SALES TERRITORIES

Sales territories facilitates matching selling effort with sales

opportunities. Sales personnel are assigned the responsibility for serving
particular groupings of customers and prospects and provide contact points
with the markets, in establishing sales territories, management is taking an
important step towards accumulating knowledge on the company’s strength
and weaknesses in serving different markets.

Realistic sales planning is done on a territory-by-territory

basis .the territory is a more homogeneous unit than the market as a whole.
Assigning responsibility for achieving specific objectives to subordinates
line executives and individual sales personnel brings selling efforts into
alignment with sales opportunities.

THE SALES TERRITORY CONCEPT

The emphasis in the sales territory concept is
upon customers and prospects rather than the area in which an individual
salesperson works. Operationally defined “A sales territory is a grouping of
customers and prospects assigned to an individual salesperson” when
sales person sell mainly to personal acquaintances, as in selling properly
insurance ,investment securities ,and automobiles.

Other situations exist in which sales territories are not

designated geographically. Certain companies have highly specialized
sales personnel ,each with responsibility for serving customers who need
his or her special skill. Small companies, and companies introducing new
products requiring the use of different marketing channels, often do not
use geographically defined territories at all or, if they do, use through
divisions, such as entire states or census regions.

In most marketing situations, however, it is advantageous

to ”assign” sales personnel to territories.

House Accounts
 A house account is an account not assigned to an individual
salesperson but one handled by executives or home office personnel .many are
extremely large customers ,most of whom prefer-indeed, sometimes demand-to deal
with the home office. most companies prefer to minimize the number of house
accounts .however ,some large customers refuse to do business any other way.

REASONS FOR ESTABLISHING OR REVISING SALES TERRITORIES

Sales territories are set up, and subsequently revised as market
conditions dictate , to facilitate the planning and control of sales operations.

1. providing proper market coverage

Sometimes a company loses business to competitors
because it does not have proper market coverage. sales management has not
matched selling efforts with sales opportunities effectively, competitors have a better
match, and they obtain the orders. territories , In other words, should represent
treasonable workloads for the sales while assuring that all prospects who are potentially
profitable can be contacted.

Good territorial design allows sales personnel to spend sufficient

time with customers and prospects and minimizes time on the road.

2. Controlling selling expenses

Good territorial design combined with careful salesperson
assignment results in low selling expenses and high sales volumes. sales personnel
spend fewer nights away from home, which reduces or eliminates many charges for
lodging and food; reduces selling expense ratios do not, however ,follow automatically
.if territorial planning is unsound or is not combined with appropriate assignments of
sales personnel, selling expense percentage.

Reduced selling expense ratios do not, however follow

automatically. if territorial planning is unsound or is not combined with appropriate
assignments of sales personnel, selling expense ratios increase.

3. Assisting in evaluating sales personnel

Well-designed sales territories assist management in
evaluating sales personnel selling problems vary geographically, and the impact of
competition differ widely. Through analyzing the market territory and pinpointing sales
and cost responsibility to individual sales personnel, management has the information it
needs to set quotas and evaluate each salesperson’s performance against them.
4. Contributing to sales force morale
Good territorial designs help in maintaining sales force
morale well designed territories are convenient for sales personnel to cover; they
represent reasonable-sized workloads, and sales personnel find that their efforts
produce results morale is high also because there are few conflicting claims of sales
personnel to the same accounts-when sales territories are not used, there are
numerous conflicts. finally, sales is high because excellence in planning territories and
making territorial assignments causes sales personnel to spend minimum time on the
road.

5. Aiding in coordination of personnel and advertising

Management may set up territories or revise existing
territorial arrangements to improve the coordination of personal selling in advertising
efforts. In most situation, personnel selling or advertising alone cannot accomplish the
entire selling task efficiently o economically. Sales personnel play key roles in
capitalizing upon synergistic opportunities. Territorial assignments make every dealer,
the responsibility of some salesperson, and proper routing ensures that sales personnel
contact all dealers at appropriate times relative to the breaking of the consumer
advertising campaign.

PROCEDURES FOR SETTING UP OR REVISING SALES TERRITORIES

In setting up or in revising sales territories, there are four
steps:

1. selecting a basic geographical control unit

2. determining sales potential in control units
3. combining control units into tentative territories
4. adjusting for coverage difficulty and redirecting tentative territories

Selecting a basic geographical control unit

The starting point in territorial planning is the selection of a
basic geographical control unit. The most commonly used control units are countries.
There are two reasons for selecting a small control unit. One reason is to realize an
important benefit of using territories, the precise geographical identification of sales
potential. The second reason is that these units remain relatively stable and
unchanging, making it possible to redraw territorial boundaries easily by redistributing
control units among territories.
Counties: In the United states. The country is the most widely used geographical
control unit. The country is small enough to prevent the obscuring of areas with high
and low sales potential, and statistical information on the more than 3,000 countries in
the United States is readily available.

Zip code areas: A basic geographical unit increasingly used by U.S. companies is the
zip code area. Using zip code areas as the basic geographical units has advantages.
The zip code system permits a precise definition of markets according to economic and
demographic characteristics.

Cities: when a company’s sales potential is located entirely or almost entirely, in

urbanized areas, the city is used as the control unit, although, in some cases, both the
city and the surrounding country are used as “twin” control units.

Metropolitan statistical areas: companies whose markets have expanded beyond city
limits and into suburbs and satellite cities find the metropolitan statistical area a good
choice for basic geographical control unit. These statistics emphasize the highly
urbanized nature of the national market and explain why an ever-growing number of
companies assign territories consisting of metropolitan areas personnel and either use
“country salespersons” to cover nonmetropolitan.

Trading areas: A logical choice for a geographical control unit is the trading areas, since
it is based upon the natural flow of trade. formally, a trading area consisting of the
geographical region surrounding a city that serves as the dominant retail or wholesale
center or both for the region.

Many customer products, including most specialty and shopping goods, are available
almost entirely in large regional shopping malls. The main problem in using trading as
control units are defining them and estimating sales products.

States: states, as basic geographical control units, provide a rough basis for subdividing
the national market. The main difficulty in using states as basic control units is that they
are political rather than economic subdivisions.

Determining sales potential present in each control unit

The next step is to determine the sales potential
present in each central unit. The territorial planner needs some way to measure sales
potential, which, you will recall, represent the maximum possible sales opportunities
open to a specific company selling a goods or services during a stated future period to
particular market segment. Sometimes, sales personnel supply information, but it is not
necessarily usable.

Combining control units into tentative territories

 The planner next combines units into tentative sales
territories. This is only a tentative arrangement because, as explained later, subsequent
adjustments must be made for relative coverage difficulty. The purpose is to obtain a
“first approximation” of sales territories, by combining contiguous control units into
tentative territories, each containing approximately the same sales potential.

Territory shape: The planner now consider territory shape. The shape of a territory
affects the shape of a territory affects both selling expenses and ease of sales
coverage. the wide appropriate for territories containing both urban and nonurban
areas.

Adjusting for differences in coverage difficulty and redistricting tentative

territories
The final step is to redistrict the tentative territories through
adjusting for coverage difficulty. The tentative territories each contain approximately the
same sales potential, but, almost certainly, territories with nearly equal sales potentials
require different selling efforts and, in turn, selling expense totals.

Redirecting to adjust for coverage difficulty is a seven-step procedure:

1. Determine number, location and size of customers and prospects in each tentative
territory: customers are identified and located through sales records; size is
measured in terms of sales potential.
2. Estimate time required