MANAGEMENT OF
SALES TERRITORY
By-
Tulsi Sindhwad Roll No. 99
Anand Vig Roll No. 114
DEFINATIONS
Sales territory is defined as a group of present and
potential customers assigned to an individual sale
person, a group of salesperson ,a branch, a dealer, a
distributor ,or a marketing organization at a given
period of time
Territories are defined on the basis of geographical
boundaries in many organizations
MANAGEMENT OF SALES
TERRITORY
In some cases territories are designed on the basis of
the urgency and frequency of customer requirements
rather than geographic coverage.
Situations where products are highly technical and
complex in design, when organizations prefer either a
technical sales force or a system selling approach, and
where a set of people with varied knowledge levels are
grouped together to provide solutions to customer’s
problems and queries
MANAGEMENT OF SALES
TERRITORY
Where the territory is designed based on urgency
and frequency, there is a possibility that the same
customer may get calls from multiple salespeople
from the same organization
ADVANTAGES
1)Ensures better market coverage, effective utilization
of the sales force, efficient distribution of workload of
sales people
2)Enhances employee’s morale and helps managers to
better control and monitor sales and evaluate program
3)Helps in building accountability for each sales
person in the form of identification of prospects,
maintenance of call norms and realization of a different
level of sales at different points of time
Cont..
ADVANTAGES
4)Inculcates higher sales through up-selling and
cross-selling to the same set of customers
5)Helps generate better value from the customers
6)Helps to integrate the selling efforts with other
marketing and promotional functions in the
territory
7)Useful in evaluating the performance of the sales
force
Cont..
ADVANTAGES
8)Identification of the effective utilization of marketing
resources and the level of competition in different areas
of the market
9)Helps identify the exact nature of the problem for
underperformance, one can take remedial actions for
motivating the sales force to perform better
10)Reduced indirect expenses like turnover and
employee dissatisfaction
11)Improves the productivity and income of the sales
force
Cont..
EG:-HP WAY
Hewlett Packard equipped all its sales people with
laptop computers backed up by a customer-
prospecting and relationship tracking system at its
HQ which resulted in a 33%growth in
sales,31%growth in sales force productivity and a
40%drop in the attrition rate of sales personnel
WHO DO NOT ESTABLISH
TERRITORIES?
Newly establish enterprises
Organizations where sales is achieved through
personal relation
Organizations selling highly sophisticated and
technically complex products
Firms with customers distributed over a vast
geographic area and with a lower density In any
specific block
WHO DO NOT ESTABLISH
TERRITORIES?
Firms using telemarketing and internet marketing as tools
to reach customers
Firms relying on customer service that requires a co-
ordination across different geographic territories
Small firms, particularly with a single sales person dealing
with insurance ,fixed deposits and other investment
Highly sophisticated and technologically complex
products like computer hardware and software are sold
through sales team’s efforts which reduce the scope for a
territory
SIZE OF TERRITORIES
1) Nature and demand of the product
2) Mode of physical distribution
3) The selling process
4) Transport and communication facilities in the
overall market and territory
5) Government regulations
6) Density of population
SIZE OF TERRITORIES
7)population spread within the territory
8)market potential and growth rates
9)level of competition
10)firm’s sales policy
11)ability of the sales person
12)overall economic conditions prevailing in the
country
PROCEDURE FOR DESIGNING
SALES TERRITORIES
Determine Location Determine
Select a
and Potential of Basic
Control Unit
Customers Territories
Assign Set Up Evaluate
Salespeople to Territorial Effectiveness of
Territories Coverage Design
Plans
TERRITORIES- BASICS
Consumer durable with a longer shelf life-larger
territory
Perishable commodities-smaller territories
Can be established on the basis of the product-
consumer, industrial, durable, non-durable
In case of huge demand in the market, the companies
decide on designing smaller territories
In case of having middlemen, larger territory is
advisable
TERRITORIES- BASICS
In case of industrial buying, the size of territory is
kept small
Organizations where a higher allotment is made
towards selling expenses go in for a larger territories
Territories in rural markets in India are smaller in
comparison to the urban market
In a market with high density of population and
market potential, companies decide in favor of
smaller territories
TERRITORIES- BASICS
In a highly competitive market, size of the territory is generally small
If a company has experienced,, well trained and competent sales
people ,it may go for a larger territorial cover
For a firm with a limited number of products, wanting to earn higher
profits, the size of the territory will be larger
TERRITORIES- BASICS
A small size territory is suitable for a firm during recession when prices
have stabilized and customers are not willing to spend spontaneously
During a boom condition, firms can increase the size of the territory so
that the sales people can cover a larger market with a higher demand due
to an upturn in the economy
TERRITORY SIZE AND WORKLOAD
FACTORS
WORKLOAD FACTOR TERRITORY SIZE
INCREASE/DECREASE
Nature of Job: Lots of presale and
post-sale activityDecreases
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
ALLOCATION OF SALES TERRITORIES
Advantages to customers-
Customers get prompt and efficient after-sales-service, quick disposal of
complaints and individual satisfaction due to the regular visits of sales
people
Customer’s risk perception is reduced due to familiarity with the sales
people of the company and frequent advice of sales people on
consumption and purchase
ALLOCATION-ADVANTAGE
TO SALES PERSON
The freedom of choice in serving customers
A transparent system for their performance
evaluation and an efficient reward system based on
their performance in the territory
EFFECTIVE TERRITORIAL DESIGN-
BASICS
Optimum size of the territory should be allocated to every sales person
with uniform distribution coverage
Overlapping be avoided
There should be some flexibility on the allocation so that a sales
manager can rotate territories among the sales people
EFFECTIVE TERRITORIAL
DESIGN-BASICS
Equal opportunity for earning average income
Providing maximum service at minimum cost
should be the strategy
While deciding allocation, a new sales person
should not be given independent responsibility of a
sales territory
DESIGNING A SALES
TERRITORY
Factors to be considered are-
Size of an organization
Level of competition in each product category
Number and quality level of the products in the portfolio
Type and quality of the services and customer support to
be provided
Quality of the sales person serving in the organization
BREAKDOWN METHOD OF TERRITORIAL DESIGN
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
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 = 50%
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
SALES TERRITORIES FOR EXAMPLE
Divide…
•The 48 states into 5-10 regions
•Each region into several districts
•Each district into 8-12 territories (typically 1 rep per territory)
WHEN TERRITORIAL
REDESIGN?
Is done when the market grows to such a size that it
is not possible for the same sales force to cater to
the market
When there is a merger or a take over
Is also needed when there is a change in the stage of
the product life cycle
When there is a reallocation of customers in the
market
DESIGNING A SALES
TERRITORY
1. SELECT A GEOGRAPHICAL CONTROL UNIT
2. CRITERIA
3. STARTING POINT
4. TERRITORY SHAPES
5. CONTROL UNITS ADJACENT TO THE
STARTING POINT
6. ALLOCATION CRITERIA AND WORKLOAD
ANALYSIS
7. NEW TERRITORIES
1.SELECTING GEOGRAPHIC
CONTROL UNIT
These control units must be small enough to allow
flexibility
These can be country, state, district, division or
block
TRADING AREA
Is a geographical control area concentrated near a
city where there are many retailers and wholesalers
that furnish a high level of sale, despite a small
geographic concentration
A trading area is made up of a principal city and the
surrounding dependent area
It is an economic unit which ignores the political
and non-economic reasons of setting boundaries
TRADING AREA
Are based on economic factors, consumer buying
habits and normal trading patterns
Trading areas facilitate sales planning and control
and reduce the probability of dispute and
duplication of efforts by 2 sales people
Firms dividing cities as trading areas often rely on
the Postal Index Number (PIN)
DISADVANTAGES-TRADING AREA AS
A CONTROL UNIT
Vary from product to product and should be
referred to in terms of specific products only
It is also difficult to obtain detailed statistics for
trading areas
The boundary of two products may not match and
this can prove to be cumbersome for a multi
product company
TRADE AREA MAPS BY ACNIELSON
Are available for various general products
classifications
The firm published 65 major trade maps and 250
minor area trade maps
Major trading areas are mapped out of metropolitan
cities and state capitals
TRADE AREA MAPS BY ACNIELSON
The minor trade areas comprise populated towns in
different states
Various newspapers and TV channels also publish
their readership and viewer ship data on cities
This data is often used by pharmaceutical and other
consumer durable companies for territorial planning
2.CRITERIA
Involves identifying the sales potential of each
control unit with the help of top authorities, market
experts and statistical models
Each territory should provide an equal standard of
living for the sales force
The attempt at this stage is on building an
approximation of a territory for final agreement
INDIAN FIRM’S TERRITORY DESIGN
1)current customers
2)potential customer’s size
3)geographic size in terms of sq. kilometers or
square miles to be covered by the sales people
CURRENT CUSTOMER BASE
Helps in identifying the basic workload for the sales
people, as existing customers are added in each new
territory
The presence of existing customers improves the
morale of the sales force and motivates them further
Current sales in the area should not be used as the
sole allocation criterion as it ignores the future
potential
MARKET POTENTIAL
Largely depends on how sales people successfully
convert prospects into customers
If there is no computation of the potential markets,
the sales force would only concentrate on doing
business with current customers
3. STARTING POINT
A common choice is the location point (often the
residence of the sales person)
This is done to avoid the relocation cost of the sales
person and provides emotional support by keeping
the sales person closer at home with his family and
relatives
STARTING POINT
Another starting point is trading area (large city or
district HQ)
Location of large account will be the starting point
so that the sales person can provide services to
customers and get information without much travel
Many times, a central geographic location or a state
capital becomes a starting point
4.TERRITORY SHAPES
1)wedge
2)circle
3)colverleaf
Shape of the territory affects sales expenses and the
ease of sales coverage
It also helps a sales person to spend less time on
travel and keeps sales people motivated to work
hard
WEDGE SHAPED TERRITORY
Is applicable to FMCG goods and is used by companies
like Marico industries, P&G and HLL
These companies serve both the urban and rural markets in
India
The design radiates from a densely populated urban area to
small rural areas
The travel time between adjoining wedges can be equalized
by balancing the travel time between the urban and rural
areas
CIRCLE SHAPE
Is appropriate when the companies have their
accounts distributed across equally sized areas
a sales person is based in the central part of the area
and travels uniformly to different areas
Companies concentrating in urban areas like
Maruti, Hyundai and park-avenue follow this
design
CLOVERLEAF DESIGN
Is used when accounts are distributed randomly
throughout the territory
Careful call planning makes each visit to the clover
a timely affair on the basis of a weekly, daily or a
periodic schedule for salespeople
5.CONTROL UNITS ADJACENT TO THE
STARTING POINT
The sales manager keep on running totals on the
allocation criteria for each newly designed territory
The process of allocation continues until all control
units are assigned to each sales person
The basic units are combined so that the sales
potential can be converted into sales
6.ALLOCATION CRITERIA AND
WORKLOAD ANALYSIS
Small and large territories in a particular geographic
spread may have an equal potential on customer
size
in such cases, there is need to allocate control units
on the basis of traveling and call norms in order to
reach customers
WORK-LOAD ANALYSIS
Consists of deciding how much of selling effort is
required to meet the sales objectives for a given region
The starting point of the workload approach is the
finalization of the tentative boundary for each sales
territory
Account analysis involves estimate the sales potential
for each customer and prospect in the territory
TALLEY’S WORKLOAD APPROACH
The sales potential derived from account analysis is
then used to decide on how much each account
must be called on and for what duration of time
The total effort required to cover a territory can be
determined by considering the number of accounts
and calls to be made for each account, the duration
of each call, estimated time of travel and non-
selling activities
TALLEY’S WORKLOAD APPROACH
The optimum call frequency is decided at sales
conferences
Firms can be grouped into volume classes and the
call frequency for each volume class can then be
agreed upon
“CALL-PLAN”-A XEROX SYSTEM
Response function to each account is generated from
each salesperson’s inputs
The program collects information from the sales people
by asking following questions related to their territory-
When no calls are made
When one half of the present numbers of calls are made
When the present level of calls is continued
When 50% additional calls are scheduled
“CALL-PLAN”-A XEROX SYSTEM
When a saturation level of calls is reached
A sales person also gives the probabilities for each of the above options
with different cal frequencies
Call plan then fits curves to these data points and prints out the expected
sales for all feasible call frequencies, optimal number of calls, length of
each call to eb made on each client, and the prospect during an average
effort period
“CALL-PLAN”-A XEROX SYSTEM
After the completion of the account and workload
analysis, the total workload is divided by the total
number of sales force in the firm to reach the call
allocations to be made to each sales person in each
of the territories
7.NEW TERRITORIES
Many firms appoint new sales persons in areas
closer to their place of stay, where as more
experienced sales people are assigned remote
territories with a higher potential for growth and
sales realization
Characteristics of each territory, needs of the
territory and the appointment of the intermediaries
are considered before finally deciding the territory
NEW TERRITORIES
Boundaries of the territory are never kept constant and
evolve over a period of time, depending on the nature and
number of customers in these areas
Situations demanding a high level of customer attention
and deeper service levels, many firms often allow sales
people in adjacent territories to operate either additionally
or jointly with the existing sales people in that territory
Unless these situations are well planned, it may lead to
confusion and demotivation among the sales staff of an
organization
USE OF IT
THE COMPUTER PROGRAMS ARE BASICALLY
USED FOR-
Territory mapping
Simulation
Optimization of routine and
Call norm behavior
IT FOR TERRITORY MAPPING
Are used to display territories as an aggregate of
various priori data sets
A sales manager feeds the basic data on the market
potential, number of present accounts, home location of
salespeople, and geographic boundary of control units
Tentative territory boundaries are then drawn
The display gives the size and locale of the territory,
relevant data on current and potential sales, and the
geographic size for coverage
IT FOR TERRITORY MAPPING
By a trial and error process ,a sales manager can
relocate his geographic control units
Territory maps are tied in which spreadsheets that
show the current potentials, sales, targets and the
number of calls to be made by the sales person for
each category of customers
Involves establishing an objective function and
attempt to minimize it, subject to a set of constraints
IT FOR TERRITORY MAPPING
Any changes in the location of the geographical
units are automatically reflected on the computer
screen and corresponding figures undergo suitable
changes
These programs can help in making territories but
do not have ability to find out optimal designs
Some computer programs use an objective function
designed to ensure compactness
IT FOR SIMULATION
This is called the ‘moment of inertia’ which is the
sum of the squares of the distances from the control
units to the trail territory centers weighed by the
potential in each area
The smaller the value of the moment of inertia, the
higher is the compactness of the territories that
make up the sales territory
IT FOR SIMULATION
Using the interactive mapping software, simulation
helps in improving the sales territory design
because the computer has the ability to examine
more combinations
Multiple runs are required to take the final decision
Many programs balance territories optimally using
several factors and minimize driving time
IT FOR SIMULATION
These programs are quite complex and are run in higher
settings
The high cost of optimizing programs make them
applicable for large, multi-product and multi-location
companies with a higher geographic spread
They don no take into consideration problems of
geographic barriers like topographic features( hills,
rivers ,forests and mountains to crossover during sales
calls
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
TERRITORY DESIGN AT MARICO
Sales people at Marico use Geographic Information
Systems (GIS) software to design territories
GIS contains detailed maps of specific regions and
allows the user to key in additional information
such as demographic data of the market to help
mangers overcome design problems
TERRITORY DESIGN AT MARICO
GIS uses sophisticated tools that analyze satellite-
based pictures to provide relevant data on
transportation , communication , distribution of
settlements and the spread of retail outlets in a
geographic area
THANKYOU
