Management of Sales Territories
Management of Sales Territories
Management of Sales Territories
Management of Sales
Territories and Quotas
Learning
Objectives
Sales Territories
A sales territory consists of existing and potential
customers, assigned to a salesperson
Most companies allot salespeople to geographic
territories, consisting of current & prospective customers
Procedure in Build-up
Method
Decide customer call frequencies
Calculate total customer calls in each control unit
Estimate workload capacity of a salesperson
Make tentative territories
Develop final territories
Objective
is
to
equalise
the
workload
of
salespeople
5
Call
No. of
frequency Customers
per month
District -Y
No. of
Calls per
Year
No. of
Customers
No. of
Calls per
Year
(4*3*12)
144
(4*4*12)
192
168
192
20
240
28
336
30
552
40
720
TOTAL
Breakdown Method
Used by companies who have intensive
distribution strategy.
Used for selling consumer products
Procedure in Breakdown
Method
Estimate company sales potential for total
market
Forecast sales potential for each control unit
Estimate sales volume expected from each
salesperson
Make tentative territories
Develop final territories
Objective is to equalize sales potential of territories
9
11
Routing
Routing is a travel plan used by a salesperson for
making customer calls in a territory
Benefits of or Reasons for routing:
Reduction in travel time and cost
Improvement in territory coverage
Importance of routing depends on the application:
Nature of the product Important for FMCG
Type of jobs of salespeople Important for drivercum-salesperson job, but creative selling job
needs a flexible route plan
12
C
1
B
B
C
5
C
4
C
3
C
2
Circular
Clover Leaf
13
Scheduling
Scheduling is planning a salespersons visit time to
customers. It deals with time allocation issue
How to allocate salespersons time?
Sales manager communicates to salesperson major
activities and time allocation for each activity
Salesperson records actual time spent on various
activities for 2 weeks
Sales manager and salesperson discuss and decide
how to increase time spent on major activities
Companies specify call norms for current customers,
based on sales and profit potentials, and also for
prospective customers
14
Sales Quotas
What are Sales Quotas?
Sales quotas are sales goals or targets set by a company for
its marketing / sales units for a time period
Marketing / sales units are regions, branches, territories,
salespeople, and intermediaries
Generally, company sales budget is broken down to sales
quotas for various marketing units
Objectives of Sales Quotas
To use quotas as performance standards or performance
goals
To control performance
To motivate people by linking quotas to compensation plans
To identify strengths and weaknesses of the company
16
Types of Quotas
Organisations set many types of sales quotas: (1) sales
volume, (2) financial, (3) activity, (4) combination
Sales volume quotas
For effective control, sales volume quota should be set
for the smallest marketing units, such as salesperson,
districts / branches, product items / brands
Sales volume quotas can be stated in (a) rupees /
dollars, (b) units, or (c) points
Rupees / dollars sales volume quotas are appropriate
when salespeople are required to sell many products
17
Financial Quotas
Financial quotas control (a) gross margin or net profits, and (b)
expenses of marketing units
Gross-margin / Net-profit quotas
Calculate gross margin by subtracting cost of goods sold
(i.e. cost of manufacturing) from sales volume. Sales
managers are not responsible for cost of manufacturing
Net profit quotas are generally accepted by sales mangers
as it is calculated by subtracting direct selling expenses
from the gross margin
Expense quotas
In many companies, expense quotas are stated as a
percentage of sales
Expense quotas to be administered with flexibility, to make
salespeople cost conscious, allowing reasonable expenses
19
Activity
Quotas
These are set when salespeople perform
both selling and non-selling activities
Objective is to direct salespeople to carry
out important activities
For effective implementation, activity
quotas are combined with sales volume
and financial quotas
E.G. Calling on high potential customers,
payment
collection
from
defaulting
customers
20
Combination Quotas
Used when companies want to control salesforce performance on
key selling and non-selling activities
Focus on a few types of quotas, to avoid confusing salespeople.
An example:
Type of Quota
Quota
Actual
Percent
Weight
Quota (Importance)
5,00,000 4,50,000
Percent
Quota x
Weight
90
270
Receivables (days)
45
50
89
178
New Customers
(Nos)
04
05
125
125
573
Total
by
established
1)
2)
3)
4)
Key Learnings
A sales territory consists of existing and prospective
customers, assigned to a salesperson
While assigning salespeople to territories, sales
manager should consider relative ability of salespeople
and salespersons effectiveness in the territory
Management of territorial coverage includes routing,
scheduling, and time-management tools.
Routing is a travel plan used by a salesperson for
making customer calls in a territory
Scheduling is planning a salespersons visit time to
customers, based on sales and profit potentials of
customers
29