sales territory

Sales Territories

Sales territory is the segment of the market for which a salesperson is responsible.

Sales territory is a usually a geographical area assigned to a

salesperson or group of persons. The geographical area may also be assigned to franchisee, distributor, or agent. A sales territory may also be assigned by type of customers, as all retailers or all wholesalers in geographical area. A sales territory may be as large as: a continent, a nation or half a nation, or as small as a: town or city.

Territory assignments may be exclusive, meaning no other salesperson can sell in that territory, or nonexclusive. Territories may be defined in terms of geographic or market segments, product or product lines, size of customer or by specific customers or prospects. The best territories with the greatest revenue potential are usually assigned to the best salespeople. The individual talents or characteristics of the salespeople can also be used to determine territory assignments. It takes a

different skill set to make sales to large corporations than to small retailers. Geographic territory assignments should be made so as to minimize the travel expenses incurred by any one salesperson. When creating geographic territories, the density of the prospect base will determine the size of the territory. For example, New York City alone may offer as many prospects as several Northwestern states

Sales Territory Management

Whether you work in sales management or sales operations, efficient and productive sales territory management is essential to your

success.

Territory management develops and implements a strategy for

directing selling activities toward customers in a sales territory aimed at maintaining the lines of communications, improving sales coverage, and minimizing wasted time. It includes the allocation of sales calls to customers and the planning, routing, and scheduling of the calls. We know that territory management is a two-way street – a dual process of information and communication. First, territory

management provides sales managers with accurate measurements of territory results, and the relative success of that territory’s sales

teams. And second, territory management offers the sales team

strategic information about the impact of promotional campaigns and a variety of other data and analyses.

Some of the Business Benefits provided by territory management include:

• Managers can gain an up-to-the minute view of their individual territory pipeline from the highest level to the most granular.

• Regional sales teams can keep lock-step with one another when collaborating on important deals.

• Your company will gain better insight into sales effectiveness and performance by territory

• Simplifying territory realignments after sales reorganizations

• Eliminating lag time in lead assignment

• Stretching your selling day and spending more time with your customers

• Planning effectively and avoiding losing sales to better organized competitors

• Selling more, earning more and accomplishing more

• Setting goals and priorities to maximize your selling effectiveness

• Increasing selling time by minimizing distractions and procrastination

• Maintaining contact with key prospects and accounts

• Making more productive use of travel time

• Improving your return on investment (ROI) and reducing turnover

• Territory Management enables organizations to automatically route opportunities, accounts, contacts, and activities to exactly the right sales team members, based on a set of flexible and configurable business rules. Sales team members can include your employees as well as your channel partners' employees, for leverage of partnerships and corporate relationships across sales organizations. Assignment rules can be based on geography, industry, product interest or virtually any other criteria you choose.

Territory Management allows you to manage your various sales territories by setting up a customized company position chart that maps your reps into territories. Regional managers can easily access critical pipeline information and monitor all the deals active within their

territory. As the organization changes, territory management allows you to very quickly and easily transfer accounts from one rep to another, build cross-functional teams, share reports, dashboards and documents, and run reports segmented by the territories you define.

Sales Territory Alignment Benefits

A sales territory comprises of a group of present and potential

customers assigned to a sales person, a group of sales person, a branch, a dealer, a distributor or a marketing organization at a given period of time.

Development of sales territories is usually the responsibility of the sales manager overseeing the larger sales units within the organization.

Here are some benefits of good territorial design:

The Benefits of Sales Territory Alignment

Aligning sales territories is an important initiative and can lead to many benefits for a business. Good territory alignment will increase revenue and customer coverage, reduce travel time and associated costs, provide a competitive advantage, and foster equity and morale among sales people.

1.Better customer coverage through balanced sales

territories

When territories are properly aligned, issues of under- and over- capacity are reduced or eliminated. Each territory is created

allowing the sales person to reach and spend time with the greatest number of high potential customers, thus increasing sales. When your salespeople have manageable territories, they do a better job of calling on customers regularly, which improves account revenues and customer retention. The key to creating manageable territories is designing balanced territories.

2.More selling time through reduced travel time

Due to the geographic nature of sales territories, better alignment means less travel time to reach customers. Less time spent in the car means more time spent with customers, thus more time for selling. Salespeople work hard calling on customers, traveling from one site to another. When your salespeople can spend less time traveling between customers, they can spend more time with each customer, resulting in more sales calls and more sales.

3.Lower sales force turnover through better morale

Balanced territories with maximum selling time not only increase sales and productivity, they allow you to evaluate the efforts of your salespeople more easily. Sales territories improve morale and decrease turnover by providing a fair and objective means of setting performance measures, quotas, and

compensation. Balanced territories, objectively measured, provide a level playing field for evaluation and reward.

This benefit of sales territory alignment is often overlooked. However, if you have better coverage in your territories, you can reach new opportunities faster than your competitors, again leading to increased sales.

5.Decrease cost of sales

Optimally aligned territories result in shorter drive times and

associated travel expenses for sales people, making each sale more profitable.

6.Equity and morale

Nothing can be more discouraging to a sales person than to see an associate milking a highly profitable territory while they’re stuck servicing an area with low potential. Properly aligned territories provide a more equitable distribution of accounts, level the playing field in terms of achieving rewards, and boost morale among sales people. In addition, sales people stay longer, thus lowering the costs associated with new hiring.

Balanced workloads and earning potential will improve morale and career satisfaction among your sales force, leading to higher

motivation and lower turnover.

When to Align Sales Territories

Many companies conduct a yearly review of sales territories. The year’s performance may or may not lead to a change in the shape or makeup of the sales territories. However, a number of situations should compel you to embark on a sales territory alignment initiative, including:

• If your sales territories are based on historical data rather than potential for sales.

• If you have a new or changed sales team due to acquisition, merger, partnering or restructuring.

• If your company is launching a major strategic initiative and sales staffing is not matched to it.

• If your sales team has experienced significant changes over a short period of time.

Each of these situations is ripe with the potential for decreased productivity, missed customer opportunity, and confusion and competition among sales people. Sales territory alignment can help rectify all these situations.

Sales Territory Design Process Examples

•

New Sales Force for New Product

A national medical supply company requires not only territories...but a prediction of the required number of sales people as well. Teams work

together to study the sales potential at hospital and clinic locations as well as travel time and other work load factors.

•

Maximizing Franchise Revenues

A business services franchise grows beyond designing territories by "what the franchisee wants". A web based system helps them use

demographics to create the greatest number of optimal areas.

•

Standardize & Update By ZIP Code

A home cleaning service wants to transition to territories defined by ZIP Codes. Older maps are used to redefine and update new areas.

•

10 Year Growth Plan

A national home protection service looks to establish over 1,200 new territories over the next 10 years. A combination of customer profiling, demographic

projections and a statistical study of distance weighted factors provide the basis for a yearly plan.

•

Translate Legal Documents

A national fast food franchise looks to establishing a computer based territory management

system. A web based mapping system was created which helps the user to visually translate legal descriptions into computer mapping formats.

•

Territories by Household Income

A regional home service looks to expand nationally. A model based primarily upon the number of households with children in areas within a certain income range is used to create territories.

•

Balance by Customers, Prospects, Drive Time

A regional office supply company looks to update sales territories. The locations of customers and prospects are factored with current revenues, current account growth and new account prospects to create a balance of sales opportunities with work.

•

Design by Retail Outlets & Ethnic Populations

With successful growth, a seller of phone cards looks to create new territories, often splitting existing ones. Analysis of sale history and location of retail outlets in relationship to targeted ethnics populations provided the basis for the new territories.

•

Door-to-Door Delivery Tools

A national publisher of phone books distributes by door-to-door delivery. An online system allows them to easily plan for each market, design each

delivery route and print the packet of instructions and delivery map used by each book deliverer each day.

•

Delivery by a National Grid

A shipping and delivery services company looks to create sales territories, analyze data and manage deliveries through a custom national grid system. A web based system helps them build and maintain this "nested grid" territory system, as well as input customer data and track delivery resources.

How to Develop a Sales

Territory

Your sales territory is where you build your personal revenue, establish your value to the company and develop your professional reputation. Creating a productive sales territory can take months or even years, but if you have a solid plan to follow, then you can have confidence in the results you will achieve. Developing a sales territory is a top-down process. Once your largest prospects become customers, the word begins to spread and your territory begins to develop itself.

The Only Way to Build Your Sales

Territory

First of all you got to realize that you are an interruption when

prospectng, and you have to be comfortable with this fact if you are going to be successful in sales.

Here's the formula you gotta follow to build any sales territory, client base, or business market:

1 – Identify Your Strengths,

2 – Create a Profile of Prospects Who Will Want Your Strengths, 3 – Advertise to Attract These Prospects,

4 – Sell a Desired Product to an Interested Prospect.

It's very simple, but too many people don't follow this. You see as a professional salesman, you often have to be a marketer and a business man too.

Start with identifying your strengths. Know what you do well, and know what your competitors do well. Get specific, get nuanced, and get into fuzzy things like the persona, style and attitude of the company and products you are selling (because these things attract people). "Plan

your work, and work your plan."

Create a profile, written down – yes written down – of the people who will want what you got. This is hugely important, and one of the easiest and most overlooked methods for getting more deals.

Far too many sales careers have run out of gas for believing that "everyone is my prospect." Focus on people who are likely to want what you got and you instantly will see a mega increase in your closing ratio.

Advertise to attract your desired prospects. Sales people think that they can't advertise – that this is something that "the company" is supposed to do.

Well cold calling is advertising. Emailing is advertising. Mailing letters and postcards is advertising. Until you have a relationship established with a prospect, your initial contact attempts are "advertising".

"Advertise" a message about your strengths to a prospect that is likely to want what you got, and you'll get some interested people contacting you.

Then all you gotta do is sell them. And selling a prospect interested in you, predisposed to think that you can do what they want is they way to build your territory.

Build your sales territory on a strong foundation. Do it the right way, and you'll have long term success in selling.

Sales Territory Alignment: Grow Sales

Without Adding Resources

For many companies, the sales force is one of their most expensive human resource investments, with sales calls costing upwards of several hundred dollars. Companies have turned to Sales Force

Automation (SFA) systems, Customer Relationship Management (CRM) systems, enhanced sales training and account management programs to gain more productivity from their sales force. While each of these initiatives has merit, many companies have found that a sales territory alignment initiative can increase productivity and sales at a relatively low cost.

Sales territories, by nature, are geographic in nature. When they are out of balance, some areas with high potential customers may be underserved while other areas are saturated. Too much effort may be expended against low potential customers. Sales and service people spend too much “windshield time” driving from sales call to sales call and don’t spend enough time seeing and listening to customers.

The result of these inefficiencies is that companies not only often leave millions of dollars on the table, they suffer from low morale and high turnover among sales people.

Why sales territories may not be developed:

• Salespeople may be more motivated if they are not restricted.

• The company may be too small.

• Management may not want to take the time, or have the know-how.

STEPS IN DESIGNING SALES TERRITORIES:

The ideal aim in designing sales territories is to have all territories equal in both sales potential and the work load. This has two

advantages. First, it becomes easy to evaluate and compare the performance of salespersons. Secondly, equal workload helps to reduce disputes and improve the morale of sales force. However, it is difficult to attain this ideal due to changing market conditions.

The process of establishing sales territories involves the following steps:

1. Select a control unit for boundaries

2.

Find location and potential of present and

prospective customers within control units

3. Decide basic territories by using

i.

Build-up method,or

ii. Break-down method

4. Assign people to territories

5. Establish a coverage plan

6. Ongoing assessment

1.Select a control unit for boundaries

While designing sales territories the first step is to decide the basic control unit as a territorial base. Commonly used

geographical units are regions, states, districts, cities, etc. A typical sales territory may consist of several individual units. For example, a salesperson’s district may consist of five towns and ten villages. The unit should be small so that it pinpoints the geographical sales potential and enables the management to adjust the territories whenever necessary.

Sales territories built around States are simple, convenient and inexpensive. But States in India differ widely in terms of size and sales potential. State is a good control unit for a firm which has a small sales force covering a national make and which uses a selective distribution policy. City as a control unit has often been used by manufactures and wholesalers of food, drugs and

tobacco products. In case of a very big city, the city may be divided into wards, etc.

2.Find location and potential of present and

prospective customers within control units

The location and potential of both present and prospective customers within each selected control unit should be

the sales records. Prospective customers can be identified with the help of salespersons, trade directories, telephone directory, credit card films, etc.

Once the present and prospective customers are identified, the potential business expected from each customer is assessed. On the basis of estimated sales potential the customers are

classified into different categories.

3.Decide basic territories

In the third step, a fundamental territory is established, on the basi of statistical measures and computers. There are two methods used for this purpose.

a)

build-up method

:

In this method, territories are

determined by combining small geographical areas so as to equalize the workload of sales peoples. Geographical areas are decided on the basis of the number of calls a salesperson is expected to make in each control unit.

b)

Breakdown method

: This method involves division of the total market into approximately equal segments based on sales potential. The firm’s customer base is broken down into groups of customers that can be meaningfully serviced by individual sales persons. The build-up method is suitable for manufacturers of consumer products and for companies that use intensive distribution policy. On the other hand, break down method is suitable for

manufacturers of industrial products and for companies that use selective distribution policy.

c)

Incremental method

:

Under this method, additional sales territories are created as long as the marginal profit generated exceeds the cost of servicing them.

Administrative difficulties, however, hamper the

application of this method. It requires a cost accounting system for determining sales, costs, and profit associated with various levels of input.

4.Assign people to territories

Once the sales territories are designed, individual sales person can be assigned to each territory. Sales person differ in their selling abilities and selling effectiveness. They also vary in age, physical conditions, experience, selling skills, initiative, etc. A particular sales representative may succeed in one territory but fail in another territory. For example, a salesperson with a

technical background is likely to be more effective in a sales territory in which a large number of customers are engineers. Differences in local custom, religion, ethnic background, etc. also influence sales effectiveness. While assigning sales people to territories, flexibility should be maintained in management of sales force. It is necessary to match the characteristics of each salesperson to the nature and the requirements of the territory assigned to him/her. The ideal would be to assign each

salesperson to the territory where his or her relative contribution to the company’s profits would be higher.

5.Establish a coverage plan

After establishing sales territories and assigning sales persons to each territory, management prepares a plan as to how it sales representative will cover his/her territory. This is an exercise in managing the time of sales force which is necessary to control field selling costs. A territorial coverage plan involves routing the sales force and scheduling their time. Routing indicate the order in which each segmebt of territory is to be covered so that both travel time and travel expenses are reduced. Scheduling is creating a time table of calls by sales persons. Many sales

persons object to routing and scheduling thinking that it reduces their initiatives and flexibility.

6.Ongoing assessment

Once established sales territories may become outdated due to changes in market conditions and company policies. Sales

territories also requires re-alignment because they are either too small or too large. Therefore sales executives should review the sales territories every year to see whether any revision is

needed. Re-alignment and re-adjustment of sales territory may have an adverse impact on the motivation and morale of some

salespersons. Therefore, due care should be exercised while revising sales territories.

WHEN NOT TO ESTABLISH SALES TERRITORIES

•

sales coverage is far below sales potential

- e.g., a new

company wants to cherry pick for the most profitable prospects first

•

the sales force is highly specialized

- e.g., when the

salesforce is organized along the lines of product specialty rather than along the lines of customer location.

•

sales are made on the basis of personal contacts and

by referrals

SOME GUIDELINES FOR DESIGNING TERRITORIES

•

sufficient potential

- with insufficient potential, a salaried

salesperson will not be used effectively, and commissioned salespeople will leave the company for greener pastures

•

reasonable size

- is a salesperson's time being spent

traveling or making face to face sales calls?

•

adequate coverage

- is the salesperson able to service all

accounts and able to meet new prospects?

•

minimum impediments

- try to set territories such that

rivers, mountains, railroads, etc. set the borders of territories rather than run through the middle.

ROUTING

Routing is a travel plan used by a salesperson for making customer calls in a territory.

Benefits of or Reasons for routing

Managerial routing reduces the travel expenses by ensuring an orderly thorough coverage of the market.routin that typical salesperson is unable to do the job satisfactorily left to their own routing criss cross their territories in order to be home as early as possible, several times a week.

Procedure for Setting up a Routing Plan

Identify current and prospective customers on a territory map Classify each customer into high medium or low sales potential Decide call frequency for each class of customers Build route plan around locations of high potential customers.

Following these guidelines will help in ensuring that tours are as short as possible:

• tours should be circular

• tours should not cross

• the same route should not be used to go to and from a customer

• customers in neighboring areas should be visited in sequence

ROUTING PATTERNS

More efficient (shorter) routes will tend to exhibit one of these patterns:

• cloverleaf

The cloverleaf pattern better follows the guidelines that were given above. Indeed, with the example territories and focal point above, the cloverleaf routes would probably require less travel time if such routing is possible on existing roads.

The above circular area was divided into five equally sized territories with a focal point at the center. A route to visit customers in the

territories was then drawn in either a circular clover leaf pattern or in a hopscotch pattern. This way of making territories and of routing sales calls would be appropriate if, say, five salespeople reported to a

common office in the center. It would also be appropriate if, say, a single salesperson was assigned to a remote territory and must divide the territory into five daily routes to visit customers once per week.

Scheduling is planning a salesperson s visit time to customers It deals with time allocation issue How to allocate salesperson s time Sales manager communicates to salesperson major activities and time allocation for each activity Salesperson records actual time spent on various activities for 2 weeks Sales manager and salesperson discuss and decide how to increase time spent on major activities Companies specify call norms for current customers based on sales and profit potentials and also for prospective customers

Time Management Tools

To help outside salespeople to manage their time efficiently and productively the tools available are High tech equipment like laptop computers and cellular phones Inside salespeople to provide clerical support technical support and for prospecting and qualifying as they remain within the company Outside salespeople can then spend more time getting more orders building relationships with major customers Outside salespeople travel outside the organization.

Key learning Territory Management

Assigning sales person to territories Horses for courses Sales persons vary in knowledge skills energy market relations Optimum assignment of territories workload market build up mostly for industrial goods potential equality of opportunity Starting point centre HQ of territory

Beat route planning to improve productivity planning control scheduling of calls calls frequency