Part III SALES FORCE STRUCTURE Management Resource: Designing Territories

Figure MR6-1: Unbalanced Territories for a Cosmetics Company Workload -15% +15% Territories Sorted by Workload Ideal Territory Workload Actual Territory Workload Workload Across Sales Territories Territory Design: Unbalanced Territories

Territory Design: Why Sales Increase Sales Potential in Territory ($000) Sales in Territory ($000) Sales lost by reducing size of large territories is more than offset by sales gained by increasing small territories. Sales Gained Sales Lost NOTE: Each dot on the graph represents one territory

Figure MR6-2: Reasons for a Major Territory Realignment  A change in sales force size  A change in sales force structure  Mergers and acquisitions  Shifts in market opportunities  Demographic shifts  New Products  Need to shake things up Territory Design: Reasons for Realignment

Figure MR6-3: Territory Design Process 1 Select geographic control units 2 Decide on alignment objectives 3 Choose starting points 4 Combine control units adjacent to starting points 5 Make final adjustments 6 Assign salespeople to new territories  Mergers  Division consolidation  Division split  Sales force turnover  Plant relocations  Product line changes Territory Design: Process Revise territory Boundaries to balance workload and potential Events triggering sales territory adjustments:

 What are triggering events?  The Buildup Method -- Six Steps (9-1) 1. Select control units  Census tracts -- good for dividing cities  Counties - convenient and data readily available 2. Choose starting points  Salesperson’s home  Large customer - cut transportation cost  Big city - convenient for services Territory Design: Process Steps

Territory Design: Process Steps (Cont.) 3. Determine Allocation Criteria  Territory balance -- effect on morale  Customer balance - distribute commission  Potential balance - share business growth  Size balance - reduce transportation costs 4. Combine Adjacent Control Unit (9-3) 5. Compare Sales Territories  Mountains, roads, population center locations? 6. Assign people to Sales Territories

Table MR6-1: Geographic Control Units Used in Territory Design CountriesCities States or provincesZip codes CountiesCensus tracts Metropolitan areasCustomers Territory Design: Common Geographic Control Units

Territory Design: Sample Alignment Metrics Pharmaceuticals:  Doctor Specialty Counts  Patient Volumes  Epidemiology Data  Influential Doctors  Teaching Institutions  Managed Care Org.  Surgical Procedures  Total Hospital Beds Health and Beauty Aids:  Retail Outlets  Store All Commodity Volume  Call Activity Requirements Office Products:  Number of White Collar Workers  Office and Distribution Locations  Headquarter Locations  Number of Accounts  Customer Types Diagnostic Equipment:  Testing Volume  Installed Machines  Contract Information Building Materials:  Housing Starts  # of Architects, Builders, Contractors  Projected Population Growth

The numbers in each county are population figures and are a measure of potential. Kentucky Counties, Major Cities, and Population Centers TENNESSEE VIRGINIA WEST VIRGINIA INDIANA ILLINOIS OHIO Figure MR6-4: Kentucky Counties, Major Cities, and Population Centers Territory Design: Kentucky

Figure MR6-5: Three Kentucky Sales Territories Territory Design: Three Kentucky Territories Three Kentucky Sales Territories TENNESSEE VIRGINIA WEST VIRGINIA INDIANA ILLINOIS OHIO Major super highways Territory borders Territory 3 Territory 2 Territory 1

Table MR6-2: Comparing Three Kentucky Sales Territories Territory Design: Comparing Three Kentucky Territories Territory Potential as Measured by Population Number of Counties 11,124, ,129, ,131,13743

Figure MR6-6: Dividing a Large Territory Territory Design: Dividing a Large Territory