SALES & DISTRIBUTION MANAGEMENT

DR. ANUPAM SHARMA

ASSOCIATE PROFESSOR
M.M. INSTITUTE OF MANAGEMENT

MAHARISHI MARKANDESHWAR (DEEMED TO BE)

UNIVERSITY
SALES & DISTRIBUTION MANAGEMENT

After completing this lesson, you will be able to

know:

 Sales Territories and Quotas

A sales territory is the region, industry, or group of
accounts assigned to an individual or team that then
influences the size of their sales quota. This is where it
does get a bit “chicken and egg” and more difficult to
separate out.

Just to add further nuance, depending on the size of

your sales division, any given “region” may vary from
a small town to an entire continent; or it could be you
have one major account given to a team for a super-big
client, while another team is working across several
hundred smaller accounts and customers.
The underlying and critical factor is that if you’re the person
responsible for setting territories, you understand them, top to
bottom.

That means being all over competitor presence, understanding

every issue and possible advantage that goes with entering a
new territory, and being the first to realize and act if a territory
is over or under-resourced with sales executives or product.
Definition: Sales territories are geographic areas or market
segments assigned to individual sales representatives or
teams. Territories are typically defined based on factors
such as geography, customer demographics, industry
verticals, or sales potential.

Purpose: Sales territories help optimize sales coverage by

ensuring that sales representatives are assigned to specific
areas where they can focus their efforts and develop
relationships with customers. Territories also facilitate
resource allocation, sales planning, and performance
evaluation.
Sales territories play a crucial role in the organization's
sales strategy and execution.

Here's why they are important:

Optimized Sales Coverage: By dividing markets into

territories, organizations can ensure that sales efforts are
focused and efficiently allocated. Sales representatives can
concentrate on specific geographic regions or customer
segments, allowing for more personalized and targeted
sales approaches.
Increased Productivity: Sales territories help prevent
overlap and duplication of efforts among sales
representatives. Each representative is responsible for a
defined set of accounts or areas, which reduces confusion
and ensures that resources are utilized effectively. This
clarity of responsibility can lead to higher productivity and
sales performance.

Better Customer Relationships: Assigning dedicated sales

representatives to specific territories allows them to develop
deeper relationships with customers. They become familiar
with the unique needs, preferences, and challenges of
customers within their territories, enabling them to provide
tailored solutions and superior customer service.
Market Penetration: Sales territories enable organizations
to systematically penetrate and expand into new markets.
By strategically allocating resources to underdeveloped or
high-potential areas, companies can increase market share
and revenue growth.

Targeted Marketing and Sales Strategies: Sales territories

provide valuable insights into regional differences in
customer behavior, market dynamics, and competitive
landscape. Organizations can develop customized marketing
and sales strategies tailored to the specific needs and
characteristics of each territory, resulting in more effective
campaigns and higher conversion rates.
Performance Measurement and Accountability: Sales
territories facilitate the evaluation of sales performance at both
individual and regional levels.

By comparing actual sales results against targets set for each

territory, organizations can assess the effectiveness of their sales
efforts, identify top-performing territories, and address areas that
require improvement. This data-driven approach enhances
accountability and enables better decision-making.
Resource Allocation and Planning: Sales territories help
organizations allocate resources, such as sales personnel, budget,
and promotional activities, in a more strategic and equitable
manner. By aligning resources with the sales potential of each
territory, companies can optimize their investments and
maximize returns on sales initiatives.

Flexibility and Adaptability: Sales territories can be adjusted

and realigned as market conditions change or business priorities
evolve. Organizations can respond quickly to shifts in demand,
competitive threats, or changes in customer preferences by
reallocating resources to high-growth or strategic markets.
Types of Sales Territories

1.Geographic Territories:
1.Regional Territories: Dividing sales regions based on
geographic boundaries such as states, provinces, or
countries. This type of territory structure is useful for
companies with broad geographic coverage.
2.City/Local Territories: Defining territories based on
specific cities, towns, or local areas. This approach is
suitable for businesses targeting customers within a limited
geographic radius.
3.Zip Code Territories: Allocating territories based on zip
code areas, allowing for precise targeting and resource
allocation.
2. Vertical or Industry-Specific Territories:

1.Industry Verticals: Organizing territories based on

industry sectors or vertical markets. Sales representatives
focus on serving customers within a particular industry,
leveraging industry-specific knowledge and expertise.
2.Customer Size or Type: Segmenting territories based on
customer size (e.g., small businesses, mid-market,
enterprise) or customer types (e.g., retail, healthcare,
education).
3. Product or Service-Based Territories:

1.Product Lines: Assigning territories according to

specific product lines or categories. Sales
representatives specialize in selling particular
products or services, catering to the unique needs of
customers in those segments.
2.Solution Areas: Defining territories based on
solution areas or bundles of products and services
that address specific customer needs or pain points.
4. Revenue or Sales Potential-Based Territories:

1.Revenue Bands: Classifying territories based on

historical sales performance or revenue potential. High-
potential territories may receive more resources and
attention, while lower-performing territories may require
additional support or strategic interventions.
2.Market Opportunity: Allocating territories based on
market potential, growth projections, or competitive
landscape. Sales efforts are prioritized in territories with
the greatest opportunities for revenue growth and market
penetration.
5. Hybrid Territories:

1.Combining multiple criteria to create hybrid territories

that reflect the unique characteristics of the business and
market. For example, territories could be defined based
on a combination of geography, industry vertical, and
product specialization.
6. Named Accounts or Strategic Territories:

1.Designating territories focused on key accounts or

strategic opportunities. Sales representatives concentrate
their efforts on nurturing relationships with high-value
customers or pursuing significant business opportunities
that align with the organization's strategic objectives.
Each type of sales territory structure has its advantages and is
chosen based on factors such as the nature of the business,
target market, competitive landscape, and strategic goals of the
organization.

The optimal territory structure is one that effectively aligns

with the company's sales objectives, maximizes sales
performance, and enhances customer satisfaction.
Sales Quotas

•Definition: Sales quotas are specific targets or objectives set

for individual sales representatives, teams, or territories.
Quotas can be based on revenue, units sold, profit margins, or
other performance metrics.

•Purpose: Sales quotas serve as benchmarks for measuring

sales performance and motivating sales teams to achieve their
targets. Quotas provide clarity on expectations, drive
accountability, and help align individual efforts with company
goals.
A sales quota is an achievement benchmark set for sales
individuals and teams. This goal is usually time-specific and
must be achieved by the end of the month, quarter, or year.

Sales managers set quotas based on historical data and sales

forecasting to ensure that the profits and revenue continue to
grow for the business. Salespeople receive commissions and
incentives for completing their quota in the specified period.
Types of Sales Quota

The sales quota depends on the type of industry, your business

plan, and your projected growth.
1. Volume Sales Quota

The quota is decided by the number of units a salesperson can

sell within the specified period. The sales reps receive
their commission when they hit the number of deals they are
expected to meet.

The volume sales quota can also be broken down for

individual sales reps based on territories and different
products.
2. Revenue Quota
In the revenue quota model, the quota is met when the
salesperson hits a particular quarterly revenue benchmark. It
doesn’t depend on the number of deals or length of sales
cycles; instead it’s similar to a book of business.

The revenue quota works all right for product-type businesses

where the sales cycle is standard, and the product price is
fixed. However, it prevents salespersons from offering a better
price or a discount while closing.
And this may lead to missed opportunities. This quota works
really well for service and subscription types of businesses
(for example, Insurance and OTT platforms) where the
relationship with the client is long-term, and their
monthly/yearly pay-out contributes to the
salesperson’s Monthly Recurring Revenue (MRR) or Annual
Recurring Revenue (ARR).
3. Activity Quota
The saying “It’s about the journey, not the destination” is very
apt for sales because you can’t close too many deals if you
don’t abide by the sales process. Many stages come before
closing a deal—storing lead information, notes from a
meeting, follow-ups, and sharing pricing—are all important to
close a deal successfully.

But in the other quota models, a salesperson’s efforts are only

validated once the sale is completed. The activity quota takes
the other tasks into account to set quotas.
It helps standardize the sales process and decrease the length
of the sales cycle.

This model also works great for training new sales employees
and maintaining CRM hygiene. It also helps track the progress
of SDRs and BDRs as they support sales reps by taking calls
and leading initial demonstration sessions.

Before implementing this quota, you must have a sales

management tool like a Sales CRM that helps you track and
review all the activities.
4. Profit Quota
The profit quota plan is like revenue quota in terms of setting
the goals, but it’s a step up. The profit quota tracks and reports
the profit benchmark that each salesperson must meet.

To calculate the gross profit quota, the cost to sell and other
expenses—like showroom rent, telephone usage, advertising
costs, discounts offered, etc.— and the cost of goods are
subtracted from the revenue. By doing so, you can improve
budgeting and overall profitability. Gross profits are a better
way to represent the business’ growth trajectory.
The only drawback here is that it complicates quota
management because the additional variable expenses need to
be tracked too. But it’s nothing that an effective CRM can’t
handle.
5. Combination Quota
Setting a single sales quota might be easy to set and track, but
it is bound to get monotonous for your teams. Combining 2-3
plans to create an intensive quota for your team keeps them on
their toes. You can also use gamification to make it more
interesting.

Each quota has its setbacks but pairing the ones that
complement each other balances them out. For example, the
profit model encourages higher value deals but can be met
without contacting too many customers.
Whereas the activity quota ensures that CRM hygiene is
maintained, and salespeople log their talk time and the number
of emails sent.

Combining these two quotas results in a higher volume of

profitable deals while maintaining a healthy sales pipeline.
You help your salespeople develop and hone their sales
skills by choosing a combination quota.
THANK YOU