School of Management Studies

Nagaland University

(A Central University Established by an Act of Parliament 1989)

Sales Territory
H Ongwang
NU/MN-08/11

12. 11.2012

Sales Territory
The emphasis in the sales territory concept is upon customer and prospects rather than the area in which an individual sales person works. A sales territory is a grouping of customers and prospects assigned to an individual salesperson. Whether designated geographically or not, a sales territory is a grouping of customers and prospects that can be called upon conveniently and economically by an individual salesperson. The term Sales Territory is defined by some eminent scholars as under: According to Maynard and Davis, Sales Territory is the basic unit of sales planning and sales. According to Philip Kotler, By Sales Territory is meant the geographical area assigned to a salesman for his selling. On the basis of above definitions, we can conclude that every product has a definite market in which goods are sold. The sales field is divided into small and viable small areas or territories. Each such divided area is known as sales territory. Objectives of establishing Sales Territories: Stanton and Buskirk explain the following objectives for setting sales territories; 1. Sales efforts can be focussed more effectively in the assigned territory. 2. It prevents duplication or overlapping of sales efforts in the same territory. 3. It is possible to have increased market coverage. The sales person meets the competition wisely as it is pre-planned because he knows the local conditions 4. Work load for each salesman can equitably be distributed in terms of sales volume in different territories. 5. Headquarters of each sales territory can be located in a place where greater number of customers is located. Reason for establishing Sales Territory Sales territories are established for achieving the following goals: 1. Proper market coverage: Systematic mapping of sales territories facilitates sales person in effectively covering the territory, including present as well as potential customers. Proper understanding of the market potential helps in establishing an ideal territory. It represents a reasonable workload for the sales person and assures that all potential customers can be followed up as directed. 2. To provide better services for the customers: once the entire market for the products is segmented into viable sales territories and requisite number of

salesperson are appointed depending on the size of the sales territory, it facilitates better serving of customer in each segment. 3. Effective deployment of sales force: Proper knowledge of the demands of the sales territory results in assignment of the right person for the territory. Clarity in job description and responsibility provides for parity in workload and potential among sales persons. 4. Improving selling and market productivity: Sales territories coordinate personal selling and advertisement. As each sales territory possesses different nature and characteristic of customer and prospects, personal selling and advertisement efforts are planned differently for different territories. 5. Objective evaluation of sales force: Comparison of the sales persons performance in the assigned territory result in their objective evaluation. Territory-by-territory evaluation of sales performance helps to spot market condition and make needed adjustments in the sales strategy.

Procedure for setting up Sales Territories: Sales territories are set up through the following procedure: 1. Selecting a basic geographical control unit: sales territories are usually established on the following basis: On the basis of country unit On the basis of state unit On the basis of district unit. Other basis like regional basis, on the basis of the size of the production unit, on the basis of government policy and on the political basis. The choice of the control units as cities, district, states, zones or trading areas depends on the statistical data available in government records. Company does not have to spend on collecting information for the sales territory. If there is no statistical data available on such geographical unit, the company has to spend a lot on collecting and analysing information in respect to such control units. 2. Determining sales potential in each control unit: the next step is to determine the sales potential in each control unit. Each control unit represents a particular geographical market segment. Geographical market segment are made up of present and prospective customer. The territorial planner must identify the buyers of the products as precisely as possible. Formal market identification studies can help him in identifying the buyers. Having identified potential buyers, the planner next determines the sales potential in each control unit. He ascertains how many potential buyers in each class are there in each control and the other market potential of each unit. Market potential are generally converted into sales potentials by analysing historical market shares within each control unit. Having made these estimates, the territorial planner ascertains those control units which have sufficient sales potential to justify sales coverage. 3. Combining units into tentative sales territories: after measuring the sales potentials, the planner combines units into tentative sales territories. The

planner has to determine only tentative without making any adjustment for coverage difficulty. Sales territories are made on the assumption that each control unit has no significant differences in the physical or other characteristics and contain approximately the same sales potential. Territory shape: the shape of a territory affects selling expenses and ease of sales coverage. The shape of a territory permits the salesperson to minimise time on the road and contributes to sales force morale. Three shapes are in wide use: the wedge, the circle and the clover leaf.

The wedge is appropriate for territories containing both urban and non-urban area and can be in many sizes. The circle is appropriate when accounts and prospects are distributed throughout the area. The salesperson assigned to the circular-shaped territory is based at some point near the centre. He makes frequent calls on customers and prospects and remains in their close vicinity. The clover leaf is desirable when accounts are located randomly through a territory. These territories are more common among industrial marketers than among consumer marketers and among companies cultivating the market extensively rather than intensively. 4. Adjusting for coverage difficulty and finalising tentative territories: the final step in establishing the territory is to revise the tentative territories by making necessary adjustment for differences in coverage difficulties which have been ignored earlier. Establishing or revising sales territories is a continuous process. The planner keeps making adjustments for coverage and other difficulties and thus, redefines the sales territories.

Routing and scheduling of sales potential Routing: A route plan improves the territorial coverage. In routing, a map is prepared of the travel plan. In routing, call sequence are laid out that satisfy the dual objectives of minimisation of travel time and call frequencies. It is devising a plan or pattern to use when making sales. The primary goal is to minimise non- selling time and maximise selling time for sales people. A well designed routing system helps salespeople reduce their selling costs, improve their territory coverage, and improve their communication with sales managers, customers,

and other who can locate them on short notice through the routing pattern. In many companies, individual salesperson route themselves because they know their territories and customers best. Routing patterns: depending on the sales territorys size and shape, routing patterns can be of the following types: i. Straight line route: With a straight-line route, the sales person starts from the office and make calls in one direction until he reach the end of the territory. ii. Circular route: Circular pattern starts at the office and moves in a circle of stops until the salesperson ends up back at the office. iii. Hopscotch route: With hopscotch patterns, the salesperson starts at the farthest point from the office and hops back and forth, calling on accounts on either side of a station like back to the office. iv. Clover-leaf route: A cloverleaf route is parallel to a circular pattern, but rather than covering an entire territory, the route circle only part of a territory. It is used offices are concentrated in specific parts of the territory. v. Outer ring route: in the outer ring approach to routing, the sales person first draws an outer ring around the customer to be called on. Then, customers inside the ring are connected to the outer ring using angles that are obtuse as much as possible.

Scheduling: In scheduling, estimate are made for time consumed in account contacts, waiting and travel for a particular weeks or months activities. Average time as revealed by historical data and experience shows only estimation. Necessary adjustments are made to reflect the circumstances of the specific planning period. The success of scheduling is increased if appointments are fixed with the accounts in advance. Each territory managers planned use of time should be compared with actual time consumed during the period and reason for divergence should be compared with actual time consumed during the period and reasons for divergence should be investigated to make better future scheduling.