Sales Management 7 Sales Territories

Customers Current and Potential Assigned to a salesperson – Or branch, dealer, distributor

Territory Design Issues Equity – Salespeople need fair chance to make a living Coverage – Design to reach all customers – Need tougher “sales” as well as easy customers Evaluation and control – A way to track effort/success/costs/profits – Can modify plan if not getting desired results

First: Determine # Salespeople Before you establish territories, decide how many salespeople you need to have. Then you can divide the market into territories, and assign a territory to each salesperson.

What size sales force? Need sufficient number of salespeople to cover customers Salespeople are expensive Balance: Optimal number of salespeople Three methods to establish size: – Breakdown – Work Load – Incremental

Breakdown Method It's alright if you love me, ♩♬♪♫ It's alright if you don't I'm not afraid of you runnin' away honey, I’ve got this feeling you won't Say there ain't no use in pretending, ♩♬♪♫ Your eyes give you away Something inside you is feeling like I do, We said all there is to say Breakdown, go ahead and give it to me ♩♬♪♫ Breakdown, take me through the night Breakdown, go ahead give it to me, ♩♬♪♫ Breakdown, it's alright, It's alright, it's alright

Breakdown Method (the real one) Divide sales forecast by average salesperson productivity N = S ÷ P – N = Number of salespeople needed – S = Total sales volume forecasted – P = Estimated productivity of one salesperson

Work Load Method Classify customers by category: ABC Frequency x Length of sales calls/category Work load to cover entire market Time available/salesperson Figure available selling time (1/6 x 2000 Hrs) Calculate # of salespeople needed

# Sales Calls on Account Sales/Account Point of Diminishing Returns Annoying the Customer More Calls = More Sales

Incremental Method Cost/Benefit of adding salespeople Calculate incremental revenue increase Calculate additional profits Less additional costs If additional profits > additional costs: hire

Designing Sales Territories Select Basic Control Unit Estimate potential in each unit Combine units into tentative territories Perform work load analysis Adjust tentative territories – geography, potential Assign territories

Select a Basic Control Unit State Trading area County Metropolitan Statistical Area/Consolidated MSA Zip Code

State

City

New York City

Frostbite Falls, MN

MSA

Estimate Potential of Territories Total number of actual and potential customers Purchase volume/frequency Remember: potential ≠ forecast – Not everyone who can buy does buy

Form Tentative Territories Group basic control units into logical territories. Try to group geographically, preferably contiguously. – Ohio/Pennsylvania: Good – Ohio/Hawaii: Fagedaboudid! Try to make the territories roughly equal in terms of market potential. This is a first attempt.

Perform Work Load Analysis Determine the sales potential for each customer/prospect in the territory. Determine sales call length & frequency. Add non-selling and travel time. Determine if one salesperson can adequately service each territory. – Too much work? – Too much time?

Adjust Tentative Territories If a territory is too large or too small for a salesperson, make adjustments. Need to balance potential and workload. Need realistic, and equitable territories to maintain salespeople’s motivation.

Assign Salespeople to Territories Now look at salespeople’s different abilities. Match abilities to territories. Try to match salesperson with customers and prospects. – Explorer to uncharted territory – Industry experience (speaks the language) Goals – Maximize company revenues and profits – Satisfied salespeople

Good Bye