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.

Sales Territory
Comprises

TM 13-2

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 Reduces Provides

customer coverage

travel time and selling costs

more equitable rewards sales for the sales organization

Aids

evaluation of sales force morale

Increases

Increases

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

Procedure for Designing Sales Territories

TM 13-4 (Fig. 13-1)

Select a Control Unit

Determine Location and Potential of Customers

Determine Basic Territories

Assign Salespeople to Territories

Set Up Territorial Coverage Plans

Evaluate Effectiveness of Design

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

Territorial Control Units

States

TM 13-5

Cities
PIN-code

areas

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

Buildup Method of Territorial Design

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

TM 13-6 (Fig. 13-3)

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

Illinois
Customer class A B C Call frequency Calls Accounts per year 10 30 68 108 240 360 408 1,008 Accounts 7 17 55 79

TM 13-7

Control Units Iowa

Calls per year 168 204 330 702

Kentucky
Calls per year 120 120 162 402

Accounts 5 10 27 34

2 per month 1 per month 1 every 2 months

Distribution of one reps calls year (1,500)* Possible control combinations Alternative territories

1,008

491

or

402

100% Illinois 100% Illinois + 100% Kentucky 100% Illinois + 70% Iowa

70% Iowa

or

100% Kentucky

*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 Workload Factor

Nature of Job: Lots of presale and post-sale activity

TM 13-8

Territory Size Increase/Decrease

Decreases Decreases Increases Increases Decreases Increases Decreases Decreases unless market is oversaturated Increases

Nature of product: A frequently purchased product A limited repeat-sale

Market development stage: New market--fewer accounts Established market--more accounts Market coverage Selective coverage Extensive coverage Competition: Intensive Limited
Copyright 2003 by The McGraw-Hill Companies, Inc. All rights reserved.

Breakdown Method of Territorial Design

Management must determine

TM 13-9 (Fig. 13-5)

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 Country into 5-10 regions

Each region into several States Each state into several districts Each district into territories (typically 1 rep per territory)

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

Routing the Sales Force

Routing

TM 13-13

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 Area A Best for routine sales jobs with regular call x frequencies.
Area B: Typically the problem area.
Copyright 2003 by The McGraw-Hill Companies, Inc. All rights reserved.

Purposes of Sales Quotas

Indicate strong/weak spots in selling structure Evaluate sales contest results Furnish sales force goals/ incentives

TM 16-4 (Fig. 16-2)

Control selling expenses

Sales quotas are used ...

Control sales force activities

Improve compensation plan effectiveness

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

Evaluate sales force productivity

Examples of Various Quota Bases

Quota Base Quota Actual

TM 16-5

Percent of Quota Attained

Sales volume, product line A Gross margin, product line B Product demonstrations Orders from new accounts Expense quota Combination of all the above using

$200,000

$200,000

110

30,000

25,000

83

120

135

117

15 50,000

17 45,000

113 -10 or 110

equal weights

106.6

For the expense based quota, the objective is to come in below quota rather than above, or 10% below quota can be interpreted as attaining 110% of the goal.
Copyright 2003 by The McGraw-Hill Companies, Inc. All rights reserved.