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Chapter

13
TM 13-1

Sales Territories

You have to recognize when


the right place and the right
time fuse and take advantage
of that opportunity. There are
plenty of opportunities out
there.
Ellen Metcalf

Copyright © 2003 by The McGraw-Hill Companies, Inc. All rights reserved.


TM 13-2

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).
Key word: customers

Copyright © 2003 by The McGraw-Hill Companies, Inc. All rights reserved.


TM 13-3

Benefits of Good Territory Design


Enhances customer coverage
Reduces travel time and selling costs
Provides more equitable rewards
Aids evaluation of sales force
Increases sales for the sales organization
Increases morale
Copyright © 2003 by The McGraw-Hill Companies, Inc. All rights reserved.
Procedure for Designing Sales Territories TM 13-4
(Fig. 13-1)

Select a Determine Location Determine


Control Unit and Potential of Basic
Customers Territories

Assign Set Up Evaluate


Salespeople to Territorial Effectiveness
Territories Coverage of Design
Plans
Copyright © 2003 by The McGraw-Hill Companies, Inc. All rights reserved.
TM 13-5

Territorial Control Units

States

Counties

Cities

Zip-code areas
MSAs (Metropolitan Statistical Areas)

Copyright © 2003 by The McGraw-Hill Companies, Inc. All rights reserved.


TM 13-6
Buildup Method of Territorial Design (Fig. 13-3)

Management must determine:

Desirable call patterns:


Call frequency per account per year

Total calls needed


in each control group

Workload capacity:
Total calls possible per rep per year =
number of daily calls x days selling
Tentatively set territorial boundary lines
by combining control units until total
calls needed = total calls possible

Modify territories as needed


Copyright © 2003 by The McGraw-Hill Companies, Inc. All rights reserved.
Territory Design: Build-Up Method Worksheet TM 13-7

Control Units
Illinois Iowa Kentucky
Customer Call Calls Calls Calls
class frequency Accounts per year Accounts per year Accounts per year
A 2 per month 10 240 7 168 5 120
B 1 per month 30 360 17 204 10 120
C 1 every 2 months 68 408 55 330 27 162
108 1,008 79 702 34 402

Distribution of one rep’s calls 1,008 + 491 or 402


year (1,500)*
Possible control combinations 100% 70% or 100%
Illinois Iowa Kentucky
Alternative territories 100% Illinois + 100% Kentucky
100% Illinois + 70% Iowa
*6 calls/day x 5 = 30 calls/week x 50 = 1,500 calls/year
Copyright © 2003 by The McGraw-Hill Companies, Inc. All rights reserved.
Territory Size and Workload Factors TM 13-8

Workload Factor Territory Size


Increase/Decrease
Nature of Job:
Lots of presale and post-sale activity Decreases
Nature of product:
A frequently purchased product Decreases
A limited repeat-sale Increases
Market development stage:
New market--fewer accounts Increases
Established market--more accounts Decreases
Market coverage
Selective coverage Increases
Extensive coverage Decreases
Competition:
Intensive Decreases – unless
market is oversaturated
Limited Increases
Copyright © 2003 by The McGraw-Hill Companies, Inc. All rights reserved.
Breakdown Method of Territorial Design TM 13-9
(Fig. 13-5)
Management must determine

Company sales potential

Sales potential in each control unit

Sales volume expected from


each sales person

Tentatively set territorial


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

Modify territories as needed


Copyright © 2003 by The McGraw-Hill Companies, Inc. All rights reserved.
TM 13-10

Territory Design: Break-Down Method Worksheet

Company sales potential = $200,000,000

Targeted volume rep = $ 10,000,000


Number of reps needed = Company sales potential = $200,000,000 = 20
Targeted volume/rep $ 10,000,000

Territory volume as = Targeted volume/rep = $ 10,000,000 = 5%


Company sales potential $200,000,000

Each territory should comprise 5% of sales potential or $10,000,000


Combine adjacent control units until each sales potential of $10,000,000

Copyright © 2003 by The McGraw-Hill Companies, Inc. All rights reserved.


TM 13-11

Sales Territories for Pharmaceutical Sales Reps


Divide…
•The 48 states into 5-10 regions
•Each region into several districts
•Each district into 8-12 territories (typically 1 rep per territory)

Copyright © 2003 by The McGraw-Hill Companies, Inc. All rights reserved.


TM 13-12

Computers in Territory Design


 Geographic Information System (GIS)
 Combines multiple layers of information to
provide in-depth understanding of a sales
territory.
 Elements of a complete GIS:
 Software
 Hardware
 Data
 Trained people
Copyright © 2003 by The McGraw-Hill Companies, Inc. All rights reserved.
TM 13-13

Routing the Sales Force


 Routing is the managerial activity that establishes a
formal pattern for sales reps to follow as they go
through their territories.
 Reduces travel expenses as it ensures a more
efficient territory coverage. Area C
 Some reps resent it. Area B
 Best for routine sales Area A

jobs with regular call x


frequencies.

Area B: Typically the “problem” area.


Copyright © 2003 by The McGraw-Hill Companies, Inc. All rights reserved.