Sales territories

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).
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
 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
 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

Tentatively set territorial boundary lines

by combining control units until total
calls needed = total calls possible

Modify territories as needed

 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
 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
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

 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
 TM 13-11

Sales Territories for Pharmaceutical Sales Reps

Divide…
•The 28 states into 5-10 regions
•Each region into several districts
•Each district into 8-12 territories (typically 1 rep per territory)
 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
Area C
Area B
efficient territory coverage.
Area A
• Some reps resent it. x
• Best for routine sales
jobs with regular call
frequencies.
Area B: Typically the “problem” area.
 Revising sales territories
• Entrepreneurs new to business may not design
territories very carefully.
• Overestimation and underestimation of territory’s
sales potential and the work load.
• Changing market conditions may outdate even
well designed territory structures.
• Faulty management.
• Growth of the business.
• Increased sales force.
• Competition.
• Changed management philosophies.