,000? Last year one salesperson
had $400,000 in sales and another had $500,000. It is unfair to ask both people to increase
sales 10 percent. It also does not consider a territory’s past and present situations. If several

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new firms move into a territory and become customers, sales quotas are easier to reach. What
if a territory was vacant for several months the past year? The addition of a salesperson can
quickly increase sales above quota the next year.
Both of these examples occurred in a territory that this author was transferred into. My
sales increased 50 percent one year. I received a midyear salary raise and an above-average
year-end bonus. I took the money, but it never seemed fair to other salespeople within the
district.

QUOTAS BASED ON EXECUTIVE JUDGMENTS

No matter what method a company uses for setting quotas, executive judgment should be a
part of the process. Yet it is generally not recommended as the only method for deciding
quotas.
Executive judgment is useful for setting quotas when little information exists. It may be
impractical to determine the sales potential for a newly opened sales territory, for example, or
impossible to estimate the acceptance of a new product. Frequently, managers have to rely on
their past experiences to make future predictions.

QUOTAS SALESPEOPLE SET

How would you, as a salesperson, like to set your own quotas? It is not common, but it does
happen, especially in companies expanding into new geographic areas or starting up a sales
force. In each of these situations, it is difficult to project sales, even if sales potentials are
available. No past sales exist on which to base future estimates.
In these situations, companies usually ask their own salespeople to set quotas for one or
two years.This is long enough to collect the data needed to set quotas by one of the
previously discussed methods. Most companies do, however, allow their salespeople to give
input on the quota-setting process. “I sit down with each of my salespeople,” Jim Mobley
says,“and we set quotas for each phase of the operation.”
Another company that uses sales force input to create sales quotas is Olympic Fasteners,
which specializes in roof fasteners. In fact, this input is the main determinant of not only the
quotas set for salespeople but also the production and manufacturing schedules.
Salespeople’s input is then combined with historical data and forecasting data to provide the
final quota.

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QUOTAS RELATED TO COMPENSATION
Often salespeople are either promoted or not promoted within a company based on their
meeting quota. Quotas represent the bottom line for a salesperson. For promotion,
salespeople are usually judged on their attaining quotas over time. It is also very common to
earn extra compensation by reaching sales volume quotas for total sales, existing products,
and new products. For example, a salesperson may be paid a salary plus a bonus of 1 to 10
percent on all sales over quota.Typically, the quota for this situation is based on the past
year’s sales. If that total sales volume was $500,000, the salesperson would be paid a
percentage of all sales over the $500,000 quota. The same thing can occur for sales of current
and new products.
Quotas related to compensation are determined by any of the previously discussed quota-
setting methods. Meeting quota is a way of life, the major job goal for many salespeople.
Reaching quota means money in the bank for a salesperson, so how quotas are set is
especially important. They have a direct influence on the motivation and morale of the
sales force. Chapter 13 has an in-depth discussion of compensation plans that have
incentive components and thus use quotas. Because quotas are so important, let’s examine
how some companies set sales quotas.

SALES TERRITORRIES

A sales territory is the customer group or geographic district for which an individual
salesperson or sales team holds 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. A sales territory comprises a
number of present and potential customers, located within a given geographical area and
assigned to a salesperson, branch, or intermediary (retailer or wholesaling intermediary).

In this definition, the keyword is customers rather than geographical. To understand the
concept of a sales territory, we must recognize that a market is made up of people, not
places—people with money to spend and the willingness to spend it. A market is measured
by people times their purchasing power rather than in square miles.

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A company, especially a medium- or large-sized one, can derive several benefits from a
carefully designed territorial structure (see the accompanying box “Benefits of Good
Territory Design”). Unfortunately, poorly designed territories are all too common because
sales executives fail to monitor and react to changes in the market. Over time, some
territories gain potential customers at a faster rate than other territories. Some territories
might even lose customers. Eventually, territories that once were fair and equal become
unbalanced in terms of their sales potential. This is why sales executives must consider
revising the territorial structure on a regular basis.

In select circumstances that typically involve small-sized companies, sales territories are not
necessary. For example, formal territories may not be needed for a small company with a few
people selling only in a local market. In this case, management can plan and control sales
operations without the aid of territories and still enjoy many benefits of a formal structure. In
addition, lack of territories may be justified when personal friendships play a large part in the
market transaction. This is one reason automobile dealers and commodity and security
brokers usually do not district their sales forces. Highly specialized sales engineers also may
serve in troubleshooting assignments or be called in anywhere to help close an important sale.

Reasons for Establishing Sales Territories

a. Achievement of company’s sales and marketing objectives

b. Ensure better coverage - territory assignments constrain salespeople to work with less
profitable customers or prospects as well as the most desirable accounts

c. Reduced selling costs - assigning responsibility to a single salesperson ensures that there
is no overlap in coverage; customers and prospects are called upon by only one salesperson

d. Improved customer service - assigning responsibility to a single salesperson helps to

ensure that all customers and prospects receive adequate servicing

e. More accurate evaluation of performance - if territories are relatively equal with regard
to workload and potential, then salesperson performance can be compared on an equal basis;
if territories are unequal in a known way, then adjustments can be made in evaluation of
unequal performance

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What Elements Determine A Territory?
a. Present and potential customers and consumer;

b. Geography;

c. Competitors’ activity;

d. Interest groups; and

e. General economic situation of the area.

Some Guidelines for Designing Territories

a. Area should have sufficient potential - with insufficient potential, a salaried salesperson
will not be used effectively, and commissioned salespeople will leave the company for
greener pastures

b. Area should be of reasonable size – To reduce a salesperson's travelling time.

c. Adequate coverage - is the salesperson able to service all accounts and able to meet new
prospects?

d. Minimum impediments - try to set territories such that rivers, mountains, railroads, etc.
set the borders of territories rather than run through the middle.

Benefits of Good Territory Design

a. Enhances customer coverage

b. Reduces travel time and selling costs

c. Provide more equitable rewards

d. Aids evaluation of sales force

e. Increases sales for the organization

f. Increase morale

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SALES TERRITORY DESIGN
The ideal goal in territorial design is to have all districts equal in both sales potential and the
sales reps’ workload. When sales potentials are equal, it is easier to evaluate and compare
sales reps’ performances. Equal opportunities also reduce disputes between management and
the sales force and generally tend to improve workers’ morale. To achieve both objectives is
an ideal, but usually unattainable, goal. However, this should not deter an executive from
constantly striving to reach it.

Changing market conditions put continuing pressure on companies to adjust their territories.
Different procedures may be used to design the districts. However, a company’s territorial
structure is influenced by the potential business in the firm’s market and by the workload
required or sales expected of its sales force.

Steps in designing sales territories

One plan for establishing or redesigning territories includes the following six steps:-

1. Select a control unit for territorial boundaries.

2. Determine location and potential of customers.
3. Determine basic territories.
4. Assign salespeople to territories.
5. Set up territorial coverage plans for the sales force.
6. Evaluate the effectiveness of the design on a continuing basis.

1. Determine Basic Control Unit for Territorial

Boundaries
When designing territories, the first step is to select a geographical control unit as a territorial
base. Commonly used units are states, counties, cities, zip code areas, and metropolitan areas.
A typical territory may comprise several individual units. One person’s district may consist of
four metropolitan areas; another’s may be three states. The unit should be small for at least
two reasons. First, a small unit helps management realize one of the basic values of
territories—the geographic pinpointing of potential. Second, the use of small control units
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makes it easier for management to adjust the territories. If an organization wants to add to
one person’s district and reduce another’s, a county unit facilitates the adjustment better than
a state unit.

2. Determine Location and Potential of Customers

Management should determine the location and potential of both present and prospective
customers within each selected control unit. Sales records should indicate the location of
present customers in each control unit. Prospective customers can be identified with the aid
of company sales reps plus outside sources such as (1) trade directories; (2) publishers of
mailing lists; (3) subscription lists from trade journals; (4) trade association offices; (5)
classified telephone directories; or (6) credit rating firms.

Once the customers are identified, management should assess the potential business it expects
from each account. Management then can classify these accounts into several categories
based on their potential profitability to the seller. This step furnishes some of the necessary
background for determining the basic territories.

3. Determine Basic Territories

The third general step in designing sales districts is to establish a fundamental territory based
on statistical measures. This can be accomplished by using either the buildup or the
breakdown method. Under the buildup method, territories are formed by combining small
geographical areas based on the number of calls a salesperson is expected to make. This
method equalizes the workload of salespeople.

The breakdown method involves division of the whole market into approximately equal
segments based on sales potential. Thus, this method equalizes sales potential. The buildup
method is particularly suited for manufacturers of consumer products or for companies that
want Intensive Distribution. The breakdown method is more popular among manufacturers of
industrial products or organizations that want selective distribution.

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 Breakdown Method
The breakdown method is often used by firms that want exclusive distribution or that sell
some type of industrial products.

Determine sales potential.

The first step is to determine what sales volume the company can expect in its entire market.
This is done using one of the forecasting procedures.

 Determine sales potential in each control unit.

To obtain the sales potential in each control unit, a market index is multiplied by total sales
potential to allocate it among the various control units.

 Determine the sales volume expected from each salesperson.

In this step, management must estimate how much each sales rep must sell to have a
profitable business. A study of past sales experience and a cost analysis are often used to
determine this information. For example, assume that the cost of goods sold and distribution
costs are estimated to equal 70 percent of sales; direct selling costs are $30,000; and
management wants to earn a profit of 10 percent of sales. Then it can be shown that each
salesperson must sell a minimum of $150,000. Of course, on the basis of experience,
management may feel that each salesperson can and should sell twice this much. Therefore,
expected sales volume is set at $300,000.

 Draw tentative territorial boundaries.

The final stage in the statistical phase of the breakdown method is to divide the entire market
so that each sales rep has about the same potential. The potential has already been established
for each of the basic territorial control units. Therefore, management needs to assign enough
contiguous units to each salesperson so that he or she has at least $300,000 of sales potential.
In other words, the sales potential of the territory should be equal to or greater than the sales
volume expected from each salesperson. The boundaries of each territory should coincide
with the borders of the control units.

 Modify tentative territories as needed.

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As in the buildup method, the tentatively drawn boundary lines may need to be adjusted due
to special considerations with regard to that geographic area.

4. ASSIGN TO TERRITORIES
Some salespeople can handle large territories and the travel associated with them; some
can’t. Some territories require experienced salespeople; some are best for new people. Some
people want to live in metropolitan areas such as Chicago, Los Angeles, or Houston. Other
people prefer territories with smaller cities. Someone bom and raised in New York City may
not want to be headquartered in Jackson, Mississippi, and vice versa.
These are a few of the (actors a manager needs to consider when assigning new and
experienced people to territories. Executive judgment based on past experience generally
guides a manager in determining who should be assigned to a specific territory.
This is an important decision since a territory may generate millions of dollars in sales.
The wrong person can cost the company in lost sales and bad relationships with customers.
The right person can turn a poor territory into a winner. Hiring the right person is so
important that the next three chapters involve staffing the sales force.

5. Customer contact plan

The fifth factor to consider in designing sales territories is the customer contact plan. This
involves scheduling sales calls and routing a salesperson's movement around the territory.
Scheduling refers to establishing a fixed time (day and hour) when the salesperson will
be at a customer’s place of business. Routing is the travel pattern the salesperson uses in
working a territory. In theory, strict formal route designs enable the salesperson to (1)
improve territorial coverage. (2) Minimize wasted time, and (3) establish communications
between management and the sales force in terms of the location and activities of individual
salespeople. When developing route patterns with their manager, salespeople determine the
exact day and time of sales calls for each account; approximate waiting time; sales time;
miscellaneous time for contacting people such as the promotional manager, checking
inventory, or handling return merchandise; and travel time between accounts.
Typically, when the salesperson finishes the work week, a routing report is filled out. It
is sent to the supervisor and indicates where the salesperson will be working in the future

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(see table 6.7). In the example, today is Friday, December 16, and the salesperson is based in
Dallas and planning, during the week of December 25, to call on accounts in Dallas for two
days.Then the salesperson plans to work in Waco for a day, spend the night, drive to Fort
Worth early the next morning to make calls, and arrive home Thursday night. The last day of
the week the salesperson again plans to work in Dallas.
The weekly route report tells management where the salesperson is, and, if necessary,
they can contact the salesperson. Some firms may ask their salespeople to specify the
accounts they will call on and at what times. For example, on Monday, December 26, the
salesperson may write “Dallas, 9:00 ante meridiem,Texas Instruments; Grand Prairie, 2:00
post meridiem, L.T.V”Thus, management also knows which accounts a salesperson will call
on during a report period. If no overnight travel is necessary’ to cover a territory; the
company may not require any route reports because the salesperson can be contacted at home
in the evening.

6. 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. Actual performance is
compared with these goals for evaluation purposes.The salesperson can see how well
territorial plans, strategies, and tactics were carried out toward meeting performance quotas.
If quotas were not met, then new plans must be developed for die territory.
Many companies routinely furnish managers and individual salespeople with reports on
the number of times during the year their salespeople have called on each account and the
date of the last sales call. Management can monitor the frequency of—and time intervals
between—calls for each of their salespeople.
As an example, a national pharmaceutical company supplies its sales force with the “net
sales by customer and call report.” The report lists each customer’s name, address, and
medical specialty.The desired number of monthly calls on a given customer and the actual
number of calls to date are noted. Net sales arc broken down into last year’s sales, the current
month’s sales, and year-to-date sales. Finally, the date the salesperson last called on each
customer is reported. Using this type of information, which might include 200 to 300
customers for each salesperson, management and salespeople can continually review sales
call patterns and customer sales to update call frequency and scheduling.

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Revising Sales Territories Many companies continually evaluate their sales territories.
Changes can be made, such as increasing or decreasing the number of territories or shifting
geographic boundaries while keeping the same number of territories. These revisions help the
company respond to business conditions. The use of computers to redesign sales territories is
becoming popular and will be discussed later.

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 CONCLUSION
Sales territory allocation is a very important step which is to be taken to
enhance consumer coverage, reduce travel time and selling cost, increase
moral and it also helps is aiding evaluation of sales force. Quota is important
because it help in setting guidelines for what to be done and means of
evaluating how well they were done.

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 BIBLIOGRAPHY

 www.tutorialspoint.com

 www.slideshare.net

 Book: Sales and distribution management by Pingali Venugopal

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